#7 have luxury brands gotten too cheeky with their prices?
How much will you pay for the price of a luxury item? How about £2990 on a Burberry Wool Duck Beanie? Anyone?
At age 25, my mother, who worked full time at a Chinese restaurant and rented in Walthamstow, bought her first luxury item - a Max Mara wool grey coat. At the time, the coat cost no more than £250. Fast forward to around thirty years later, a Max Mara coat is worth around two grand… that’s a 780% mark price up.
Let’s look at bags. The raging ‘It’ girl bag at the moment is undeniably Balenciaga’s City bag, they’re everywhere yet, how are people affording them at the current price of £1750? And that’s for a small. If you’d like to fit more than just your wallet, keys and phone, that’ll be an extra £300.
Take Chanel, where handbag prices have more than doubled since 2016. The auction house, Sotheby’s, found a classic 2.55 Chanel bag sold for around £1300 in 2008. In 2023, that figure from Chanel is closer to £8100. (If the cost had risen in line with inflation over the 15 years, it would be expected to cost £1900). Pharrell Williams, musician, producer and men’s creative director at Louis Vuitton, unveiled the label’s new Millionaire Speedy bag back in November last year. This custom crocodile hide bag will set you back a cool million. And if that price tag doesn't scream ‘wealth’, it’s flashy gold hardware and real diamond bling certainly will.
Just since when did luxury items get so ridiculously expensive? “We use exquisite raw materials and our production is very rigorous, laborious and handmade - so we raise our prices according to the inflation that we see” says Leena Nair, chief executive of Chanel. Is that enough of a justification? If anyone would know, it would be Tanner Leatherstein, a TikTok leather connoisseur. Following an acetone examination of a black Louis Vuitton Vachetta leather wallet, he demonstrates there is minimal finishing. He then burns strips of the wallet, it catches flame and subsequently melts - 100% genuine leather is fire resistant. He estimates the leather to be valued at $10 per square foot, totalling $20 for the two square foot used, $5 for the materials (inner linings, fabrics, authentication chip) and $10 for the labour to make a wallet of this sort or better. Ultimately costing nothing more than $35 to make. He concludes that a reasonable price range would fall between $50 to $100; paying $535 for this would be a huge waste of money if you were in it for the quality of the product. However, to buy the status of owning a Louis Vuitton is completely subjective and down to the consumer.
And I think this is the most important question, how much will you pay to own Louis Vuitton? I guess consumers will buy expensive luxury goods not simply based on the brand, but also on the future expected resale value. This has led to a cynicism setting into the market in line with what stock investors call the ‘greater fool theory’. “Sure, the products may be junk,” the cynical buyer might say. “But since everyone thinks they’re great, they will appreciate in the coming years.” This leads to an “emperor’s new clothes” dynamic where even the smarter players have an interest in maintaining the fiction.
But at the end of the day, why buy clothes just to invest? Isn’t the point of purchasing to actually wear them? Well, that will probably be the 1%. Despite there being a cost-of-living crisis for many, the number of high-net-worth individuals is increasing which is driving the demand for luxury sales’, says founder of art advisory Parapluie, Julie Bell. ‘Post-Covid, people are enjoying the ability to return to buying in person rather than online and with that comes the luxury experience that is so attentive and attractive.’ The 1% spend just under £3000 on Burberry’s Wool Duck Beanie, £1200 on a cotton shirt from The Row and £10,500 on a Brunello Cucinelli blazer. Luca Solca, an analyst for Bernstein, estimates that the top 5% of luxury clients now account for more than 40% of sales for most luxury goods brands. As wealth inequality increases globally, luxury brands are doubling down on an ever smaller slice of their clientele.
