Bigger items like Birkin bags and Rolex watches are often seen as barometers for the luxury sector. However, the way everyone is viewed during this crisis could not be different. Throughout the COVID-19 outbreak, reports have shown that prices for Birkin bags in the secondary market have risen, while values for Rolex watches have fallen.
The amount of Birkins that appear in the resale market during a recession typically increases, as exchanging a high-value item for cash flow is common during a market downturn. But what’s surprising about the Birkin bag is how high its price remains, even in times of oversupply (the basic economic principle of supply and demand does not seem to apply when it comes to oversupply. this is the price of this bag). According to the financial publication Nikkei, one of the oldest second-hand luxury stores in Hong Kong, Milan Station, reported a 30% increase in Birkin bag transactions in the past two months.
If the French luxury titan was not spared by the COVID-19 crisis, it is doing much better than its competing luxury groups. According to its latest financial report, Hermès reported first quarter revenue of $ 1.64 billion – up from $ 1.74 billion a year earlier – and constant exchange rate revenue fell. by 7.7%. The decline has been less dramatic than those of competing luxury groups like LVMH and Kering, both of which saw sales decline by 15% or more in the first three months of 2020.
As COVID-19 has shown, owning a Birkin bag is not only a guarantee of status, but it has also become an investment that retains its value during the economic downturn. Below, Daily Jing examines precisely how and why the Birkin has succeeded in serving as currency during crises.
Exclusivity: the discreet look of Birkin Bags
One of the main differences between investing in Birkin bags and other categories of exclusive accessories like Rolex watches is its financial liquidity. Birkins are made in a range of different styles, colors and designs so that each bag is unique. A traditionally long waiting list, varying in length from months to years, along with recent store closures (due to COVID-19 production lines shutdown), means it took more more time to purchase and receive a Birkin order than usual.
This increased exclusivity has driven up bag prices in primary and secondary markets, especially in China. When it reopened, Hermès’ flagship store in Guangzhou achieved record sales: $ 2.7 million in total. The store is said to have received a shipment of rare Hermès products that have drawn Chinese influencers and luxury consumers out of their homes to spend money on bags.
In the past, the Birkins were compared to another well-known luxury item: the Rolex watch. While it is no less of a status symbol, the average unit price of a Rolex is not as high as that of a Birkin, although the models are quite similar. However, it is usually not as difficult to buy a Rolex as there is no comparable waiting list. Therefore, the negotiating space of a Rolex watch owner is limited.
The target audiences for Birkin bags and Rolex watches are also very different. Traditionally, the male group that buys Rolexes is often described as “the successful elite.” In contrast, fans of Birkin bags are stereotypically dominated by older women whose decision-making powers are not as affected by price changes.
In recent years, however, affluent millennials and successful professional women have gradually taken a larger share of Birkin purchases. And, at the same time, more and more male luxury buyers regard Birkin bags as good investments and have entered the market as well. For this reason, gender labels placed on different consumer groups have been redesigned in recent years.
Birkin bags as hard currency
Birkin bags are the backbone of Hermès’ overall sales, accounting for over 50 percent of the brand’s revenue. The Baghunter online marketplace reported that the average value of a resale Birkin has increased by 14% over the past 35 years, suggesting that investments in Birkin bags may offer more stability than gold. Baghunter also noted that they are now even considered the financial asset with the least volatility.
According to a report by WWD earlier this year, a new online platform named Rally Road began securitizing and dividing high value IPO-style assets into shares. The categories included luxury collectibles, wines and whiskeys, rare cars and vintage Rolex watches. In a call to women, Rally has teamed up with Florida-based handbag retailer Prive Porter to procure 20 new rare and valuable Hermès Birkin handbags, which they will offer for investment among the 150 total assets of the platform.
This initiative is similar to how the stock market works, allowing Rally Road members to claim the purchase of shares in an appreciating item, so that they can profit from that appreciation. This way, people who cannot afford the luxury item can still enjoy the growth in its value. This is further indication that there is a growing perception of the Birkin as a financial tool similar to stocks or securities.
China dominates Asian appreciation for Birkins
Year after year, the Asian market remains the most lucrative for Hermès. As the world struggles to recover from the current COVID-19 crisis, retail traffic in China continues to rebound and mainland China’s 11 Birkin stores have reopened. Yet sadly, as activity increases elsewhere, several neighboring countries – including Singapore, Australia and Thailand – have seen a second wave of store closings due to extensive government restrictions.
But the remarkable sales generated by Hermès after the reopening of Guangzhou probably could not have happened without the company’s strategic market planning. Since entering the Chinese market in 1996, the brand has created a vision of luxury that flawlessly reaffirms the ideals of craftsmanship and exclusivity. These concepts were reinforced by lavish store layouts, excellent service, high prices and long waiting lists.
What Hermès also understood is that a smart marketing strategy is the key to a brand’s success. Each campaign message must convey the brand’s core values. But Hermès is also particularly innovative in digital marketing and uses multiple creative digital strategies in the social media sector.
An example of how Hermès harnessed the marketing power of social media was the launch of Twilly d’Hermès at the Cha House in Shanghai. In 2019, the brand hosted a two-day pop-up flash sale in the historic building, which has been transformed into a quaint event space to reintroduce the brand’s latest computer scent. Two days before the event, Hermès created a digital campaign on WeChat for subscribers to make reservations online – an ideal way to redirect online traffic to offline activities.
Decades ago, the muse of the same name for the original Birkin bag, British actress Jane Birkin, could hardly have imagined that her conversation with Jean-Louis Dumas on an Air France flight would culminate in a legendary handbag. To this day, the bag continues to be worth far more than its intrinsic value. And now COVID-19 has proven the bag’s ability to hold value as currency. But how to preserve its status by attracting the younger generations of China is the next question Hermès must answer.
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