The Crazy Economics of the World’s Most Coveted Handbag
Kanebridge News
    HOUSE MEDIAN ASKING PRICES AND WEEKLY CHANGE     Sydney $1,620,822 (+0.21%)       Melbourne $982,926 (+0.06%)       Brisbane $1,009,356 (-1.26%)       Adelaide $923,788 (+0.47%)       Perth $903,798 (+0.06%)       Hobart $738,016 (-0.31)       Darwin $683,268 (-0.53%)       Canberra $947,837 (-2.13%)       National $1,048,958 (-0.25%)                UNIT MEDIAN ASKING PRICES AND WEEKLY CHANGE     Sydney $771,811 (+0.48%)       Melbourne $498,317 (-0.21%)       Brisbane $604,029 (+0.74%)       Adelaide $473,315 (+0.11%)       Perth $484,865 (+1.36%)       Hobart $517,864 (+0.68%)       Darwin $369,303 (-3.27%)       Canberra $488,239 (+1.38%)       National $549,209 (+0.47%)                HOUSES FOR SALE AND WEEKLY CHANGE     Sydney 11,549 (+165)       Melbourne 15,638 (+59)       Brisbane 8,333 (+27)       Adelaide 2,369 (+5)       Perth 6,280 (+130)       Hobart 1,120 (-18)       Darwin 283 (-2)       Canberra 1,143 (+67)       National 46,715 (+433)                UNITS FOR SALE AND WEEKLY CHANGE     Sydney 9,757 (+153)       Melbourne 8,911 (+100)       Brisbane 1,776 (+43)       Adelaide 446 (+14)       Perth 1,475 (-13)       Hobart 196 (+8)       Darwin 355 (-7)       Canberra 1,092 (+19)       National 24,008 (+317)                HOUSE MEDIAN ASKING RENTS AND WEEKLY CHANGE     Sydney $800 ($0)       Melbourne $600 ($0)       Brisbane $630 (-$5)       Adelaide $610 ($0)       Perth $650 (-$10)       Hobart $550 ($0)       Darwin $730 (-$20)       Canberra $680 ($0)       National $665 (-$5)                UNIT MEDIAN ASKING RENTS AND WEEKLY CHANGE     Sydney $750 (-$1)       Melbourne $575 (-$5)       Brisbane $625 (+$5)       Adelaide $500 ($0)       Perth $620 (+$20)       Hobart $450 ($0)       Darwin $580 (+$30)       Canberra $550 ($0)       National $593 (+$6)                HOUSES FOR RENT AND WEEKLY CHANGE     Sydney 5,780 (-41)       Melbourne 6,692 (-23)       Brisbane 4,278 (+31)       Adelaide 1,425 (+36)       Perth 2,283 (+7)       Hobart 265 (+12)       Darwin 90 (+11)       Canberra 474 (-38)       National 21,287 (-5)                UNITS FOR RENT AND WEEKLY CHANGE     Sydney 9,676 (-207)       Melbourne 6,557 (+72)       Brisbane 2,213 (-18)       Adelaide 389 (+14)       Perth 576 (-45)       Hobart 94 (-9)       Darwin 201 (+11)       Canberra 786 (-10)       National 20,492 (-192)                HOUSE ANNUAL GROSS YIELDS AND TREND         Sydney 2.57% (↓)       Melbourne 3.17% (↓)     Brisbane 3.25% (↑)        Adelaide 3.43% (↓)       Perth 3.74% (↓)     Hobart 3.88% (↑)        Darwin 5.56% (↓)     Canberra 3.73% (↑)        National 3.29% (↓)            UNIT ANNUAL GROSS YIELDS AND TREND         Sydney 5.05% (↓)       Melbourne 6.00% (↓)     Brisbane 5.38% (↑)        Adelaide 5.49% (↓)     Perth 6.65% (↑)        Hobart 4.52% (↓)     Darwin 8.17% (↑)        Canberra 5.86% (↓)     National 5.62% (↑)             HOUSE RENTAL VACANCY RATES AND TREND       Sydney 0.8% (↑)      Melbourne 0.7% (↑)      Brisbane 0.7% (↑)      Adelaide 0.4% (↑)      Perth 0.4% (↑)      Hobart 0.9% (↑)      Darwin 0.8% (↑)      Canberra 1.0% (↑)      National 0.7% (↑)             UNIT RENTAL VACANCY RATES AND TREND       Sydney 0.9% (↑)      Melbourne 1.1% (↑)      Brisbane 1.0% (↑)      Adelaide 0.5% (↑)      Perth 0.5% (↑)      Hobart 1.4% (↑)      Darwin 1.7% (↑)      Canberra 1.4% (↑)      National 1.1% (↑)             AVERAGE DAYS TO SELL HOUSES AND TREND         Sydney 28.6 (↓)       Melbourne 30.4 (↓)       Brisbane 31.2 (↓)       Adelaide 24.8 (↓)     Perth 35.7 (↑)        Hobart 29.4 (↓)       Darwin 37.5 (↓)       Canberra 29.6 (↓)       National 30.9 (↓)            AVERAGE DAYS TO SELL UNITS AND TREND         Sydney 28.8 (↓)       Melbourne 31.2 (↓)     Brisbane 31.5 (↑)        Adelaide 23.1 (↓)       Perth 33.7 (↓)     Hobart 33.0 (↑)      Darwin 47.7 (↑)        Canberra 34.4 (↓)       National 32.9 (↓)           
Share Button

