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Why Buy a Hermes Bag? As an investment of course!

In Miami in 2016 a handbag sold for $298,000 (approximately £205,000).  A simple handbag.  Hailed as the most expensive handbag ever to sell, it was a Hermes Birkin made in bright red shiny crocodile with white gold straps encrusted with 10 carats of diamonds.    It was purchased in 2008 for half the price but never worn.   This June  a 2008 Himalaya Birkin, which features a diamond-encrusted 18k white gold lock, sold for £162,500, a price that exceeded the £155,000 paid for a navy Croc Birkin in 2017, both sold by Christie’s.

What was once considered an attractive accessory has turned into one of the world’s most lucrative investments.     Even ten years into the phenomenon, the trend continues to amaze people.

There are a number of reasons for the phenomenon.   If you consider other relatively new investment vehicles – wine, watches, and classic cars – they are all now accepted as alternative investment pieces, and are often highly profitable.   Now the once modest handbag has joined the club of these ‘passion assets’.  In general, they have become worthy investments through finite supply:  like a bottle of Romanee Conti or a limited edition Patek Philippe.    And as the world moves to more highly automated systems and machine-made goods, an awareness of the higher quality of handmade products has emerged.

The prices of classic cars started to rise in the 1990s.  An appreciation of the highly skilled workmanship, coupled with the romance and challenge of the gearstick, started to appeal to North American and then to European markets.   Cars outperformed the global stock market between 2005 and 2016.  Just this year, the 1957 Ferrari 335 S Spider Scaglietti sold for a record breaking £24.7m.

The story is similar these days with vintage bags.  On a smaller, more manageable scale.

30cm Mykonos Birkin in Ostrich with Palladium Hardware

Mrs Thompson in Battersea, London, hadn’t worn her 1985 Hermes Kelly in ostrich leather more than twice.   Clearing through her wardrobe one rainy November afternoon she came across it and approached Lilac Blue London to value and sell it.   We estimate the bag cost her £550 in 1985.    It has just been sold at £12,000.

35cm Graphite Kelly in Shiny Croc with Palladium Hardware

Or Mrs Mills in Suffolk, who had a collection of Hermes handbags bought in Las Vegas in 2000.  Her 35cm black crocodile Kelly was recently sold at £17,000.  The cost 16 years ago would have been approximately £5,000.

As the Times London explained: “Consider the following: in the 35 years since it was created, the value of the Hermes Birkin has gone up by 500 percent. That’s a better return on investment than gold or the stock market…. Why has this happened? In a nutshell, because even if you can afford them, they’re incredibly difficult to buy.”

In essence the bag itself has become a loved and cherished item, and at the same time handbags have become status symbols.  So combined together, these factors have turned an everyday accessory into a powerful investment piece.

So while older and vintage bags can be sold at high prices, New Hermes Birkin and Kelly bags sell at a premium of up to 100% because buying them is a serious challenge.   There are no more waiting lists in the UK: Hermes could not deal with the queues waiting outside the Bond Street store on the days the waiting list would open.   So to buy a bag takes serious application, patience, and expenditure on other goods in the store, and as a result, it becomes extremely desirable.

Then there is the new phenomenon of the handbag as a status symbol.

Historically, Europeans would buy one lovely handbag on a very special occasion.     So a lady had one or perhaps two luxurious handbags that she could hand down.    European royalty collected handbags: the Queen has a wonderful collection of Launer handbags.  But mere mortals would only have a few pieces.    Then, over the last 20 years, the popularity of handbags has grown in general, and as Hollywood A-listers started building collections of Hermes and Chanel bags, it became acceptable for well-heeled ladies to build collections of their most cherished accessories, and Hermes is at the very top of the list of luxury houses.

The Mastery of Hermes

How has Hermes managed to stay at the top, in creating the most desired handbag the world has ever known?   There is no doubt that this was never planned.  In no time in fashion history has a handbag achieved such status. But Hermes has harnessed and managed the situation extraordinarily well.   In order to increase the desirability of the bags, the iconic French brand limits the production of certain models.  They claim that only the finest artisans are able to create the Kelly and Birkin handbags, and with each bag taking up to 25 hours to make, they are unable to keep up with the demand.  With resellers selling the bags at vast premiums, Hermes is able to increase prices year on year, up to 10% per annum.  The classic Birkin 35cm is now just over £7,000 in a Hermes boutique.

