Handbags
Published: 27/11/2023

Handbags as an investment

April Newsletter (25)Investing in luxury handbags is a relatively new trend that has piqued the interest of many, including those who have nothing to do with the world of fashion.

 Luxury handbags are an emerging category on the Alternative Investments spectrum with a very high potential to make profits. The luxury handbags market has significantly grown in size in recent 5 years, and it is expected to grow much further.

The luxury handbags market is not directly linked to conditions present on the stock market. They would still be expected to increase in value in a bear market caused by recession or inflation. Furthermore they are one of the most stable asset class with annualised volatility between 2% and 7%.

Not all handbags are born equally

A recent Financial Times article highlights luxury handbags' rising status as an investment, captivating high net worth individuals and young clients. Demand for top brands like Chanel, Hermès, and Louis Vuitton has surged, driving significant growth. Iconic models have doubled in price over a decade, becoming collectibles.

Collectible handbags thrive on expert advice, favouring limited editions for safer investments. Beyond their investment allure, luxury handbags offer low market correlation, a unique advantage.

In recent times, Hermès has been raising its prices on average by 1.5 to 2% each year in line with inflation.

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Auction record: The Diamond Himalaya is infamous for being the most expensive handbag ever sold at auction. In 2022, Sotheby's sold the 30cm bag for over $450,000 USD (approx. 397,000 CHF). It contains 18-karat white gold hardware studded with white diamonds.

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⚠️What are the risk factors to consider?

Damaged item: The handling and storage of luxury handbags are crucial in maintaining their fundamental value. However, in case of unforeseen events such as human errors, fire or natural disasters, the handbags can be damaged or destroyed.

Counterfeit pieces: Due to the popularity and exclusivity of luxury handbags, counterfeit pieces are not uncommon on the market. As the popularity of the category increases, the issue will become even more paramount.

Market conditions: Following a set of due diligence and market research, investment-grade assets are identifiable. Nevertheless, paying the right price for the asset is a challenge and therefore poses a risk of acquiring the asset at a price premium.

ESG: Currently, the entire fashion industry is under the microscope in the context of ESG. CO2 footprint and usage of water are heavily criticised. This poses an additional regulatory risk. However, in the luxury segment, the margins tend to be much healthier which provides the premium brands with the possibility to adapt while remaining profitable.

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Aurelio Image CEO

Aurelio

CEO & Co-Founder