Cost of Designer Handbags

I recently had occasion to try and recall what the price of a Louis Vuitton Speedy Bag was during my college years, which weren’t so long ago, and only when I came up with the number of $560 did I realize how quickly designer handbag prices have crept up in those intervening eight years. (I’m assuming that was the opening price point for the bag around when I became aware of luxury handbags, which was 2005 or so, although I can’t place the number with total certainty.) The Speedy now starts at $855, which is a price increase of almost 53% in less than a decade, far outpacing both inflation and the market-wide price increases for non-luxury consumer goods. What gives?

According to Business of Fashion, a few things are at play. First, Louis Vuitton is far from the only brand to increase prices at such a rapid clip. Marquee pieces from both Hermes and Manolo Blahnik have had price increases of 50-60% in the past decade, and annual or biannual announced price increases of up to 13% at a time are de rigueur for brands like Vuitton and Chanel. BoF reports that the average cost of manufacturing and selling a bag is about 35% of its final retail price, and most brands use the high margins on handbags, along with shoes and beauty products, to balance out their less profitable ventures – namely, the clothing that fleshes out the brand’s luxurious, fashion-forward image and makes people want to buy into the brand via a bag or tube of mascara. And also, you know, to make sure that Roberto Cavalli’s yacht renovations are ready in time for Cannes.

The costs that make up that 35% determine what the 100% price will be, of course, and all of that stuff just keeps getting more expensive. The cost of Chinese labor has nearly doubled in the past decade, and if you think that shouldn’t affect the price of your “Made in Italy” bag, think again. Your bag, in whole or in part, likely made its way through a Chinese laborer’s hands at some point in the manufacturing process. The global prices for leather and cotton are also ever on the rise, with cotton in particular at an all-time high, and those costs are more or less fixed for handbag brands – they can’t forgo the materials entirely, no matter what they do. Some companies have acquired tanneries in order to vertically integrate as much of the process as possible and keep prices for materials manageable, but it doesn’t entirely solve the problem.

Some of the problem, too, is simply our baser instincts as consumers. There’s a bit of voodoo to creating successful luxury accessories, and part of that is making them seem as desirable as possible. The more out of reach something seems, the more fashion customers fetishize it, and that leads the status-conscious and the deep-pocketed alike to make purchases in droves. There is likely a point at which an elevated price tag affects the number of units sold in such a way that it hurts profits, but it seems as though designers have yet to find it – they keep raising prices and we keep buying, and even if the number of units moved decreases a little bit, the higher prices make up for it. And then some.

Lastly, BoF points out, the market for luxury accessories keeps expanding. Burgeoning markets in places like China, Brazil and India mean that more people are interested in a finite amount of goods, which drives prices up no matter the industry. With more customers than ever, designer brands can name their prices, and they are.

To read more, check out the full feature on Business of Fashion.

  • The Bagateur

    Great article– to think that we fall prey to designer bags despite their ever-inflating prices is so true.

  • Tanya

    I recall wanting the LV Galleria. In a period of about a year the price had went up about 200.00 so I refused to buy it. A 200.00 increase was just ridiculous they can get their money from some other dope

  • laura

    I remember not too long ago I was about to purchase (online) the YSL Belle du jour clutch at $495 but I was going to have a trip to Vegas in four weeks so I decided to wait to buy it in person (no YSL store where I live). To my surprise the price had increased to over $700. I couldn’t believe it. I simply thought it was an insult to have such a high increase. I still want the bag and I regret not buying it online :( If I had known…
    btw, if I remember correctly my first and only speedy cost $650

  • Pearls ‘n Heels

    This is so true. i am glad that someone took the time to explain this concept.

    • Magical Empire

      I am a Bag Designer I think more famous designers get the more expensiver the bag will be… personally I do not sell my bags which are limited editions for very high prices just try to cover my costs and my work…. anybody interested in seeing my work can take look on my blog …..magical-empire-me.blogspot.com

      • http://www.honeybadgerofmoney.com frankenmint

        You selling Pineapples with that Spam u got there?

      • andrew hook

        I have a dragon fruit farm in South east asia you are welcome to visit… homeview-indo.com you can also visit one of my design studios…

  • ahhhsoneo

    the prices of handbags today has driven me into the resale market… but unfortunately, those prices go up as well:(

  • Tracy

    I was saying the same thing to my husband.. I told him I cannot find a decent handbag around $1000 anymore.. please let me up my budget to $2000.

    • Cantrell Alex

      This has got to be the most privileged basic white girl comment in the history of the internet.

  • thedesigner

    The luxury goods market is very interesting. You could make the highest quality bag in the World, put a $2 price tag on it and 9/10 people would walk straight past it. Price, to some extent, defines the desirability of a luxury product. But more often than not, company’s go too far to the other end of the spectrum *cough – looks at Bentley*

  • Mimi

    When I first got into LV about 5 year ago, there were a lot of options in the $1000-$1500 for bags. Now everything that catches my eye is $2000-$30000. I will happily buy a $1000, but a $3000 bag, hell no. I feel like they are pricing out more people than they realize – even well off people may not spend that much just based on principle.

