Fashion and the Economy: Bags aren't Investments

As the economy has cratered and more or less stayed that way, we have begun to hear more and more from designers (and their PR companies) about the new way we should be looking at fashion – as an investment in our futures. People have used the “investment” excuse to justify the money they spend on bags for years, but as conspicuous consumption of luxury good contracts at an even greater rate than across-the-board retail spending, brands and their mouthpieces have looked to the word as a possible way to pry the remaining dollars out of consumers’ wallets. Lesley Blume of Slate‘s finance blog The Big Money has the breakdown on exactly why the fashion-as-investment logic just doesn’t hold.

According to Blume, the old marketing tactics for luxury goods just aren’t working out in this economic climate. You probably remember them well – “Everyone deserves to indulge a little bit,” “There’s nothing wrong with wanting some luxury in your life,” et cetera. Well, now that unemployment is approaching double digits and luxury might mean something completely different to some of the consumers that they were trying to target in years past, luxury firms have changed their language a bit. Instead of a splurge, it’s an investment. Instead of luxury, it’s quality.

But the entire thing seems a bit disingenuous when you think about what an investment is supposed to mean – it’s a store of value expected to at least hold or increase its worth over time. There’s always the chance that an investment may depreciate, but generally, that’s not the expectation. What Blume points out that should be obvious, though, is that the vast and overwhelming majority of fashion items are going to depreciate like a new car just driven off the lot.

The problem with most fashion items, particularly bags, is that they’re mass produced. The brand may not want you to think about them like that, but they are, and they appear in the exact same iteration in stores all over the country, and probably will for several seasons. When they’ve run their course, many look dated because people have moved on to the new styles that are now in stores. Bags don’t hold their value or appreciate because they’re widely available at a set price in a store near you; wait a bit, and they’ll probably go on sale. When a consumer can just as easily buy the same thing, brand new, at an expected price level without a problem, then there’s no way that they’re going to pay extra (or even the same amount) for a used bag. Even if you look at the word ‘investment’ as meaning something that you can use for a long time (which is not what it means, not even close), there are only a handful of handbags you could buy that will be at all relevant in a year or two. Something new always comes out that we want and the old things get put back in the closet. We all know that.

And then there’s the curious case of the Hermes Birkin, which is widely cited as a wise “investment” by fashion people. The Birkin differs a bit from the average designer handbag because they’re much less widely available and most people that want them have an ideal iteration that they’d like to find one day. As a result, they escape the quick loss in value that most handbags experience when they leave the store. In that way, the people that claim it’s an investment aren’t THAT wrong, but Blume does a bit of math to illustrate that even the Birkin isn’t a great option, despite the fact that it may be the best one in the handbag universe. Most people in the Birkin price range aren’t going to take to eBay to sell their own bags because of the financial risk associated with high-dollar transactions on an Internet auction site; instead, they go through resellers. As a result, even if the bag sells for above retail, the money that the owner gets back will likely be less than what they paid after the reseller takes their commission. Compared to what the stock market did in November 2008, the depreciation might seem minimal (Blume calculated it at about 20%), but it’s still not a wise investment if depreciation can be reasonably predicted.

I’ve resold a number of bags in my time, mostly Balenciaga, and they’re another brand that holds their value better than average because they’re a bit harder to find, have a heavily devoted following, and their colors change every season. Still, none of them sold for their retail price, even those that I sold during the It-Bag heydey a few years ago. So Blume’s article more or less corroborated my own personal experiences – bags are not a solid investment by any reasonable definition of the word, although some bags lose less value than others, and you may even get lucky and buy a rare color that collectors will pay a premium for in a few years.

In the end, though, the odds are against it. My advice for those that are looking to buy handbags in this economy is simply to buy something that you love and that you think you’re likely to use often. If you have the discretionary income in your budget for luxury goods, then by all means, spend it. But don’t spend it on what a brand is telling you to “invest” in – just buy what you love.

Article via The Big Money

  • Cherie L.

    Exactly! let’s not kid ourselves with the dollar signs. we buy bags cos we LIKE to buy bags and we CAN.

    anyone who justifies buying bags for “investment” is lying to themselves. stop kidding, we are material beings, we will continue buying. just be willing to write off the entire value the moment you take it out of the store.

  • boobeary

    I second that! I am an unabashed bag lover, but I will never kid myself about bags being a sustainable form of investment.