The Crazy Economics of the World’s Most Coveted Handbag

The Hermès Birkin is one of the fashion world’s most conspicuous markers of wealth. Is it worth the investment?

By CAROL RYAN
Mon, Jun 24, 2024 9:06amGrey Clock 8 min

You could double your money in five minutes by buying a Birkin handbag at your local Hermès boutique and then flipping it. But getting your hands on the world’s most sought after purse is a lot more complicated than it sounds.

A basic black leather Birkin 25 costs $11,400 before tax at the Hermès store. Buyers can walk out and immediately give it to a handbag reseller like Privé Porter in exchange for $23,000 in cash. Privé Porter will then sell the Birkin on Instagram or at its Las Vegas pop-up store, possibly on the same day—box fresh, with receipt—for up to $32,000. All this for a bag that analysts estimate costs Hermès around $1,000 to make.

The unusual economics of the Birkin have upended the normal balance of power between shopper and store worker. At the Hermès boutique, it is the buyer who kowtows. Some of the wealthiest women in the world have brought homemade cookies to the store to cozy up to their sales assistant. They have offered tickets for Beyoncé concerts, trips to the Cannes Film Festival in a private jet and even envelopes stuffed with cash—all to get their hands on a Birkin.

Shoppers also spend tens of thousands of dollars on Hermès products they might not particularly want, such as an $87,500 canoe, to be in the running for a rare purse.

The Birkin turns 40 this year and is maturing into a phenomenon. To carry one is to signal that the wearer can afford to drop anywhere from $10,000 to $100,000 on a handbag. It appeals to the limelight-seeking Kardashians, who own extensive collections, but also to European Central Bank President Christine Lagarde , who is often photographed on her way to meetings carrying a Birkin.

The purse anchors the Hermès founding family’s $150 billion fortune. But they aren’t the only ones getting rich: An army of unofficial flippers all over the world profit from reselling the purse.

The Birkin first hit shelves in 1984, a couple of years after the late actress Jane Birkin and Jean-Louis Dumas, then chief executive of Hermès, met on a flight to London. After complaining that she couldn’t find the right-size handbag, the two sketched out a design together—on a drink napkin or an Air France sick bag, depending on the retelling. In return for lending her name to the new product, Hermès paid Birkin an annual royalty.

The story about the bag’s creation is part of its appeal and one of the reasons why competitors have found it hard to replicate its success. “It’s a great narrative,” said David Dubois, associate professor of marketing at the business school Insead. Shoppers like the “serendipity of the meeting” and that a woman who was admired for her style had a direct hand in its design.

The purse didn’t take off right away. During the early 1990s, shoppers could walk into an Hermès boutique and buy one off the shelf. Birkins weren’t reselling for more than their original price tag back then.

But something shifted in the years after the 2008-09 financial crisis, according to Matthew Rubinger, now chief commercial officer at the online marketplace 1stDibs and one of the first people to recognise the Birkin’s resale potential. Rock-bottom interest rates meant more money was sloshing around, and it began to find its way into alternative assets.

