Luxury Bags As An Investment: A Guide To Smart Purchasing

Luxury bags can be a brilliant alternative investment option, with research by Credit Suisse showing that jewellery, handbags and watches are the most stable options when it comes to 'collectible' investments. In fact, in the past decade, the price of a classic Chanel bag has risen by 100 per cent, outperforming both the stock market and gold.

However, it's important to note that not every bag is an investment. These 'passion' investments require extensive knowledge of the asset. For example, a handbag investor should know the difference between a Birkin and a Kelly bag.

When it comes to which bags make good investments, Chanel, Hermès and Louis Vuitton are the holy trinity of brands. The average Chanel or Hermès handbag price increases by approximately 12 per cent annually, making investing in bags more lucrative than other assets.

Stick to established brands like Chanel, Dior, and Hermès

When it comes to investing in luxury bags, it is best to stick to established brands like Chanel, Dior, and Hermès. These brands have a long history of producing high-quality, sought-after bags that retain or increase in value over time.

Chanel, for instance, has seen the price of its classic bags double in the past decade, outperforming both the stock market and gold. Their bags are not only attractive to fashionistas but also to investors, with the brand's late designer, Karl Lagerfeld's pieces, being especially coveted. Chanel's 11.12 bag, also known as the Chanel Classic Flap Bag, is a timeless piece characterised by its gold chain, diamond quilting, double flap, and iconic 'CC' clasp. The popularity of this bag has surged, with Chanel introducing waiting lists and increasing prices, making it a wise investment choice.

Dior is another powerhouse in the luxury bag market, with its Lady Dior bag being a true classic. Originally named 'chouchou' (French for 'favourite'), the bag was renamed in 1996 as a tribute to Princess Diana, who carried it faithfully for years. The updated D-Lite version of this bag commands a premium in the resale market, reselling for as much as 70-80% of the original retail price.

Finally, Hermès is synonymous with luxury and exclusivity. Their intentionally elusive and limited product strategy has created a perfect recipe for an investment handbag. The Hermès Birkin, in particular, has seen impressive returns, with a study by Deloitte and Credit Suisse finding that it had an average return of 38% in 2020—the highest of all collectible assets. A rare Himalaya Birkin sold at auction for a record-breaking £162,500, showcasing the potential returns on investing in this established brand.

In summary, when investing in luxury bags, it is essential to focus on established brands like Chanel, Dior, and Hermès. These brands have a strong track record of producing desirable, high-quality bags that retain or increase in value, making them a wise choice for investors seeking both financial gains and fashionable accessories.

Opt for neutral colours and designs

When investing in luxury bags, opting for neutral colours and designs is a wise choice for several reasons. Firstly, neutral-coloured bags are timeless and versatile. They can be paired effortlessly with various outfits, from a little black dress to a stylish pair of jeans, ensuring you get more wear out of your investment. Neutrals transcend seasonal trends, so your bag will remain fashionable all year round.

Additionally, neutral colours are always in style and can complement any personality type and dress style, whether traditional or modern. They also provide a perfect backdrop to highlight vibrant personalities and colourful outfits. For example, a black bag complements almost any outfit and is a forever classic, while grey tones add sophistication and freshness to your look, and brown tones add classiness and elegance.

When choosing a neutral bag, you can select from a range of shades, such as chocolate brown, taupe, beige, blush, butterscotch, and more. These colours offer a subtle warmth or coolness to your ensemble, allowing your personality to shine through.

Neutral-coloured luxury bags are also a smarter investment as they tend to have higher resale value and are less likely to go out of style. This means that even if your taste or preferences change over time, a neutral bag will still hold its appeal and can be easily passed on or resold.

Choose timeless pieces over trendy items

When it comes to investing in luxury bags, it's important to remember that not all bags will retain their value. To make a wise investment, opt for timeless pieces over trendy items. Here's why:

The Risks of Trendy Items

Trendy bags, like the Dior Saddle Bag, are subject to the whims of fashion. They may be in high demand at one moment, but their popularity can quickly fade. If you invest in a trendy item, you run the risk of it going out of style before you have a chance to sell it. This could lead to a loss of value and a difficult resale.

The Benefits of Timeless Pieces

On the other hand, timeless staples like the Chanel Flap Bag or the Louis Vuitton Neverfull are always in fashion. These bags have a classic design that endures over time. By choosing a timeless piece, you can be confident that it will retain its appeal and value, even if you decide to sell it years later.

