Handbags - a luxury collectable with strong performance against inflation and uncertainty

Handbags - a luxury collectable with strong performance against inflation and uncertainty
A BLACK LAMBSKIN LEATHER JUMBO CLASSIC SINGLE FLAP BAG WITH GOLD HARDWARE CHANEL, 2008 Source - Christie's

In a world marked by heightened uncertainty and inflation, investors and collectors are seeking alternative assets that can provide value preservation and potential returns. Among the various collectables, luxury bags have emerged as an intriguing option, offering both aesthetic appeal and investment potential. This article examines the performance and value of luxury bags,

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with a specific focus on Chanel handbags, in the face of economic fluctuations and rising prices. Drawing insights from Deloitte, Credit Suisse and Sotheby's reports, we explore the resilience of luxury bags as stores of value, their response to inflation and interest rates, and the recent price hikes in Chanel bags along with the thriving resale market.

Executive Summary

Luxury bags outperformed: Luxury bags, specifically Chanel handbags, are considered to offer the best inflation protection among collectables. This implies that their value tends to hold up well during periods of high inflation. Furthermore, luxury bags, including Chanel handbags, have seen strong performance in recent years, 2020 saw unexpected niche collectables areas such as luxury bags perform well.

A MATTE PINK ALLIGATOR JUMBO CLASSIC DOUBLE FLAP BAG WITH ROSE GOLD HARDWARE CHANEL, CIRCA 2013 Source - Christie's

Strong 2021 performance after a disrupted 2020

  • Luxury handbags, particularly Chanel bags, experienced a significant rise in value in 2020.
  • The value of Hermes Birkin bags saw a substantial increase of 38% in 2020 but declined to -3.6% in 2021.
  • The return on Chanel handbags was 11.8% in 2020 and 24.5% in 2021.
  • In comparison, other collectables such as classic cars, fine wines, wristwatches, and jewelry also had positive returns, although at slightly lower rates.
  • Figures indicate that luxury handbags, particularly Chanel and Hermes Birkin bags, were standout performers in terms of value appreciation among collectibles in 2020.

Stores of value

  • Watches and handbags, particularly Chanel handbags, are highlighted as stores of value with low volatility and low draw downs.
  • The annual returns for watches and handbags range from 4.5% to 6.5%, with information ratios exceeding 100%. This indicates that the average returns consistently outpace the fluctuation ranges.
  • Rolex watches and Chanel handbags have particularly strong information ratios, with values of 200% or higher, meaning their average annual returns significantly exceed their usual fluctuation ranges.
  • Lagerfeld-designed Chanel handbags are expected to benefit from the scarcity effect in the coming years, while the broader evolution of the luxury handbag brand depends on sustaining collectors' excitement.
  • Hermes Birkin bags in contrast to Chanel bags have had higher volatility compared to global bonds or hedge funds among financial assets but offer a better risk-reward profile than the latter.
  • Pocket watches are noted as under performers among stores of value, with a less compelling information ratio and a smaller collector group compared to wristwatches.
  • These insights emphasize the value and stability of watches and handbags, particularly Chanel handbags, while also highlighting the specific dynamics and considerations within the market for different types of bags.
A CUSTOM BAMBOU & ÉTOUPE TOGO LEATHER BIRKIN 30 WITH GOLD HARDWARE HERMÈS, 2015 Source - Christie's

Inflation, interest rate and growth sensitivities

  • Chanel handbags are standout performers as stores of value with low volatility and low drawdowns.
  • Chanel handbags offer good protection against inflation, making them resilient during periods of elevated inflation.
  • Lagerfeld-designed Chanel handbags are likely to continue benefiting from the scarcity effect in the future.
  • Hermes Birkin bags have higher volatility but still offer a favorable risk-reward profile compared to certain financial assets.
  • Watches and jewelry, including Chanel handbags, are stores of value with impressive information ratios, indicating strong returns relative to volatility.
  • Traditional Chinese works of art also stand out as stores of value with significant value appreciation.
  • Different types of bags have varying sensitivity to inflation and interest rates, with Chanel handbags performing well and classic cars being more favorable in low or normal inflation times.
  • These takeaways emphasize the value and performance of Chanel handbags, Hermes Birkin bags, and other types of bags as stores of value and assets that can withstand inflation and economic fluctuations.

Gaining Insight into Recent Increases in Chanel Bag Prices and the Flourishing Resale Market

The article 'Understanding the Latest Chanel Bag Price Hikes and the Resale Market by Sotheby's' discusses Chanel's consistent price hikes for their luxury bags, the history of these price increases, and the resulting boom in the resale market. The key points from this article are below.

Key takeaways:

  • Chanel increased bag prices in March 2023, with the Chanel Classic flap bag prices rising by 16%, and other models like Coco Handle, Chanel 19, and Chanel Pearl Crush seeing a 14% increase.
  • Rising production costs and supply disruptions due to COVID-19 lockdowns are contributing factors to the price increase.
  • Growing global demand for Chanel bags is another significant factor driving up prices.
  • Chanel bag prices have been steadily increasing since 2008, with prices accelerating faster in the last five years.
  • Vintage Chanel bags from previous decades are selling at significantly higher prices on the resale market compared to their original retail prices.
  • The resale market for Chanel bags is thriving, and prices have reached record levels, with collectors seeking rare bags and sold-out styles.
  • Selling a Chanel bag or Chanel jewelry item is currently a favourable option due to high demand and limited supply in retail stores.
  • Sotheby's is mentioned as a platform where Chanel bags and accessories can be sold, and they are accepting both vintage and modern Chanel items for consignment.
  • Overall, the key takeaways highlight the price increase of Chanel bags, the reasons behind it, the growth of the resale market, and the opportunities for selling Chanel items.

Conclusion

As uncertainties persist and inflation looms, the appeal of luxury bags, particularly Chanel handbags, remains steadfast. These bags have proven to be more than just fashionable accessories; they have become sought-after assets with the potential for value appreciation and preservation. Deloitte's research highlights the exceptional performance of Chanel handbags in inflationary environments, positioning them as reliable hedges against rising prices. Furthermore, the scarcity effect surrounding Lagerfeld-designed Chanel handbags and the enduring demand for Hermes Birkin bags further solidify their appeal among collectors and investors.

Despite recent price increases, the resale market for Chanel bags is thriving, driven by growing global demand and limited supply in retail stores. Collectors are willing to pay record prices for vintage Chanel bags, which have significantly surpassed their original retail values. Sotheby's, a renowned marketplace, has embraced the growing interest in Chanel bags and provides opportunities for sellers to capitalize on this demand.

In conclusion, luxury bags, notably Chanel handbags, have proven their worth as stores of value with low volatility and impressive returns relative to other financial assets. They have weathered economic fluctuations, responded to inflationary pressures, and captivated collectors worldwide. As uncertainties persist and investors seek alternative avenues for wealth preservation and growth, the allure of luxury bags, with Chanel at the forefront, continues to shine bright.

Sources

Collectibles amid heightened uncertainty and inflation | Deloitte Luxembourg | Art & Finance
This initial report aims to provide an overview of some of the most popular collectible assets fueling investors’ imaginations over the years.

Sotheby's, Erica Kagan, (Mar 16, 2023), Understanding the Latest Chanel Bag Price Hikes and the Resale Market. https://www.sothebys.com/en/articles/understanding-the-latest-chanel-bag-price-hikes-and-the-resale-market

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