What Makes Designer Handbags So Valuable?

Last month luxury online retail platform Baghunter announced the Hermès Birkin bag outperforms the S&P 500 and gold when they measured the three investments over a 35-year period. Case in point: 1dibs.com recently listed a Himalayan Nilo crocodile Birkin with 18k white gold lock with white diamonds, totaling 1.64 carats, for $450,000. It’s retail price was $300,000.

With prices matching (or exceeding) real estate, it’s easy to detach ourselves from the object itself. At some point it becomes incomprehensible and just a bunch of zeros. So, we’re stripping back the hype of zeros to understand the true value of designer handbags.

One could argue that the luxury industry is defined by its preference for handcrafted manufacturing. From Lambourghinis to haute couture, we’ve come to understand that fine luxury goods are created by the hands of master craftsmen who’ve dedicated their lives to perfecting their art. Pierre Grosperrin, an Hermès bag maker, joined the iconic fashion house after two-years of studying the craft. His internship lasted one-year before he was promoted to create a Kelly bag. The handle alone took Grosperrin about seven-months of practice to perfect and pass Hermès’ quality control. Naturally, when one pulls back the curtain to discover the time vested to develop the skills of a master craftsmen (by employer and employee), the big ticket price begins to demystify.

Location of manufacturing also dictates price. The cost of Chinese labor has doubled in the past decade and that affects almost all luxury handbag manufacturing. Even if the tag reads, ‘Made in Italy,’ it’s likely the bag was handled in a Chinese factory (partially or in whole) during the manufacturing process.

When it comes to exceptional handbags, brands up the ante with fine art details, such as hand painted designs. Unique finishing touches add another layer of skill (and cost) to the handbag’s creation. As with every industry, fashion houses are constantly researching and developing materials and processes to ensure their product is not only unique, but distinctly difficult to replicate. For example, Stefanie Phan acrylic clutches feature an exclusive hardware-free ‘frameless’ design (i.e. no metal hinge). Each part of the clutch is hand machined with aerospace-grade tolerances. This was chosen to exhibit the master craftsmen’s skill and to help distinguish the brand from others. The seamless design resulted in the designers learning that existing acrylic clutches have metal hinges and screws that were damaging valuables, so they engineered theirs to improve the overall functionality.

Global cost of goods has also increased over the years—specifically, cotton and leather, which are relatively fixed costs for handbags. When it comes to maintaining competitive edge, brands are seeking exclusive and unique materials. In the case of Stefanie Phan acrylic clutches, an extremely rare earth magnet is used in lieu of a clasp. There are only two manufacturers in the world that produce them and they’re considered the strongest magnets in the world. Albeit, such strength exceeds the item’s functionality. However, designer Phan points out, “No one else was creating an acrylic clutch with such attention to detail. I wanted to challenge our highest standard. When you hear the snap of the magnets close, it just sounds expensive. Luxury is a sensual experience—it should delight all the senses.” Whenever we see an exceptional handbag, it’s likely due to exotic materials, which leads us to the third element of what makes designer handbags so valuable:

Basic economics proves limited supply yields high demand. Co-founder of online luxury resale platform Vestiaire Collective, Fanny Mozart says, “There’s a huge market for rare bags, and as soon as brands manage the distribution and restrict production, people will pay more. They want rarity, timeless shapes and heritage brands.”

Combine multi-generational master craftsmanship techniques with exotic materials in super limited productions and you have what makes designer handbags so valuable.