When Can Luxury Goods Be a Wise Investment?

Woman with black Chanel leather bag with silver chain stock photo
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Chanel, Balenciaga, Louis Vuitton. These luxury brands speak for themselves. They are not only timeless classics, but they can be a great investment as well. According to The Business Of Fashion, designer bags in particular have been seen to retain their value over time thanks to brand trust and classic styles.

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As the outlet noted in a recent article, “As top luxury labels raise prices and tighten distribution, designer bags are garnering higher prices at resale, with some styles from coveted brands retaining a significant portion of their retail value long after purchase.”

During the pandemic, accessibility has diminished due to supply chain issues. Given that people are less likely to spend money going out to restaurants (or vacations) during the pandemic — and instead focused on goods — it has driven up demand for said goods, particularly on the resale side.

Designer Bags Hitting High Prices at Auction

Designer bags are a discrete category at luxury auction houses such as Sotheby’s and Christie’s, per The Business of Fashion, where bags are garnering high prices from bidders. Further, according to a report from The RealReal — an online marketplace for luxury consignment — those prices are up 26% this year, with Hermès, Louis Vuitton and Chanel fetching the highest prices (as much as 55% over the original retail price).

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Part of this is due to the advent of online luxury sites like The RealReal, Hardly Ever Worn It and Rebag that have cropped up in the past few years. The success of these sites indicates a demand for online shops selling high ticket items as many designer brands instead focus more on in-store experiences.

“With the few brands that are holding out from e-commerce, they don’t have the same accessibility from the primary market if you’re not shopping in-store or have your sales associate that you’re working with,” Kelly McSweeney, merchandising manager at The RealReal, told The Business Of Fashion. “That unintentionally paves the way for resale, where people can… get that immediate gratification. She also added, “The handbag demand shows no signs of slowing down any time soon.”

Gen Z Flipping Luxury Brand Items for Profit

In fact, as Bloomberg pointed out, Gen Z has found an inflation hack by “shopping to sell” luxury brands. A 2022 “Luxury Resale Report” by The RealReal noted that “the secondary market for luxury saw massive growth this year, primarily among Gen Z and Millennials.”

Bloomberg suggested that the 25-and-under crowd sees luxury shopping as a “sport” where they can get the best finds and resell them at a higher price than they paid, thereby making a profit. It’s a trend that is set to continue to grow.

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In fact, it was not too long ago that a report showed investing in a luxury handbag was better than investing in gold. As Bag Hunter noted in their analysis, an Hermès Birkin bag, for example, increased in value by 500% over the past 35 years and was a “historically safer investment than the stock market.”

In a February article published by Money Week, the outlet noted there are realistic ways to profit as luxury items keep skyrocketing in popularity, and there’s good reason to expect the trend to continue. First is the fact that designer houses have built a reputation over a long period of time — they are unparalleled status symbols that people covet, especially with so many celebrities touting them. Second, designer goods are starting to attract the eye of younger consumers, as exhibited in the aforementioned Bloomberg report, which all but signals their longevity.

Luxury Brands (as an Investment) May Be Immune to Inflation

Additionally, per Money Week, luxury brands are basically immune to price structuring and inflation. “Their margins are high, and they can put up their prices, because that is what their deep-pocketed customers already expect.” So when investing and reselling the item, you might expect the same high return.

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There’s one key pointer to keep in mind when making your luxury investment, however: authenticity. Whether you are buying diamonds or handbags you will always want to make sure you are getting an authentic item. The rise of the counterfeit market (and manufactured gems) has become an issue as demand has increased for these coveted items — so always look for brand identifiers, ask for certificates of authenticity and consult an expert when needed for a second opinion.

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About the Author

Selena Fragassi joined GOBankingRates.com in 2022, adding to her 15 years in journalism with bylines in Spin, Paste, Nylon, Popmatters, The A.V. Club, Loudwire, Chicago Sun-Times, Chicago Tribune, Chicago Magazine and others. She currently resides in Chicago with her rescue pets and is working on a debut historical fiction novel about WWII. She holds a degree in fiction writing from Columbia College Chicago.
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