A Handbag Transforms into a Luxury Asset

Why is the Birkin such a great investment?
How the market has grown.
March 2021

This is an extract from our article from February 2017:

“Last year in Miami a handbag sold for $298,000 (approximately £205,000).  A simple handbag.  Hailed as the most expensive handbag ever to sell, it was a Hermès 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.    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.”

And then in July 2020 The Independent in London reported:

“An Hermès bag has set the world record for most expensive handbag – selling for a grand total of £230,000 ($300,000).  The extremely rare Hermès Diamond Himalaya Birkin 25 is made of the skin of the Nilocitus crocodile found in Africa and is covered in 18k white gold and diamond hardware.”

We are often asked how this has happened.  After 14 years of selling Hermès bags Lilac Blue London is constantly tracking what is changing in this market, and the reasons why investing in Hermès bags is now becoming a major trend.

There are a number of reasons for the phenomenon.  If you consider how other relatively new investment vehicles – wine, watches, and classic cars – have become accepted as alternative investment pieces, it is a natural progression in society that another symbol of personal status should join the ranks of the passion assets.  In general, Hermès handbags have become worth investments through finite supply:  like a bottle of Romanée-Conti fine wine or a limited edition Patek Philippe watch. But there are other considerations to take into account:

  • Women are increasing their personal wealth and have more control over their own finances.
  • There is an increasing desire in the western world to re-use beautiful creations in the desire to slow environmental damage.
  • There is a new-found weariness amongst the fashion cognoscenti of short term, semi-disposable fashion accessories designed to be replaced by a new style each year.
  • As the world moves to more highly automated systems and machine-made goods a growing appreciation of hand-made products is emerging.

Initially the market for Hermès handbags was created by Royal Families in the Middle and Far East.  Lilac Blue London was the first world wide reseller of these coveted accessories in London in 2008.  The trend for the Birkin handbag was soon adopted by Hollywood A list celebrities.  And gradually it has moved across the world.  We are now, in 2021 seeing an awareness pick up in the UK, not just amongst captains of industry and serious fashionistas, but now also by high income, fashion conscious professionals across the UK.

A Constant Presence in a Fickle World

So while Hermès Birkin handbags appear year after year in the press articles – See Forbes Magazine Sept 2013 How To Buy Your First Hermès Birkin, few articles look into why it has come about.  The timeless design of the Birkin and Kelly handbags is seldom discussed, so we thought it about time we gave some credit to Hermès for their canny design strategy.

The core design of the Birkin and Kelly handbags has not changed for decades.  Both bags have just one large compartment, and inside one small zipped pocket and one small flap.  The most important angle to consider is the leather.  It is extremely durable, usually young cowhide, and the bags are lined in goat skin.  Being lined in another leather rather than a light fabric creates a heavier bag, but importantly Birkins and Kellies are sturdier than almost any other handbag available, because essentially you are buying two handbags in one.  In essence this means that Birkin and Kelly bags have lifespans that far outstrip almost any other handbag.  

Then you have the straps: two leather bands, finished at either end with metal plaques, are secured across the top of the body of the bag.  They can be used to tighten the bag, gathering the four panels closer together, or to close it altogether with the swivel clasp.  The bag can be locked with the accompanying padlock, but frankly it is more of a notable twist on a classic bag than a useful device.

So how have the Birkin and Kelly bags changed over the last decades?  The real alteration is that Hermès has oh-so-cleverly made is remodelling both these bags to offer different sizes.  The original Hermès Birkin and Kelly bags were made in size 35cm, which is now considered a large work or travel bag.  Over the years Hermès has cleverly introduced smaller styles to reflect the change in trend for small handbags.

“The Birkin varies, yet never changes”

By adding to the range of Hermès bags, adding to the sizes of the Birkin and Kelly to encompass a 25, 30, 35 and 40cm Birkin, and maintaining the unequalled level of craftsmanship in the creation of these pieces, Hermès has created a long-standing product coveted by many and cherished by those fortunate enough to build a collection.

As an understanding of the durable and timeless nature of these hand-made accessories gently drifts across the globe, it is fitting that in the age of the Me Too movement, a woman’s accessory should rival -and at times outstrip – the equivalent male investments.

Here are two examples of investment by ladies who have put their pre-loved, or second hand Hermès Kelly handbags on consignment with us:

Mrs Thompson in Battersea, London, hadn’t worn her 1985 Hermès 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.

Or Mrs Mills in Suffolk, who had a collection of Hermès handbags bought in Las Vegas in 2000.  Her 35cm black crocodile Kelly has just gone on the market 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 Hermès 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.”

And The Times is correct:  while these older and vintage bags can be sold at many multiples of their initial retail prices, new Hermès Birkin and Kelly bags also sell at a premium of up to 100% because buying them is a serious challenge.  There are no more waiting lists in the UK: Hermès could not deal with the queues waiting outside the Bond Street store on the days the waiting list would open.  To buy a bag takes serious application, patience, and expenditure on other goods in the store, and as a result, the Birkin and the Kelly become extremely desirable.

The Handbag as a Mark of Status

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

Historically, Europeans, especially the French, 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: Queen Elizabeth 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 Hermès and Chanel bags, it became acceptable for well-heeled ladies to build collections of their most cherished accessories, and Hermès is at the very top of the list of luxury houses.

The Mastery of Hermès

How has Hermès 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 Hermès 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, Hermès is able to increase prices year on year, up to 10% per annum.  The classic Birkin 35cm is now just over £8,000 in a Hermès 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 Hermès bags is generally classic and 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 amber yellow Kelly from Spring 2021 is on of several different shades of yellow produced by Hermès in the last few years.

How to get your hands on one

If you are looking to buy a bag, first you should try your nearest Hermès 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’.

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