It also became bad taste to wear a new “it bag” every season when the economy was on the ropes. This played to the strength of no-logo designs like the Birkin. Rubinger established the handbag departments of both Heritage Auctions and Christie’s and built them into multimillion-dollar businesses. When rare Himalaya Birkins began to set records at auction, people took notice.

“Once they started getting above $100,000, things got more serious,” he said.

Today, shoppers who want a Birkin at the Hermès store must jump through hoops. First, they need to establish a good rapport with one of the brand’s sales assistants. The next step is to spend serious cash on other goods, such as silk scarves, watches and shoes, to “qualify” for a bag, according to Birkin collectors.

When a shipment of Birkins arrives at an Hermès store from France, the leather-goods manager assigns the purses to individual sales assistants, all of whom have a list of wealthy clients waiting to be offered a bag. The sales assistant must make a case for which individual on that list deserves to be offered a Birkin and get the manager’s approval.

This has created a perception among Hermès shoppers that the biggest spenders get access to Birkins first. Hermès is being sued in a California court by two wounded shoppers who allege that the brand only sells Birkins to “worthy” customers and makes purchases of the bag conditional on buying other items at the store. Hermès said in a recent court filing that it doesn’t require customers to buy other products before getting one of the coveted bags.

Just how much do shoppers need to drop to be offered a bag? Birkin collectors say that there is no hard rule but that most people can expect to shell out $10,000 or more on Hermès scarves, shoes and clothes before they will be offered a basic Birkin. To get a rare bag like the Himalaya Birkin, they might need to spend $200,000 or more.

This is known as the Hermès “prespend” or the “spend ratio” in Birkin-collecting circles. Hermès never spells this out explicitly, nor has it ever used these terms. But Birkin hopefuls say they have been told by their sales assistants that they need to visit the store more often. Resellers say that Hermès sales assistants don’t make commissions on Birkins, but that they can leverage hunger for the bag to sell other products for which they are rewarded.

Even after spending tens of thousands of dollars, Birkin hunters might not be offered the size or colour bag they want. This creates a golden opportunity for resellers.

Say a woman who shops regularly with the brand wants a red Birkin but is offered green. Rather than appearing ungrateful—because it is important to keep the sales assistant on her side in the Birkin-hunting game—she will buy the bag, knowing it can be sold to a reseller for a profit and hope to get the red later.

Hermès knows its top clients are flipping the bags. Read the fine print on a Birkin receipt, and the company asks that its customers will not, “directly or indirectly, resell Hermès products purchased in our boutiques for commercial purposes.” No Hermès shopper was willing to go on the record for this article about the experience of flipping the bags to a reseller, out of concern over being blacklisted by the brand.

The resale market has become a kind of “buy-now button” for Birkins, said Michelle Berk, founder of Privé Porter. Some shoppers are willing to pay a big premium to get their hands on a Birkin immediately, in the exact color they want. They might not have the patience for the steps needed to secure one of the bags at the Hermès store.

In the past, resellers recruited flight attendants or polished overseas students to buy Birkin bags in Hermès stores all over the world in return for a fee. Now, the flippers get most of their supply from Hermès’s VIP customers. They also get Birkins by trading with their peers on WhatsApp. If clients are looking for a size or colour that one seller doesn’t have in stock, they can put out a call on the resellers’ group chat to see if anyone has that model.

One way Birkin hunters can accelerate an in-store purchase is by splashing out on the brand’s furniture or fine jewellery, said Judy Taylor, founder of Madison Avenue Couture and a handbag reseller for 15 years.

They can pick up an $8,000 paper basket for the home office, a $70,000 gold bracelet or a $140,000 sofa. Taylor said Hermès’s sales in categories like fine jewellery or watches, where the brand isn’t known for its expertise, are at least partially driven by Birkin hunters.

“No offence to Hermès, but if you can buy a necklace from Van Cleef for the same price as Hermès, you’ll likely go to Van Cleef,” she said.

Really big spenders are offered bespoke goods. Hermès does a sideline in special-order skis, skateboards and fishing gear for superwealthy clients and can customise the interior of a yacht or chopper. Privé Porter’s Berk received a message from a customer who was offered an $87,500 canoe. These buyers get access to the rarest Birkins.

