Most people I know of who buy luxury watches or handbags say they’re a good store of value and can fetch a high resale price in the future. If the market mostly consists of people who buy them for the sole purpose of reselling, wouldn’t that make it a purely speculatively priced item, akin to crypto? How has the luxury market not collapsed?
In: Economics
I don’t think *most* people buy them to resell. They may hold their value fairly well, but I don’t think it’s common to resell them for *more* than what was paid. If they are, it’s a small quantity being resold to a small # of buyers who will pay a lot for a discontinued bag – not selling to other speculators. That’s kind of a guess, it honestly sounds more like a rationalization people tell themselves to justify such a large luxury purchase.
In any case, purely speculative markets exist all over the place, and can last quite a long time before/between crashes.
I don’t have any luxury items but know people who do. It’s just something they consume. They are not buying them to resell or make money. Some of them *may* consider that they are only “renting” these luxury items while they own them, expecting that they’ll get a good chunk of their money back when they resell.
One of the flaws in this argument is that people look to previous price increases of brands which are currently very much in fashion. In their previous days they were less popular and there are consequently not many vintage items around for sale. If they’re now in fashion and huge numbers of people own them, then it’s unlikely they’ll hold value into the future, especially if the strength of the brand falls.
It is speculative to some degree but not like crypto because there’s an intrinsic value. I’m only familiar with watches so using watches as an example, let’s say a particular watch model sells for 25K at retail, due to the limited supply of maybe 1000 units, it’s sold out and u can only buy from other sellers, thus causing a price increase in the aftermarket. Now let’s say the watch market tanks and everyone is trying to offload that watch model, it will still have a baseline price and likely won’t be far from the retail price it originally sold out. However, this only applies to specific watches, typically made of material other than steel and from specific brands. Most of the watch Grey market, the value is about half of their retail price. You can easily find an example but comparing prices of specific Rolex models 2-3 years ago compared to today.
Some do. Most won’t outperform the s&p 500, but you can’t wear that. The people that I know who are buying the watches and handbags that have a good chance to increase in value also have more money than you expect. So, they are looking to diversify their investments. The luxury item just becomes a hedge like gold for wealthy people trying to park their money somewhere, so there will always be a market. Plus, average people crave status and keep these brands relevant, with the purchase of baseline products.
This is mainly a justification people use for THEMSELVES, to mentally justify why it was OK to spend so much on an item. It’s 99% cope.
The reality is that the re-sale market on these items is NOT that strong. I mean yes, compared to a non-designer bag, they DO retain some re-sale value. As in, a 2 yr old Birkin still retains some value, whereas a 2 yr old purse from Target will have none. But they are by no means a “good store of value” compared to pretty much anything else. You will, at best, get a small fraction of the purchase price back on a re-sale. It’s kind of like the diamond/jewelry market… you’ll never get back anything near what you spent.
Then there is also the fact that high-end/designer fashion is its very nature trend-based. Sure there are a few “classic” looks that are somewhat timeless, but in general part of what makes popular fashion popular is that its popular. And these trends change over time, sometimes from season to season. If someone DID need to tap into their “designer purse inventory” to make a little cash, they will likely find the purse that was the “cool trendy popular” bag 4 years ago now looks dated. And instead of signaling to the world
>I am current and trendy and have my finger on the pulse of the current style, and am successful enough to afford the latest
it signals
>I am behind the curve fashion-wise and/or cannot afford the currently-popular thing
Which is basically the opposite of what people are going for when they buy high-end designer fashion. So this further hurts the re-sale value.
So in short: no, these things are not good “stores of value”. People saying that are usually just huffing some high-grade copium to justify their own purchases to themselves.
I assure you they wouldn’t hold their value if we had some sort of major financial calamity, because the recent value has relied on an increase in the number of people being able to purchase them.
Watches, for example, have “held their value” because (a) there has been an explosion of interest in mechanical watches in the last decade or so, (b) certain watchmakers limit their supply as a marketing effort, and (c) we’re at the tail end of literally the longest economic expansion in the history of the United States. But there’s no particular intrinsic value holding their prices up the way there might be for a commodity or a piece of real estate or whatever. They’re luxury items, and we’re living in luxurious times.
There are more than one kind of luxury item, but the most common is the status symbol one. People buy them *because* of the price tag, to show off, because they have nothing else to show off with. The best exemple of this are probably Rolex watches. They’re good, but you can get muuuuuuuuuuuch better watches for that price. They *are* status symbols, though, in part because they are still cheap enough that you don’t need to really be rich to get one.
The real luxury items are mostly from brands you’ve never heard of, who do small scale artisanal production, and they often aren’t even that expensive for the quality they offer. The accent there is put on the experience of what you touch: quality fabrics, leathers, finishings…
There’s a constant stream of people buying luxury goods in order to show people they own luxury goods. This describes most collectors too – they might make a profit selling the odd item but almost none make a profit overall.
Very few people buy new and are genuinely going to make a profit reselling. Those that do are extremely careful to leave the purchase in perfect condition. There are not many people buying a perfect condition 2004 Rolex to wear, but there are even fewer available for purchase.
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