    We love purses and award ourselves by purchasing them. These days, rewards are few and far between as we seek to be practical and ride out this economy.

  • anonymous

    agree. buy something you love. the thing with me though is i think of the mileage i’m going to get. i’ve always been told that i should buy jewelry instead of bags because they’re more likely to appreciate. but unlike a bag, i don’t take out my jewelry as often. a bag is something i can use everyday so between the two, i’m getting my money’s worth with a bag. also, i’ve never bought anything pricey that i didn’t love and so, i never had to think about the resale value.

    i say, three things when it comes to handbags: you have to be able to afford it, easily maintain it and sustain your love for it. otherwise, forget about it.

  • Linda

    Wow! You are making me think twice! YSL is having a sale in NYC and I was about to purchase a Rive Gauche bag primarily because I love bags and thought maybe this would put an end to any future purchases. They say you should buy one classic bag and not a lot of lesser expensive assembly ones! What do you think? I own a Kooba, Gryson, Biasa. This would be my first MAJOR purchase!

  • 19yearslater

    Oh, come off it. Birkins aren’t investments either. No one is going to buy a used Birkin for the same price as a new Birkin. It might be expensive, even lasting fashion and economy-wise. But that does not make it an investment. This might be a good time to buy something that’s going to last a couple of seasons but other than that the only thing that has changed at luxury stores are the words used to sell. The closest thing would probably be coveted, limited bags that would sell for more on ebay because thats the only way to get them.

  • A-T-G

    I’ve never looked at fashion as an investment. I changes per season and per year. The look you purchased for the Spring may not work for the fall and certainly not for next Spring!

    As for bags? I certainly agree with the article and the posters above! Bags are not an investment (not even a Birkin)! I’ve actually never even purchased one used because I deem the prices too high. For a little bit more, I can go get it UN-used and I prefer that. There are some bags that hold a higher value (limited editions, hard to find colors, etc.) but, in general buy a bag because you love it and never expect to get your “investment” back when/if you decide to sell it. Think instead, of recouping some of your money and putting it toward a newer model.

  • airslady

    The term “investment” can have different meanings. One of them is most certainly seeing designer handbag purchases as a literal investment of your money. Of course, as we’ve all seen what happens to investments during a recession (401ks anyone?), they can and will fluctuate in value. How many people that purchased properties as an investment (and how often have we been told properties are the soundest investment) are now on the brink of bankruptcy? Perhaps, once upon a time, designer bags were an investment, but our current economic environment isn’t favorable for such ventures.

    Other handbag lovers use the term “investment” as I’ve always used it. Here’s an example: which handbag is a better investment of your money, a trendy Be&D bag or, let’s say, a classic Chanel 2.55? Most people, even non-Chanel lovers, would agree that the Chanel bag is the better fashion investment because the design has already proved to withstand the test of time not because anyone at Chanel is telling us we should buy it as an “investment” piece. So, in fact, that particular handbag is a valuable investment if you’re looking to spend such a large sum of money on a handbag and would like to use it past one season. Expensive handbags can be considered valuable investment pieces if they end up giving you more bang for your buck.

    So, if any really thinks handbags are investments in the literal sense, I have a bridge in NYC they might be happy to “invest” in. I’ll just have to disagree with the author of this piece who must think we’re all idiot robots easily programmed to buy what designer label marketing staff say we should. She writes …..[the word ‘investment’ as meaning something that you can use for a long time (which is not what it means, not even close)]….. Quite the contrary, fashion is most certainly an investment to everyone who spends their hard-earned money on it. It’s an investment in themselves – in how they look and feel, now and in the future. Wise purchases, especially expensive ones, will have you looking and feeling great for years to come. The author of this piece has completely missed the point of fashion, its very nature and the reason why it has survived throughout the years, even in times of war an economic downturns.

  • http://graduationday.wordpress.com Amanda Mull

    At the point where “investment” means “anything you can spend money on, ever,” I think we’re really diluting the meaning and concept of the word. Which is, in actuality, exactly what the marketing firms hired by these designer brands probably want.

  • Janinevs

    I agree with the post above that the writer completely missed the point of what is meant by an investment piece in the world of fashion. I’ve always considered it to mean cost per wear and I thought this is what everyone meant, guess I was wrong. If something is of good quality and design and you love it, you get to wear it for years and the cost per wear goes down to pennies, so low capital outlay, high return equals good “investment”.