    • jennas-side.com

      when i worked at the LV storefront in Saks, the head honchos were always coming in and secret shopping the client…there was a consistent and general upset RE: clientel, especially because Snooki and JWoww look-alikes were buying Neverfulls and Artsys and Speedys in droves…but yeah 3 grand for a mostly canvas bag is absurd, and this is coming from someone who’s used her rent check to snag a Pashli (more than once)………..

  • CocoLove

    I’m a business student and recently did a marketing research project on luxury handbags as well, this article was great and thanks for sharing!

  • CocoLove

    I’m not sure how many people are actually aware, but I wanted to mention that CHANEL keeps their prices so high by destroying unsold merchandise, therefore never providing a discount to keep brand equity.

    • Edía Paff

      but they have like sale shoes and clothing…

    • dela

      Not too sure about that. I have bought two Chanel bags on discount at Neimans.

  • Jennifer

    My first LV, the mono petit bucket, purchased in 2000 was only $510. Not sure if they are still producing it, but the last time i checked the price online (a couple of years ago), that bag was up to $1180….

    • ginger

      ONLY $510!

  • pixiegirlie

    I’ve been cutting back on my handbag buying this year big time. Now that I know the real cost of the bag is 35% of the retail price will help curb any temptations.

    • nu nu

      think about how much it costs to make a Kors selma bag…we could do it ourselves and have it turn out the same, quality-wise

    • Idiots everywhere

      If people think that a $3000 bag cost anywhere near $1000 to produce then they are out of their minds, the materials aren’t that expensive and the metal on them isn’t precious.

      You could go to somewhere like Turkey and pick up a copy of most of these bags for under $50 and they’ll likely have been produced a mile down the road from those expensive leather “luxury” brands.

      You been had

    • monica

      It definitely has to be more than 35% even though the article mentions it. What about those major clearances where items are as much as 75% off?

  • Jennie M.

    With Louis Vuitton there’s a price increase every year. I was super surprised to see that the new louis vuitton pallas bag $2180.00 for a canvas bag?? I think the only brands whom are with in reason are Gucci and Fendi. Louis has just lost there mind and there will be a time where things are going to get to pricey even for the affluent plus the bags aren’t all made in france any more…some are in the usa, spain, germany..I would like to see prices go down one of these days lol but I don’t see that happening :-s

  • Yerani_km

    My first LV cost $350, that was 12 yrs ago. Now I can afford the $3500 bags but refuse, for 2 reasons. One is I will be carrying the real bag while shopping right along next to me at ___(insert luxury retailer) with her fake one she bought online and nobody is none the wiser. And two, I refuse to pay triple the price of something from 3-5 years ago when the product hasn’t changed at all! I mean is the $3500 bag going to get up and fold my laundry? No thanks!

  • Bob

    Agree with the article apart from the line “more people are interested in a finite amount of goods” – I doubt that these companies have kept producing the same number of bags! Come on! These things can and are mass produced.

  • Onushua Fiza

    The Luxury Market is very Interesting . The market handbag is best quality full.

  • kitty

    So silly for hand bags to cost hundreds of dollars

  • kitty

    designers manage to find suckers to buy them

  • Socially Responsible

    I think anyone who spends over a $100 on a bag or a pair of shoes should be band from every using any kind of government assistance in the future and if they end up homeless or starving they should live and eat their damn bag. Sorry, but the opportunity cost of investing the difference could be thousands upon thousands of dollars sometime down the road when needed for retirement needs. Pathetic. It’s a name!!! I wish they would access a stupidity tax on any good considered a “Luxury” item and use the money for children who are starving, homeless or trying to get an education.

    • Socially Responsible

      Assess*

    • kiki

      banned’*

    • Sandy

      I AGREE!

    • relmneiko

      Eh, it’s easy to spend over 100 on good quality dress shoes or work boots, and you often need those for a job. I’ve spent almost 200 on a pair of leather knee-high boots, and that’s pretty typical. I’d put that roof a little higher.

  • chanel

    It’s almost laughable how many people have Louis Vuittons and own them because of the status associated with it. Don’t get me wrong, the Damier is a nice design….. But not nice enough where 1 in 3 women will own a damier purse. At that point a large percent of the population is just buying LV because they are sheep or because they want status…. Both of which are equally pathetic.

    What happened to fashion being an expression of individuality? You can buy LV but you can’t buy style. There are girls with 10 dollar purses which look better than your LV purses and the only thing you have going for you is the idea in your head that you’re more high status than the girl walking next to you. Yet she looks better than you and is actually someone who is herself instead of another mass-media trend-following zombie

    • Jamila Taylor-Norris

      I could not agree with you more! These fashion trends, and the price tags that are attached to them are #ridiculous! People own $1200 bags and live in undesirable neighborhoods, don’t drive reliable vehicles, and live from paycheck to paycheck…#Why?