An unusually large amount of new Hermès inventory ends up for sale in the secondhand market—another sign that Birkin mania might be driving sales of products that customers don’t really want. Of all the nonhandbag Hermès items on The RealReal , 35% are in pristine condition, according to data supplied by the luxury resale website. The average for other designers on The RealReal, including Louis Vuitton, Gucci, Prada, Bottega Veneta and Saint Laurent, is 20%.

The Birkin’s popularity is very flattering for Hermès and might also help the company to keep its marketing budget low. It doesn’t need to promote itself when celebrities can be relied upon to freely splash photos of their bags on social media. In 2023, Hermès reinvested 4% of its sales back into promotions, compared with 12% at crosstown rival LVMH Moët Hennessy Louis Vuitton.

But the circus does cause problems for Hermès. Last year, the company had to fire staff at its Miami Design District store after some customers got more than their official allocation of Birkins, according to sources. Collectors say Hermès only allows two bags a year per individual, but employees might have been helping shoppers to get around this.

Shoppers and resellers have tried to bribe their way to Birkins. Hermès has strict rules about what customers can and can’t give sales assistants as gifts. Well-behaved Birkin hunters give goods that can be handed over openly at the store and shared among employees—hence the home-baked cookies. Trays of baklava are another go-to.

Hermès doesn’t like the flipping, but stamping out the resellers would harm the brand’s own interests. The company raised prices of its exotic-skin Birkins by around 20% in January. Resellers think the move was aimed at squeezing profits in the secondhand market, but it hasn’t worked. Dealers passed on the increase to their customers without a hitch.

Hermès could increase production and flood the market with new bags. This would end the financial incentive to resell Birkins, but it would also destroy their mystique.

Why are women— and increasingly men , too—so hungry for the Birkin? One justification for spending huge sums on a handbag is that the Birkin is a good investment. Except, it isn’t really. Any profit on reselling a bag purchased in store will be lower after factoring in the thousands of dollars spent on other goods to qualify.

A bag sourced from a reseller or on the block at Christie’s has limited upside because a hefty markup is factored into the price. A Birkin bought at auction in 2010 would sell for around 50% more today, according to Art Market Research data. Contemporary art, watches and classic cars have all performed better. Hermès’s own stock has been a much smarter investment than the Birkin, rising more than 20-fold since 2010.

Shoppers seem to lust after the Birkin because it is rare, expensive and well made. There is no better status symbol for those who want to display their wealth. And the hunt involved in getting one might be the whole point. Wealthy shoppers tolerate waiting at the Hermès store in a way that wouldn’t be acceptable in other areas of their lives.

Even how a person treats the Birkin has turned into a kind of code. Some collectors store them in glass display cabinets, hardly ever using them. This preserves their resale value.

But the supermodel Irina Shayk was photographed last year carrying her dog in a black crocodile Birkin. According to Sasha Skoda, The RealReal’s vice president of merchandising, the subtext to the “messy Birkin” trend is that you have to be seriously rich to treat a $40,000 handbag this casually. Jane Birkin was also hard on her bags, covering them with political stickers and tying charms around the handles. One of her weathered black Birkins sold at auction for £119,000 in 2021, around $150,000 at current exchange rates.

Rival luxury brands are trying to come up with challengers. Louis Vuitton recently launched a $1 million handbag. Chanel has almost doubled the price of its classic flap purse in four years to make it more exclusive.

For now, though, the reign of the Birkin looks secure. If you want to own one, better dig deep at the Hermès store.

—Herme`s Birkin bag provided by The RealReal.



MOST POPULAR
11 ACRES ROAD, KELLYVILLE, NSW

This stylish family home combines a classic palette and finishes with a flexible floorplan

35 North Street Windsor

Just 55 minutes from Sydney, make this your creative getaway located in the majestic Hawkesbury region.

