The second half of 2015 was rough for most luxury retailers and the new year isn’t bringing any extra cheer (read: Luxury Market Expects Weakest Year Since Lehman Crash). Stories continue to pile up indicating we’re well into a bear market for bags. According to analysts at Credit Suisse, premium department stores are upping their discounts on luxury bags to shed excess inventory from the holidays. This will put downward pressure on prices at least through the next quarter, all but guaranteeing another round of disappointing profit numbers.
Take note of the dramatic increase in mark downs between 4th quarter 2014 and 4th quarter 2015.
Which bags are being marked down? Coach Edie 28 Bag – Michael Kors Large Gracie Tote – Kate Spade Cedar Street Mini Nora Crossbody – Tory Burch Small Britten Slouchy Tote
But it isn’t just the big-time luxury players in trouble. Coach, the mid-level handbag and accessory giant, reported a disappointing 7% decline in the second quarter in both sales and overall profit. Discounts were a major cause of the decline. Coach braced the fall with a sales boost during boot season from recently acquired Stuart Weitzman, but it’s clear the handbag market is becoming prohibitively competitive at all price points.
Where will new demand in the industry come from? Which brands stand to benefit most in this ultra-competitive environment? Who might not survive?
- Remember we discussed the need for brands to embrace the accessories for your accessories (read: Bear, Bugs, and Karlito: Trinkets are NO laughing Matter).
- The cause and effect of internet brand fatigue (read: Internet Causes Brand Fatigue for Handbag Companies)
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Explore more related financial posts:
Internet Causes Brand Fatigue for Handbag Companies
Are Luxury Brands Losing Their Exclusivity?
From Coach to Hermes: The Luxury Handbag Market
The Increasing Accessibility of High Fashion
Luxury Market Experiences Weakest Year Since Lehman Crash
Bear, Bugs, and Karlito: Trinkets are NO laughing Matter
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Updated: May 28th, 2017
Comments
2 Responses to “The Bear Market for Bags”
Bear market for bags? I didn’t think this ever happened ??? and I’m shocked with the mark downs ??? for me it’s great, the bigger the mark down, the better hahahaha ??! But really, I honestly didn’t imagine all this!!plus, one thing is for sure: Hermès is not included in any bear market EVER ???! ❤️❤️??
I think part of the reason mid-level luxury companies are not doing so well is because lately they’ve been trying to become more luxe than they really are. How do they achieve that? Sell higher priced items to make them more “exclusive”, use more or only materials perceived as expensive (regardless of quality), such as all leather bags and create designs that emulate those selling in the current in the high end market. Coach is the perfect example when they launched their Swagger bag; if you cross a Saint Laurent Sac de Jour with an Hermes Birkin, you get a Swagger. Let’s not forget le master of “inspired” bags, Michael Kors for his Michael line.
I think the discounted prices reflect what the real price of those bags should be, for what you’re getting. Plus, that’s more in line pricewise with what the bulk of their consumers want to spend and not the $500+ bags. They should go back to focusing on their bread and butter, stick to their original price range and make that look lux, fresh, new and high end. Asymetrical skorts from Zara, anyone? They didn’t have to get out of their lane to make it a huge hit. Just great design, decent quality & right price.