  • Tamee

    I agree that the term “investment” has been [mis]interpreted to mean something other than “laying out money or capital in an enterprise with the expectation of profit”. And it can considered done by the fashion houses as either deliberately or not. They have to market their goods somehow after all!

    But to each their own. I would hope one would make any purchase on both a personally and financially sound basis. By not doing so is what has caused so much havoc in today’s market all around.

    If one purchases something with the intent to resell it at a profit, then at that time I would think that they’re making an investment, of both time and money.

    However, I think the majority of people are making purchases without the intent of reselling, and are therefore not “investing” in a purchase.

  • luvhautecouture

    from my mac’s dictionary application:

    investment |inˈves(t)mənt|
    noun
    1 the action or process of investing money for profit or material result : a debate over private investment in road-building | a total investment of $50,000.
    • a thing that is worth buying because it may be profitable or useful in the future : a used car is rarely a good investment.
    • an act of devoting time, effort, or energy to a particular undertaking with the expectation of a worthwhile result : the time spent in attending a one-day seminar is an investment in our professional futures.

    So this is how I see a Chanel purse to be a good investment:

    I will spend A TON of money on this purse now, BUT it will in turn provide lots of use and happiness for many years/generations to come (future benefit). I think that fits in one of the above definitions….??

  • luvhautecouture

    I was also thinking… a person could buy a super limited edition Chanel purse today, not use it, and sell it later at a profit.

    Same thing for the classics, but it today, wait like 3 years when the price has gone up $1,500 and sell it for more than you paid… kind of an investment?

  • Otter

    As a total bag sl*t, i agree — bags are not investments. Cars are not investments. Watches are not investments. Clothing is not an investment. When a salesperson pulls this line on me, even if I want the item very badly, I leave. I want to purchase most things like new cars, expensive watches and bags as vanity or status items. I like high end and great quality, but never kid myself that they are an investment and any sales slob that pulls that stuff gets stiffed from me.

  • http://graduationday.wordpress.com Amanda Mull

    @luvhautecouture You can sort of twist a handbag into one of those categories, but the common denominator of all of them is an eventual financial gain. I have a habit that dates back to high school debate team of looking stuff up first in legal dictionaries, and this is what I got: Main Entry: investment –
    Function: noun
    1 : the outlay of money usually for income or profit : capital outlay; also : the sum invested or the property purchased
    2 : the commitment of funds with a view to minimizing risk and safeguarding capital while earning a return —compare SPECULATION
    .
    If you were to tell someone that your car was an investment, most people that have ever bought a car would scoff. It’s something that you spend a lot of money on, and get a lot of use out of, but rarely will you recoup even half of the money that you spent on resale. Some sort of financial return is the hallmark of an investment in the way that these companies are using the word (and in basically any definition that I’ve read that assumes an initial expense of money, which is what we’re dealing with here), and trying to convince customers that their goods will hold their value when only a tiny percentage of them stand a chance (I don’t deny that there are a couple of instances, just like with cars) might even be unethical. If a car company was using the same kind of language, I’m sure we’d all feel like our intelligence was being insulted.
    .
    My point isn’t that you shouldn’t buy things, or that you shouldn’t base decisions on what you think you’ll get the most use out of. All that is logical. It’s justifying it by calling any high-dollar purchase an “investment” that doesn’t make a whole lot of sense.

  • Kate W.

    I see nothing unethical about the use of the term ‘investment’ to describe fashion purchases. I’ve been reading fashion magazines since I was in my early teens, and certain purchases have always been described as ‘investments’…even as a thirteen year old I grasped that such a description was meant to connotate the quality, durability, and classic style of the item rather than said item’s resale value. As a lawyer, by the way, i can tell you that just because a certain definition isn’t found in a legal dictionary doesn’t mean that it wouldn’t be an accepted definition in a court of law. Common usage counts for a lot! Are salespeople calling fashion items ‘investments’ that aren’t really investments under any use of the word..items that will neither increase in value nor be useful for many years? Yes, of course, just like stockbrokers sometimes push bad stocks. It doesn’t mean that using ‘investment’ to describe something in fashion is a wholeheartedly evil endeavor.

