Saturday, June 12, 2021

Is The Hermès Birkin A Good Investment?

By chance, today, I came across this Bola Sokunbi piece about Hermès Birkin bags and I’m going to share it here! If you have read my post yesterday about these sought-after bags, I suppose, in a way, this is a good accompaniment to it. 

It is claimed that the Hermès Birkin is a better investment than stocks or gold. Well here comes an opposing viewpoint! 

According to Time Magazine: "The Birkin bag outpaced both the S&P 500 and the price of gold in the last 35 years – a time period chosen to reflect the date when Birkin bags were first produced in 1981. They say that the annual return on a Birkin was 14.2%, compared to the S&P average of 8.7% a year and gold’s -1.5%". 

While the above information might be correct, in theory, the reality is that this handbag is really NOT a better financial investment. And below are 5 reasons why: 

1. You need to get your hands on a Birkin first and preferably more than one 

Yup. I'm sure you've heard how difficult it is to purchase one of these babies from Hermès. This is simply because they are just that hard to get a hold of (exclusivity, demand, supply, whatever, the mystery remains). Which means you have to wait, and wait and wait and wait. 

You also need to make friends. Specifically, Hermès sales associate friends. And you'll most likely need to spend a lot of money with them to impress them into calling you as soon as a Birkin is available for purchase. 

What about buying from resellers, if you're not the patient type? Sure, you can go the reseller route. However, the problem there is that the reseller markup can be anywhere from ~50% to 100%. 

Yes, you read that right, some resellers will sell you a brand new Birkin at 100% more than what is costs. Don't believe me? Just google "Reputable Hermès Birkin Resellers" or something along those lines and check out their prices. 

Between the additional spending, you might have to do at Hermès and the crazy reseller fees, you can kiss that 14.2% annual return goodbye. Plus you'll need at least a few of these handbags if you really foresee yourself retiring comfortably on your Birkin investment. 14.2% of let's say ~$12,000 for a basic Birkin will only be $185,000 after 30 years. Certainly not enough to retire on if retirement itself on average lasts 25 to 30 years. 

2. Not everyone can shell out $10k for a Birkin

We're still talking about just one Birkin bag here. Investing in a Birkin requires you to pay for your investment upfront. There's no contributing on a monthly basis for the next several years. There is no luxury of the power of compounding (you have to rely on the original purchase price to increase in value). And there is NEVER a sale where you will be able to get it for a cheaper price. 

3. Insuring your investment will cost you

That's because if you are going to spend this amount of money on a handbag as an investment, you sure as heck better insure that investment. God forbid your house burns down or it gets stolen. Then what? Personal article insurance can run you anywhere from hundreds to thousands of dollars a year depending on the value of what is being insured. 

4. You need to keep it pristine in order to maintain its value

Or in other words, in perfect, like-new condition especially if you want to sell it. This is because, in order to get the return on your investment, you actually need to sell it. Note that a well-used handbag is not going to get you the price of a brand new bag. 

5. Selling this investment can be challenging

First of all, there's the whole issue of authenticity. Sure you bought the bag at the Hermès store (or from a reputable reseller) but you can't sell it back to Hermès! 

Unless you are a professional handbag seller or consignor you are going to have to prove the authenticity of your Birkin bag which means you need to have kept all your paperwork intact and be able to vouch for the authenticity of your item. Some purchasers will even go as far as to ask for documentation from actual authenticators, which will, of course, cost you money. 

Secondly, you need to be careful about where, how, and to whom you sell to, in order, make sure you don't get scammed and you get your payment in full. 

Thirdly, as an individual reselling a handbag (aka a non-professional handbag seller), a lot of buyers and resellers will try to take advantage of that fact and try to low ball you or take ridiculous commission fees off the selling price. 

A reputable consignment service will charge you anywhere from 15% to 40% of the sales price of your Birkin. Sure, you avoid the stress of authentication but hey everyone wants to make a profit. Again, 14.2% which is not so realistic. 

Therefore, it’s best to consider a Birkin bag as a wardrobe investment, rather than a financial investment. By all means, own one – if it’s something you love and can afford.

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