When can luxury goods be a wise investment?

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Chanel, Balenciaga, Louis Vuitton. These luxury brands speak for themselves. Not only are they a timeless classic, they can also be a great investment. According to The Business Of Fashion, designer bags 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 handbags command higher resale prices, with some styles from coveted brands retaining a significant portion of their retail value long after purchase.”

During the pandemic, availability decreased due to supply chain issues. Given that people are less likely to spend money at restaurants (or on vacations) during the pandemic — and instead focus on merchandise — this has increased demand for said merchandise, especially on the resale side.

Designer bags at high prices at auction

Designer handbags are a separate category at luxury auction houses such as Sotheby’s and Christie’s, according to The Business of Fashion, where bags fetch high prices from bidders. Additionally, according to a report from The RealReal – an online luxury consignment marketplace – these prices have risen 26% this year, with Hermès, Louis Vuitton and Chanel commanding the highest prices (up to 55% above original retail price).

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

“With the few brands that are holding on to e-commerce, they don’t have the same accessibility of the primary market if you don’t shop in-store or have your sales associate that you work with,” Kelly McSweeney, merchandising manager at The RealReal, told The Business Of Fashion. “It inadvertently paves the way for resale where people can … get that instant gratification.” She also added: “The search for handbags shows no signs of slowing down anytime soon.”

Generation Z is turning luxury branded items for profit

In fact, as Bloomberg pointed out, Gen Z has discovered an inflation hack by “shopping to sell” luxury brands. The 2022 Luxury Resale Report from The RealReal notes that “the luxury aftermarket saw tremendous growth this year, primarily among Gen Z and Millennials.”

Bloomberg suggests that under-25s view luxury shopping as a “sport” where they can get the best finds and resell them at a higher price than they paid, thus making a profit. This is a trend that will continue to grow.

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

In a February article published by Money Week, the store noted that there are realistic ways to profit as the popularity of luxury items continues to skyrocket, and there is good reason to expect the trend to continue. The first is the fact that designer houses have built reputations over a long period of time – they are unparalleled status symbols that people crave, especially with so many celebrities promoting them. Second, designer goods are beginning to catch the eye of younger consumers, as shown in the aforementioned Bloomberg report, which hardly signals their longevity.

Luxury brands (as an investment) can be immune to inflation

Also, according to Money Week, luxury brands are largely immune to price structuring and inflation. “Their margins are high and they can raise their prices because that’s what their deep-pocketed customers already expect.” So when you invest and resell the item, you can expect the same high return.

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However, there is one key point to keep in mind when making your luxury investment: authenticity. Whether you’re buying diamonds or handbags, you’ll always want to make sure you’re getting an authentic item. The rise of the market for counterfeits (and manufactured gems) has become a problem as demand has increased for these coveted items – so always look for brand identifiers, ask for certificates of authenticity and consult an expert when necessary 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 articles in Spin, Paste, Nylon, Popmatters, The AV Club, Loudwire, Chicago Sun-Times, Chicago Tribune, Chicago Magazine and others. She currently lives in Chicago with her rescue pets and is working on a debut historical fiction novel about World War II. She holds a degree in fiction writing from Columbia College Chicago.

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