    I think generally consumers understand that by ‘investment’ most people who sell, say, a cartier watch or chanel bag, aren’t saying ‘wow, you’ll be able to sell this for a lot more money than you bought it!’ in the manner of stocks, more that ‘this will still be in style and functioning many years from now and you can pass it on to your kids.’ Perhaps the proper economic term would be ‘increased utility,’ but really, that would be a much harder concept to understand than a simple re-interpretation of the word ‘investment’. Could one buy certain fashion items that would actually increase in value? Yes, a classic chanel could be bought for aprx. 1K in 2003, and I know a seller could get at least 1200 for one now ebay. However these sort of examples are rare as pointed out above…but then again, so is an example of a stock price that’s higher now than it was 5 years ago :-).

  • dierregi

    I never considered bags as an “investement” purchase and I am glad to see that finally someone agrees with me. Maybe some people find it easier to spend a lot for luxury goods if they think of it as a wise move, rather than indulging themselves. I am pretty well aware that when I buy something pricey I do it because I expect good quality, durability and style – but I do not fool myself into believing that I am in any way “investing”. I do not re-sell and I don’t buy used goods, so that part of the market does not even exist for me.

    As far as handing over your luxury items to future generations… well, taste and fashion change and it might very well be that your grandchildren will not like at all whatever piece of jewellery of handbag you’re handing over – therefore considering the re-selling as a piece of “antique” :-) However, leather does not keep well with the passing of time (tends to get very cardboard-like) and that’s another reason why considering bags an investment to hand over to future generations seems a bit foolish to me – maybe you should consider jewellery, it depreciates less.

  • LVDevotee

    Amen sister :). I love bags as much as the next gal and have spent a lot on LV’s and lately Chanel’s….but every time I hear (read) folks referring to high end bag purchases as an “investment”, I cringe. I guess that it is semantics….I see what people mean when they say that it is an investment…they are not referring to a money making/protecting investment but rather an investment in themselves. Still, I think that we have to be careful with that definition because it can lead to “over-indulging” in luxury at the expense of wise choices. That said…I still love Chanel and will continue to buy them….but I think that it is best to call a spade a spade….these purchases are a splurge that I get a lot of joy from…..but not really an investment!

  • papertiger

    A more expensive bag can be an investment if it stops you from buying cheaper ones that don’t last or you only liked for a minute because some celebrity of the moment was given it to carry.

    I bought a mid-priced (£75 – which is not exactly cheap) branded bag and both handles broke within 3 times of me using it – I was heartbroken. The shop where I bought it and the manufacturer didn’t want to know. If a handle of one my prized Gucci’s broke, unlikely but hypothetically if it did, I know Gucci would fix it. Ten years from now, if an epidemic or climate change hasn’t killed us all, Gucci would still fix my bag.

    I love my vintage huge LV garment-carrier but after so much wear the wheels need replacing. I’ll just pop down to a LV store and they’ll replace the old ones and voila! Like new again. Instead of spending a couple of hundred pounds on an OK suitcase that might last a couple of years I’ll have my old faithful (and FAB) LV back on its feet for half the price.

    As for heirlooms, my father left me his Gucci belt (I know, not a bag). It was bought in 1987 and the reversible leather had worn (he wore it almost continually). I took it to Gucci in January and they replaced EXACTLY the brown/black leather that went with the model 22 years earlier. only shorter so it now fits me. Same buckle, better new and only £90 rather that double for a new one. My dad’s back with me whenever a where it.

    Granted, in the early 1990s none of the status bags, all the LV speedys and classic-flap Chanels included, were worth very much after a decade of so called investment dressing. That’s why I could buy such wonderful bags in the late 1990s in charity shops (good will) and second-hand (vintage) shops for next to nothing (e.g. in 1999 I bought a pre-owned Chanel large black lambskin limited edition flap bag with ‘cocoa’ leather interior £5)

    Good bags, luggage, accessories should last for years not as long as the season. Isn’t that the point of luxury. I want the things I buy to last for ever not just the season. Just make sure that everything you buy is for love and not whim – that’s the investment.

  • Martha Nakajima

    Investment–yes, in the case of a professional woman who wants to project a certain image of taste, success, or class.
    It could be J Crew and Coach one day and Dior another, depending on the day and the effect being sought.

  • yslsuperlover

    agreed.

  • yslsuperlover

    also, i’d like to add that many women do not carry handbags for investment purposes. If that were the case, you would leave them at home in their dustbags. They are an outward sign of wealth, style, what have you…that’s pretty much it. If handbags were anything less than that, I would be carrying around my Whole Foods canvas bag 24/7.