Being a big luxury handbag lover, off late, the constant rise in prices of bags has now started to pinch me each time I indulge. I remember about two years ago, a really good handbag would cost me under two thousand dollars, but now, every time I start saving for a new bag, I end up crossing the 2k USD mark. I can almost never save up for another Chanel 2.55 bag after I got my first one in 2010. The price for a 2.55 reissue large was roughly about 2.2 lacs INR in December 2010, now that same bag will cost me nearly 3 lacs INR. That's a big difference!
Whilst I know some brands like Chanel have customary annual price hikes, especially for their classic models, some brands raise prices according to the demand for certain goods. Take the Celine Trapeze for example, when it was introduced, the starting price was 1,800 dollars (not including tax), but by the time I was done saving up that much money, the prices had gone up to 2,300 dollars because it was the IT bag of the season. Forget totes, even a good leather clutch with very little hardware can cost you over a thousand dollars. The classic Saint Laurent Paris Y clutch costs about 1,000 dollars, the Givenchy Antigona clutch can set you back nearly 1400 USD and the Valentino Gryphon clutch where the only hardware is a gold coloured gryphon costs about 82,000 INR. These are some crazy prices for such little leather.
I got down to researching the reason behind the drastic changes in prices. Has the cost of raw materials and labour gone up? Is the Veblen goods theory? Is it the increase in demand especially from emerging markets like India and China? Or simply a combination of everything?
Lets start with the cost of raw materials, namely leather. Luxury brands now are choosing to produce more leather bags as opposed to cheaper canvas bags due to a rising demand for leather. In the last few years, there has been a significant increase in the price of superior quality hide especially from French tanneries where most luxury brands source the leather from. Calfskin is a by product of beef which has seen a decrease in consumption, especially in Europe due to people becoming more health conscious. Fewer cows being slaughtered limits the supply of leather. Also, strict competition from third world leather producers has left only a handful of tanneries still operating in France. According to the Wall Street Journal, Tanneries Haas, one of the oldest tanneries in France receives orders from Louis Vuitton, Hermes, Bottega Veneta and Chanel. A lot of demand from a single source.
Apart from cowhide, exotic skin handbags are also high in demand. Crocodile leather especially, has increased in demand drastically is one of the toughest to produce. At a Chanel boutique in Dubai, a very sweet salesman explained to me why a croc Chanel 2.55 cost 150,000 AED (nearly 25 lacs INR). Breeding crocodiles for leather is very tough, dangerous, expensive and takes a long time. The crocodiles are kept in pens which are cleaned regularly and only a few people have access to them. They are fed a strict diet to ensure growth and good quality skin. Moreover, the crocs are kept away from each other as they tend to get into fights which can ruin the skin. Despite that, only a small percentage of croc leather ends up being perfect enough to be used for a bag. Even the slaughter process follows a strict and ethical regime. Brands have now started to purchase tanneries like the case of LVMH and Kering to ensure their supply is constant. That still doesn't stop the price hikes.
Labour costs are constantly on the rise too, especially in France where they reached an all time high in 2013. In addition, finding the right kind of people that possess the know how required to craft hand made bags is also a challenge. Furthermore, the number of hours that go into creating a single bag are quite high. The Gucci Nouveau from example takes nearly two days to create and so does the Hermes Birkin. Most brands have now started circulating artistic images in the media about how their bags are made to show the mastery taking place behind the scenes. This will enable customers to see what they are purchasing is truly exquisite and worth the high costs.
Aside from raw material and labour costs, there is a steep increase in the demand for luxury goods as the global number of super HNWI increases especially in emerging markets like China and India. Hey, try strolling the streets of Florence in July or London in June and you'll see it swamped by Indians and Chinese walking around with large designer shopping bags! In fact, if you visit a luxury boutique in Dubai, there will ALWAYS be a Chinese speaking salesperson. According to a survey conducted by Bain & Co. in March 2013, the Indian luxury market is growing at 15% to 20% a year. Furthermore, the number of super HNWI's are also on a rise in our country. In 2011, Forbes reported 55 billionaires, whereas the current Forbes list includes 100 billionaires. This is just one example. Overall, the rich are just getting richer with nothing to stop them from paying super high prices.
Finally we can take into account the Veblen goods theory which states that the more expensive the commodity, the more desirable it is. A lot of us perceive something to be more appealing if we pay more money for it.
Honestly, it does get very tiring for me to have to constantly top up my savings account each time I set my eye on a bag I want. By the time I'm done saving, there comes a price hike! That still doesn't stop me though. Till the time people like me exist to fuel the industry, the prices will continue to rise. Such is life.
Till the next time,
XOXO
