You've probably heard people talking about purchasing luxury designer handbags as wardrobe investments and many times, it seems like all this talk about handbag investments gets confused with financial investments. So I'll start by clarifying the difference between the two.
A handbag (wardrobe) investment means buying a quality piece that will last over the long term and that you intend to use well (think cost per wear). Can you have more than one? Absolutely but in my opinion, it should not be at the expense of your financial goals.
"A handbag investment means buying a quality piece that will last over the long term and that you intend to use well (think cost per wear). It is not a financial investment."
A financial investment means putting your money in places where it will have the opportunity to compound, grow and create more wealth for you over time. Very few luxury handbag purchases increase in value over time and even if they do, a variety of factors impact what you can hope to earn for them when you attempt to sell them. Let's talk them through.
Reasons Why Designer Handbags Are Not Good Financial Investments
1. Designer handbags go in and out of fashion. This affects how much you can get in the preloved handbag market
In today, out tomorrow. That's how fashion works and the same applies to seasonal luxury handbags. In no way does that mean that you can't keep rocking your designer handbag long after you've purchased it. However, the chances that it will hold anything close to its original value when it was the hottest bag in town are very slim.
There are, however, classic brands, for example, Hermes, Chanel, and Louis Vuitton and classic handbag styles that may hold their value. But who's to say that particular classic bag will still be as strongly desired 5 or 10 years from now? The reason why these bags maintain value boils down to exclusivity and desirability. That's taking a big chance.
2. Keeping your handbag pristine is a must to retain its resale value
In other words, you need to keep your handbag in perfect, like new condition if you want to sell it to make a good amount of money in the future and get a return on your investment. Unfortunately, a handbag showing signs of use and wear and tear is not going to get you the price of a brand new bag. It doesn't matter what luxury brand made it. That's just the simple truth.
The condition of your handbag very much dictates what designer consignment stores, resellers or individuals will pay for it.
3. Luxury handbags are not as easy to sell as you think
And that's for a variety of reasons, specifically due to handbag authenticity, reseller fees, and fakes/scams. Let's discuss:
Ah yes, that. The authenticity of your designer handbag happens to be a big deal because people want to make sure they are not buying fake handbags which are everywhere these days. Yes, you bought your handbag directly from the brand's store but you can't sell it back to the brand.
Unless you are a reputable handbag reseller or consignor you are going to have to prove the authenticity of your bag which means you will need to have kept all your paperwork and receipts intact to be able to vouch for the authenticity of your bag.
While many online consignment stores will authenticate your bag for you, this service is typically built into the price they'll offer to purchase the bag from you.
As an individual reselling a handbag, a lot of buyers will try to take advantage of the fact that you are selling as an individual and try to get you to sell cheaper.
If you choose to go the reseller or online luxury consignment store route (where a reputable company sells the bag for you) you will probably be paying them super high commission fees off the selling price. A reputable consignment service will charge you anywhere from 15% to 40% of the sales price of your handbag. As a result, at the end of the day, you'll be making less money on your sale.
Scammers and fakes
There are stories of people being scammed all the time. So you need to take extra precaution about where, how and to whom you sell your bag to, in order make sure you get your payment in full and you don't get scammed.
Key things to keep in mind when buying designer handbags
When it comes to considering designer handbags as an investment it's important to have the right expectations.
- They can be great wardrobe investments meant to last you a long time and look beautiful along the way because of their quality. Financial investments? Not so much.
- If you plan to sell them in future expect to earn a small fraction of your purchase price. And that's if you are able to sell them all.
- Purchasing luxury bags should be based on your disposable income after your expenses and savings goals are met. If you have debt, it's a better idea to forgo the handbag, get rid of your debt and plan for a luxury handbag later when you can truly afford one.
A better alternative to investing in handbags? Put your money to work for you by diversifying into various financial investments. Focus on building real wealth first and then you can buy all the handbags you want and enjoy them the way you want to without having to think of them as financial investments because they are really not.