What must not be overlooked is that this phenomenon could never have taken place without the creation of extremely beautiful products.   The style of Hermes bags is generally classic: the Kelly is a relatively formal bag which works extremely well at formal occasions.   The Birkin is a more practical piece; the size 35cm can hold enormous amounts (I have carried a laptop, travel documents and an ipad in one) but has no shoulder strap.

The handbags are created with the best leathers, in the best tanneries, and in a range of colours that no other luxury house can begin to achieve.    This Bleu Paradis limited edition Kelly from 2016 is one of 8 different shades of blue produced by Hermes in the last 5 years.

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How to get your hands on one

If you are looking to buy a bag, first you should try your nearest Hermes boutique.  If you look beautiful and elegant enough, you may be given the chance to buy directly, if there happens to be one available.  If you would rather be able to choose the size, colour and leather, you might want to try a reseller.  Just make sure they are reputable and you can meet them before sending any funds. To buy a bag for an investment, see our article ‘how to choose an investment piece’.

How to Choose an Hermes Bag as an Investment

If you have decided on making an investment in a handbag, the next issue will be how best to buy a piece, and where. Our advice is spend time and money in an Hermes boutique, dress and accessorise to impress, and be prepared to return every day for a week. Or two or three weeks. And be aware that if you do get the chance to buy a Birkin or Kelly, you will be given one option only; you cannot choose your colour or leather. Should you declare the bag unsuitable for you, there is little likelihood of being offered another model. So the alternative is to buy from a well reputed reseller or auction house.

When choosing the ideal investment, the first consideration should be the timelessness of the piece. You need a size and a model that is always going to be popular. And if you are worried about what makes an item popular, consider the usefulness of the bag. A handbag that is easy to wear now is likely to be highly wearable in 5 or 25 years’ time.

The item should be in very good condition. It can be used, but make sure there are no tears or cracks in the leather. Zips should work seamlessly after many decades. Classic colours and models are super, as they will be recognised in years to come, and limited editions and bright colours will fetch higher returns in a connoisseur market.

32cm Bordeaux and Sanguine Horse Shoe Kelly in Shiny Nilocitus with GoldHandbag sizes vary year to year, so investing in a wearable, mid-range size is advisable. In terms of leather, the most desirable right now is the very expensive crocodile (a Hermes Birkin crocodile in size 35cm is currently above £40,000 in the store, but only VIP clients are allowed to buy one, and that can take years of investment in other Hermes goods…). 35cm Saffron Birkin in Ostrich Gold wmBut crocodile bags are fragile and need care and attention, so are not for all of us. My favourite is the ostrich, which is ridiculously hard wearing and maintains its shape, but seen less and less these days, which could make it a good investment piece.

Hermes produces calf leather bags in numerous varieties: the best known is togo, which is natural young bull calf leather. It is pebbled and scratch proof, but some of the bags in this leather will sag over time, giving it a more casual look. Epsom is very popular in Asia, because it retains its shape for many years. It is a stamped leather, so not as resilient as the togo. Other varieties are taurillon clemence, which is pebbled like the togo but softer, and swift leather – currently used for smaller bags – which is very soft and smooth. Swift leather will scratch, but many of the marks can be removed. It’s always worth remembering that these leathers are all of extremely good quality and durable, so can be cleaned at home. If you a little hesitant about scrubbing your treasured piece, bring it to us for gentle cleaning, or take the bag to Hermes and put it into the spa. They will clean it and spruce it up amazingly, at a very reasonable cost.

And finally, perhaps most importantly, buy a bag you like. It is after all, a passion asset, so make sure you are at least fond of the item. In terms of maintenance, decide whether the bag is to be worn or carefully kept in a pristine condition. In either case, make sure you look after it. We see bags which have been thrown into the back of a closet for years, and kept crumpled under shoes and boots. Even the very strongest leathers will begin to alter in shape after months or years of reshaping.

The best places to buy are reputable resellers and auction houses. London, Paris, New York and Hong Kong have a selection. Europe probably has the most reputable and reliable selection. You should really try to see the item before bidding. There are online authentication services which can provide guidelines and help on what you are buying, but beware, authenticating through photographs is not always completely reliable. It is always best to visit premises and meet the people who are going to sell or examine your bag.

Happy Shopping.

Lilac Blue London Ltd
www.lilacblue.com

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