There’s been a lot of bad news over the past 18 months in the luxury retail industry. We’ve covered all the twists and turns already: currency swings, China’s crackdown on corruption, dampened demand due to global terrorism….the list goes on. Consultants and industry experts keep piling on too: consumer sentiments are changing, logos are in and then logo’s are out and a shift in the millennial market.
(Read Bain’s predictions : Luxury Market Expected to Bottom Out This Year)
But it’s not all doom and gloom. It appears as if the product category closest to our hearts is still growing steadily. Yep, you heard that right, handbag sales are keeping the largest luxury houses in the black (some of them at least). According to a new report by NPD Group Inc., handbag sales grew 5% to $11.6 billion in 2015. Not only are buyers willing to spend more per bag, but they’re diversifying their collections. Women 18-45 now own an average of 13 handbags spread across 7 brands. There are a number of reasons we can identify that could explain this new phenomenon.
Unlike other accessories such as jewelry that serve a decorative role, handbags serve a purposeful one in our lives too. Busy women are looking for both functional pieces that can accommodate their cell phones, laptops, and other essentials, as well as fashionable pieces that make a personal statement. In terms of style, handbags express our individual look. Kathleen Kusek at Forbes explains… “Handbags have usurped watches and footwear as signature items that instantly inform the world of the owner’s fashion sense”.
Furthermore, to many bag collectors, handbags are also considered “investments” instead of just purchases. Certain bags like the Hermes Birkin and Kelly, and the Chanel Iconic bags like the Classic Flap, Reissue, and Boy, retain their value on the resale market since their prices increase every year.
The quest for a handbag is often part of the fun too. Many people consider the Hermes Birkin the “Ultimate Holy Grail bag” because the Birkin is one of the most sought-after handbags but can be very difficult to attain. Buying a Birkin requires lots of research, patience, and dedication. The air of exclusivity behind certain handbags keeps consumers more intrigued.
Handbags are becoming an asset class in their own right. While the industry may not be on board with it, in the last few years we’ve seen a proliferation of online handbag resellers, offering buyers the opportunity to actually see their bags appreciate in value. This could tip the scales for a prospective buyer on the fence about shelling out a few thousand dollars. But the emergence of a vibrant secondary market could also end up dampening sales, and it definitely won’t save struggling mid-tier brands like Michael Kors. It’s really too early to know what impact this new online environment might have.
At the very least, 5% annual sales growth is welcome news for an industry locked in battle with macroeconomic forces. Especially when sales in the rest of the segments are falling or completely flat.
Can handbags save the day in the luxury world? Share your thoughts on BopTalk.
Read related articles below:
Luxury 2016: The Year of Struggle
Luxury Market Expected to Bottom Out This Year
China Woes Weigh Heavy on Luxury Market
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Global Price Implications on Chanel Street
Why Western Luxury Retailers Should Still Be Looking East