For years, Birkin by Hermès has been the go-to investment item for luxury fashion enthusiasts. It had the reputation of not only being able to hold its value year after year but also surpassing its original price on the secondary market, especially during the 2020 lockdown. Now, however, Chanel seems poised to compete with its fellow French fashion house, with its bags retaining their value even in the face of inflation and ever-increasing prices.
Chanel Bags: Low Risk, Reliable Returns
According to a recent report from Credit Suisse in collaboration with Deloitte titled Collectibles amid Heightened Uncertainty and Inflation, annual returns on “Chanel handbags rose by 24.5%” in 2021 compared to Birkins which stood at -3.6%.
The study also revealed that just like Rolexes, Chanel handbags “are clearly standing out as stores of value with low volatility (between 2.5% and 5% annually) and low drawdowns… Their information ratio (which puts returns in relation to volatility and is thus reflective of the risk-reward) is impressive, with values exceeding 100%, i.e., average returns systematically outpacing fluctuation ranges.”
“Particularly noteworthy are Rolex watches and Chanel handbags, with very strong information ratios of 200% or higher. This means that the average annual return of 10% for Rolex watches, for example, is double the usual fluctuation range of 5%.”
This impressive performance can be tied to recent deliberate efforts made by Chanel to increase the value of its purses and other related products: in 2021, it followed Hermès’ example and introduced a purchase restriction on popular bags like the Classic Flap Bag and the Coco Handle as well as other small leather goods. This was in addition to three price hikes in 2021 that put some of its purses at a higher price point than Birkins, i.e., if you consider the size. (In 2021, a medium-sized Chanel flap bag [25.5 x 15.5 x 6.5] in France cost €7,800, €100 less than a Birkin 30 in Togo calfskin by Hermès [30 x 22 x 16])
So, where does this leave Birkins?
The rise in the value of Chanel bags has not made Birkins any less desirable. According to the report, Hermès’ signature purses are considered medium-volatility assets and have had higher volatility over the years, “more comparable to that of global funds or hedge funds among financial assets, but [providing] a better risk-reward than [Chanel bags].”
Like all capital growth assets, which is where Birkins fall under, anyone looking to invest in these Hermès purses should be looking at a longer investment horizon for maximum returns.
What about other alternative investment items?
Luxury timepieces, luxury autos, fine art and wine are also other alternative investment pieces to consider, but they either fall under the high or medium volatility assets category – meaning that they are higher risk – or they can be more challenging to maintain: therefore, alterations due to wear and tear can cause their value to fall.
For example, luxury timepieces. Vintage pieces can lose their value if parts have to be changed, replaced or polished as their authenticity, patina and originality are considered lost due to these necessary repairs.
In the case of fine wine, it is as much a pain to source original, profitable ones as it is to transport and store them in a way that their taste does not change. Not only is it easy to counterfeit older vintages, but it is also difficult to constantly keep them at the ideal temperature for a period of time. Unless you’re truly passionate about collecting them and have the resources to keep them as good as brand new, investing in fine wine is not the best route to go in your alternative investment journey.
A word of caution
While Chanel bags are excellent investment pieces, it is essential to note that not all models are equal. The popular, most sought-after purses are the Lagerfeld-designed ones, such as the re-invented Classic Flap, the Boy Bag and the Gabrielle.
It remains to be seen how long Chanel handbags will be able to retain their collectible status. Time would definitely tell, but more importantly, the fashion house would need to put in the work to maintain their desirability. For now, if you’re looking to get a Chanel purse, today is a good day to go out and get one, for more reasons than one.