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.

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