The Chanel Flap Bag, for instance, is a perfect example of a timeless investment. According to Sotheby's, this bag is now 10 times more expensive than it was in the 1990s. Its value has increased by 50% between 2020 and 2022, and it saw another 16% increase in 2023. This bag's enduring popularity demonstrates why choosing timeless pieces is a wise investment strategy.

Additionally, sticking with neutral designs and colours is a safer bet. Neutral tones, such as beige, black, and navy, are always in demand and less likely to go out of style. This makes it easier to resell your investment piece in the future.

The Impact of Brand and Scarcity

When investing in luxury bags, it's crucial to consider the brand and its reputation. Legacy brands like Chanel, Hermès, and Louis Vuitton tend to retain their value better over time. The average Chanel or Hermès handbag price increases by approximately 12% annually, making them more lucrative investments than other assets.

Scarcity also plays a significant role in driving up the value of certain luxury bags. For example, the Hermès Birkin bag is known for its limited availability, which increases its desirability and resale value. The Telfar Shopping Bag, also known as the "Bushwick Birkin," employs a similar strategy by limiting supply to drive up demand.

In summary, when investing in luxury bags, it's generally wiser to choose timeless pieces over trendy items. Timeless bags from reputable brands are more likely to retain their value and appeal over time, making them a safer and more profitable investment option.

Invest in limited-edition luxury pieces

Investing in limited-edition luxury pieces is a great way to diversify your portfolio. Luxury handbags, in particular, have become a popular option for investors, especially women, who are more likely to invest in alternative investments such as bags, wine, yachts, and art. In fact, research by Credit Suisse has shown that jewellery, handbags, and watches are the most stable options within the category of collectible investments.

When it comes to luxury bags, the "holy trinity" of brands to invest in are Chanel, Hermès, and Louis Vuitton. The average Chanel or Hermès handbag price increases by approximately 12% annually, outperforming both the stock market and gold in terms of price growth. For example, a Chanel bag that cost US$1,650 in 2005 is now worth over US$10,000. Similarly, a Hermès Birkin bag that could be purchased for US$4,000 in 2000 would cost over US$11,000 today.

Limited-edition and highly desirable pieces, such as the Himalaya Birkin, which sold at auction for over US$440,000, or the Ombré Birkin, tend to see the most significant increases in value. These bags will cost a significant amount upfront, but their value can increase exponentially over time.

When investing in limited-edition luxury bags, it is important to consider the following:

• Choose a timeless design: Opt for a bag that is unlikely to go out of fashion, such as the classic Chanel Flap Bag. Trendy items may fall out of favour and be difficult to sell in the future.
• Stick with neutral colours: Neutral designs are always in demand, and there is no risk of a specific colour going out of style, making it harder to sell your investment later on.
• Authenticity and packaging: Ensure you receive the certificate of authenticity and original packaging when purchasing a luxury bag. This will help prove the legitimacy of your item when it comes time to resell.
• Budget: Only buy what you can afford, even if you are certain the bag will increase in value. Luxury bags are a consumer good, and their prices do not always grow exponentially.
• Diversify: Luxury bags should not be your primary financial investment. They are a great addition to a wider and diverse investment portfolio.

Diversify your portfolio with other luxury accessories

Diversifying your portfolio with other luxury accessories is a great idea. While luxury bags can be a brilliant alternative investment option, it's important to remember that not every bag is a good investment. The same goes for other luxury accessories. So, what should you consider when diversifying your portfolio?

First, look for timeless staples. Choose pieces that are unlikely to go out of fashion, such as the Dior Saddle Bag or the Chanel Flap Bag. These items tend to have a higher resale value and can be easier to sell. Unique and limited-edition pieces can also be a good investment, but they may come with a higher price tag upfront.

Second, stick with neutral designs and colours. This is a safer option as there is less risk of a specific colour or pattern going out of style, which could make reselling your investment challenging.

Third, when purchasing luxury accessories, be sure to keep the certificate of authenticity and the original packaging. These can help prove the legitimacy of your item when it comes time to resell.

Fourth, only buy what you can afford. Investing in luxury accessories can be exciting, but it's important to stay within your budget. Luxury accessories can be expensive, and you don't want to spend decades paying off a debt.

Finally, consider investing in other luxury accessories like jewellery and watches. Brands like Rolex and Patek Philippe often grow in value over time, but be prepared to spend at least a few thousand dollars.

Remember, luxury bags and accessories should be part of a diverse investment portfolio. Do your research, understand the market, and only invest what you can afford to lose.

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