Last year, a Hermès handbag sold at auction for six figures. The collectors’ club of handbags is growing, but does the temptation to wear and use these luxury assets make them a good investment?
The 2020 edition of The Wealth Report included handbags in its Luxury Investment Index for the first time, joining the likes of art, classic cars, fine wine and rare whisky. For good reason, too. The asset value of Hermès handbags (the leader in the secondary handbag market, according to Christie’s auction house) increased by 13% in the past 12 months alone – more than any other luxury asset in the Knight Frank report. In 2019 alone, handbag sales at the top five auction houses totalled £26.4 million, according to the Luxury Handbag Report 2020.
For a truly collectible handbag, you can still be looking at six figures – in 2019, a Hermès sold in Hong Kong for the equivalent of US$386,000. But a handbag tends to be more affordable than a rare piece of art or a classic car, which means we’re starting to see more of them. “A handbag is very Instagrammable,” says Andrew Shirley, Editor of The Wealth Report. “They’re becoming more popular because of the rise of social media. It’s much easier to know what the trendy people are wearing, so if they’ve got the latest Hermès bag, other people will want it.”
Christie’s held its online Handbags sale in June. Bidders from 39 countries across six continents participated, one of whom secured a rare Hermès Birkin for £125,000 (estimated at £60,000–£80,000). In July, the auction house held its London Handbags & Accessories auction, where the sale of 120 pieces totalled over £1.8 million. In other words, more investors are turning to luxury items, like handbags, as serious investment pieces.
“People are just as interested in a Banksy print or a Ferrari as they are in a Gucci bag,” explains Sebastian Duthy, Managing Director of Art Market Research, the company behind The Wealth Report’s data and producer of the Luxury Handbag Report 2020.
Duthy attributes the luxury item’s success to a combination of “the canny younger investor” (a third of participants in Christie’s handbags auctions are Christie’s first-timers), for whom a handbag averaging five figures might be slightly more affordable than a classic car or rare whisky, and the eagle-eyed auction house. “Auction houses are brilliant at creating markets where there’s potential,” he says. “They spotted that luxury is a big growth area, particularly in secondary markets.”
Outside of London and New York, Christie’s also has a sales site for handbags in Hong Kong. The Far East has for a long time been a key driver behind the success of luxury markets. The rise in whisky recorded in The Wealth Report in 2019 was down to Chinese and Hong Kong buyers, and in 2020, the performance of handbags is no different.
A growing middle class has meant more people can afford to invest in these luxury accessories; while Christie’s estimates and sale prices can reach six figures, estimates can also come in below £100. Data from the World Economic Forum estimates that two billion Asians are members of the middle class, and that this could increase to as much as 3.5 billion in the next decade.
“The growth of the middle class has been a significant factor in China. Having these assets is important to them, and as long as that demand and the trajectory of the Chinese economy stays on track, the people will pay high prices,” says Duthy. There are, for example, 126 Hermès stores in Asia, compared with 113 in Europe and just 40 in North America. Demand in this part of the world is high, which means becoming a VIP Hermès customer and being able to get your hands on a limited-edition or brand-new bag is tricky. For most, the best entry point is the secondary market.
There’s no hard and fast rule on what makes a good handbag investment – as well as Hermès, Christie’s also represents names including Chanel, Louis Vuitton, Gucci, Dior and Fendi – but the market is starting to favour the more unusual styles. “We are seeing trends towards unusual vintage styles and rare and limited-edition pieces in bright colours,” says Rachel Koffsky, Christie’s Head of Sales, Handbags & Accessories, London, who adds that the sustainability conversation, which has resulted in a number of designers saying goodbye to animal skins in their design (Chanel, for example), is driving demand for these no-longer-in-production models, and adding a significant price tag to those available on the secondary market.
For these Instagrammable investments, there is one thing that really drives the highest prices. “The real holy grail is condition,” says Koffsky. “Pieces which appear untouched by age and use are highly coveted by collectors.” The Luxury Handbag Report reveals that 23% of Hermès Birkin bags in the report’s index were less than two years old when sold at auction. So, if you’re investing to sell on, Koffsky recommends investors “keep your pieces stored properly, use gently and take to the spa when in need of a refresh”.
But there’s something different about investing in a handbag compared to a piece of art or the rarest whiskies. Chances are, you’re collecting handbags because you’re truly passionate about fashion and you want to wear your investment. “It’s a fascinating market. It’s not just about the handbag, it’s about lifestyle and the way people are thinking about what they’re collecting,” says Duthy.
Koffksy, who cites handbags as her “greatest passion”, agrees. “Handbags are treasured, functional objects that should be worn and loved,” she says. “The price appreciation happens to be a great added benefit, but the most important aspect is to buy what speaks to you, what represents your style and lifestyle.”
But even for those collectors who have no plans to sell, sometimes the price tags these luxury accessories are achieving at auction are too much to resist. More and more of these items are selling at far beyond their estimate. In 2020, Christie’s sold a 2019 Hermès Limited Edition Bleu Zellige Swift Leather Quelle Idole with Palladium Hardware for £50,000 – five times its estimate. “Collectors are passionate and they say that they’ll never sell what they’re collecting, but this can change if they’re seeing the right price on the market,” says Duthy. But, like any asset or collectible, there’s no guarantee.
The combination of affordability and functionality makes the handbag a unique investment proposition. A handbag is an item that its owner can use – and, being on the more affordable end of the luxury spectrum, its owner might be more inclined to do so. But each time that handbag is used, the further away it gets from being in that holy-grail state of near-new condition that affords it that coveted price tag.