  • idkwhat

    well in malaysia these hermes priced from 3k.. and 3k is a degree-graduate-with-3 years-working-experienced-someone’s monthly wage. it’s funny how you see high-end shopping malls with these brands. only the rich of the richest people can afford them.

  • JAMAL

    This is all about being exclusive. The real manufacture cost of these bags are crazy. Even if you add the designing cost it shouldn’t cost more than 100-250 per highest quality bag. The catch is that this businesses know that human nature likes being exclusive and in rage they are going to pay beyond their means and more than the actual cost. Since economy is doing well they will continue to cash on this heard.

  • Anonymous Handbag Brand Owner

    Hi There,

    I have a luxury handbag brand, I came across this article and I couldn’t help adding in a few more facts you might have missed in your research. What I can tell you is that while the cost to actually make ta bag is 35% of the final retail cost, the designer does not actually make 65% profit unless it is sold online. The reason why is because the bags have to be marked up twice. First for wholesale, so brick and mortar retailers can buy them to sell in stores, and then again by those retailers, which tends to be about 200%. The average markup from cost to wholesale for a luxury bag is around 25%-35% percent. The sales agency takes 10-15% of that, so already the designer doesn’t make much when selling wholesale. When sold online though, yes, you’re right, the mark up is much bigger. However, people are also more likely to buy luxury bags in person from retailers when spending that kind of money, unless they are already very familiar with the brand.

    Another reason why luxury bags are so expensive is due to manufacturing. A lot of luxury brands are not made in China. Louis Vuitton, for example, is made in France, and for their Suhali line they actually own an island and breed a specific type of goat just to make those bags. Hermes bags are as well made in Europe, and a person making them has to apprentice and practice for 4 years before they’re allowed to make one bag. The quality of a luxury bag does not compare to an economy handbag. Louis Vuitton bags last for decades.

    In support of ethical and domestic labour, my own luxury handbags are manufactured in the US. It’s not the leather that makes my bags so expensive, as I might only need 2-3 sq ft of leather to make a bag, which comes out to around $20, but to actually manufacture, that bag might cost $175 a piece. So the cost of all materials, could be maybe $40, then labour, $175, then overhead $70, the actual cost to make 1 bag becomes $285. Marked up at 30% for wholesale, it becomes $370. My sales agency takes 10% of the wholesale cost, which is $37. I’m left with a profit of $48 for one bag. The retailer will then take that bag they paid $370 for and sell it for $740 in stores.

    As well, not just any manufacturer knows how to make a luxury handbag. The people who do know how are in short supply, and are true artists who have honed their skills for decades.

    The prices are not raised to make the bags seem more desirable, it has nothing to do with appealing to the ego side of a customer. They are already high because a LOT goes into producing a high quality item and it really is that expensive to make.

  • Kiddo

    I think some should understand that the people who create designer handbags and those in the fashion industry have to make a living too. What happen to appreciating a work of art in general? If you do not want to buy the handbag then so be it and let it go. Oh..I wouldn’t spend $3000 on a handbag…please..you would if you had the money. I know I would…who are we kidding? Plus it is all about quality too…some handbags that are really in expensive do not even last as long. Would you rather buy a handbag that is $1000 or buy several cheap handbags that add up to that amount and even more because they will eventually break…leaving you to buy new ones? I do not see really an issue with the rise in prices.

    • LDBrown

      I don’t agree with this. I have several non-high end designer Italian bags that I’ve had for over 20 years and they are still fully intact. No thread out of place. No scratches. No discolorations. It all depends on how you take care of them.
      I refuse pay over $500 for something so utilitarian. Yeah! They look nice but it’s still something that you are going to carry other things in. Its going to get damaged.
      I definitely can’t see paying $1000 or more for vinyl covered canvas.
      Almost every woman I know who has high end bags I hear them complain about stains that don’t come out (duh! you’re carrying makeup, ink pens, etc.), ripped linings, color fading or rub marks, scratched leather (duh! some high quality skins like lambskin, snakeskin, etc are not as tough and sturdy as say pebbled cowhide). Then they complain more when the company refuses to honor a so-called policy to resolve any issues that should with the bag. Good example: one of the secretaries in the firm where I work always buys high end designer bags: Gucci, Louis Vuitton, Fendi, Givenchy and likes to brag about it. But then she complains about pieces falling off and how the companies make her pay to have the item shipped to Europe or China for repair. One time I recall her complaining about how long it took for her Gucci bag to come back (over a month) for some hardware that had fallen off. Apparently, they had to wait for the piece to come in from China. Another time she complained about the corners of her Givenchy bag getting scuffed up. She attempted to get the company to do something (she was hoping they would replace it) but they refused. They claimed normal wear and tear (duh! of course). But she still continues to buy high priced bags.
      This same woman bought her husband (who doesn’t care less about designer names) a pair of $400 white Gucci sneakers to wear…in the rain. Because she got sick of him wearing a pair of ratty Adidas that he liked to wear in rainy weather. LOL! Then she got mad when he refused to wear the Gucci sneaks. All I could do was laugh.

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