Related Stories
Money
World Economy on Track for Slight Pickup as Inflation Is Tamed
By PAUL HANNON 29/09/2024
Lifestyle
Unicef Has a Growing Circle of Ultra-Wealthy Individuals on Tap
By ABBY SCHULTZ 28/09/2024
Lifestyle
When It Comes to Private Jet Perks, the Sky’s the Limit
By ERIC GROSSMAN 27/09/2024
World Economy on Track for Slight Pickup as Inflation Is Tamed

In its quarterly report on the economic outlook, the OECD said it now expects global output to increase by 3.2% in 2024 and again in 2025

By PAUL HANNON
Sun, Sep 29, 2024 3 min

Falling interest rates and recovering real wages will help drive a slight pickup in global economic growth this year and next, while recent falls in oil prices could aid the final push to tame inflation, the Organization for Economic Cooperation and Development said Wednesday.

However, the Paris-based research body warned that “comparatively benign” projections may not come to pass, with uncertainties remaining about how large an impact high interest rates will have on demand in the months ahead, while an escalation of the conflicts in the Middle East could push oil prices sharply higher.

In its quarterly report on the economic outlook, the OECD said it now expects global output to increase by 3.2% in 2024 and again in 2025, having grown by 3.1% last year. That was a slight upgrade from the 3.1% growth it forecast in May, and a sizable revision from the 2.7% expansion it expected to see when it published forecasts at the end of 2023.

The U.S. is largely responsible for that better performance, but India and Brazil are also growing more rapidly than expected, as is the U.K. By contrast, Germany and Japan have disappointed, with the former now forecast to hover on the brink of stagnation this year, and the latter to experience a small contraction.

However, despite the improved outlook for growth, and inflation rates that the OECD expects to fall to central-bank targets by the end of next year, consumer confidence has yet to pick up significantly, which would give a further boost to growth.

The OECD said that persistent dissatisfaction with economic performance, which is not limited to the U.S., is likely linked to the fact that food prices remain well above their pre-pandemic levels.

“There is a disconnect between how the economy is perceived and how the economy is doing,” said Alvaro Pereira , the OECD’s chief economist. “For people who go to the supermarket, food prices relative to wages are still higher.”

In the U.S., the gap between food-price and wage inflation between the end of 2019 and the second quarter of this year was roughly four percentage points. But that gap was much wider in large European economies, and above 15 percentage points in Germany. In South Africa, it was above 20 points.

The recent fall in oil prices may help offset some of that dissatisfaction, and boost a global fight to tame inflation that appears to be in its final stages. The OECD estimated that the 10% decline since July would knock half a percentage point off the global rate of inflation, if it were to be sustained. But it is far from certain that it will be.

“If the conflict in the Middle East escalates, this will have an impact on energy prices,” Pereira said.

Should escalation be avoided, the OECD said further falls in oil prices could allow for a faster reduction in central-bank interest rates than it currently expects, and boost growth in countries that don’t produce oil.

With inflation rates set to fall further, the OECD said central banks should lower their key interest rates, but in a manner that is “carefully judged” to ensure price rises continue to slow. It expects the Federal Reserve’s key rate to fall by a further 1.5 percentage points by the end of 2025, while the European Central Bank’s key rate is forecast to fall by 1.25 percentage points.

The Paris-based body said the interest-rate rises that central banks announced in 2022 and 2023 to counter a surge in inflation continue to weigh on growth, although with diminishing force.

But it noted that many households and businesses continue to see the interest rates they pay rise as their debts mature and they enter into new contracts. The OECD estimated that almost a third of rich-country corporate debt is due to mature in 2026, with new debt issued to replace it likely paying a higher rate of interest.

The OECD left its forecast for U.S. growth in 2024 unchanged at 2.6%, and also retained its 4.9% projection for China. Pereira said the package of stimulus measures announced by the Chinese government Tuesday could lead to a “slight” upward revision when the OECD next releases growth forecasts in early December.

MOST POPULAR
11 ACRES ROAD, KELLYVILLE, NSW

This stylish family home combines a classic palette and finishes with a flexible floorplan

35 North Street Windsor

Just 55 minutes from Sydney, make this your creative getaway located in the majestic Hawkesbury region.

Related Stories
Property
The key drawcard for property buyers in Australia’s capital city markets
By Bronwyn Allen 08/08/2024
Money
The top 10 motivators for Australian investors
By Bronwyn Allen 25/07/2024
Money
Dating Apps Once Ran on Novelty. For Some Users, the Fun Is Over.
By SARA ASHLEY O’BRIEN 25/06/2024
0
    Your Cart
    Your cart is emptyReturn to Shop