Problem: It's not true
Even with this clarification, there is something vaguely dishonest about the use of the term "investment. "Moreover, this seems like an odd time to encourage the once-greedy-and-now-subdued masses to shell out thousands of dollars for anything but necessities. No matter how narrowly the term is used within the new marketing context, the underlying implication is that these items are literal investments -- i.e., objects that will hold or increase their value.In most cases, this notion is simply untrue.
"Investment is the concept that you invest $1,000 to get back $5,000 in the future," says Pam Danziger, a consumer-insights expert at Unity Marketing who specializes in the luxury market. "The idea that any of these consumer goods are going to grow in value is just ridiculous. They're like cars: The minute you take them out of the store, they lose half their value."
Luxury-goods experts point out that in troubled times, consumers have tended to purchase jewelry, which has a perceived inherent value -- meaning that you believe that if you needed to sell that diamond in a pinch, you'd get around the same amount of money that you'd spent on it. (More on this delusion below.) Those peddling today's luxury products as investments seem to be trying to import this perception -- that aura of undiminished perpetual value -- to the realm of leather handbags and other luxury goodies.
The Hermès Birkin bag is often touted as such an investment. Though classic in sensibility, the Birkin became a badge of excessive disposable income during the "because I'm worth it" era.
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Case in point: Pop icon Victoria "Posh Spice" Beckham reportedly owns about 100 Birkins, a collection perhaps worth $2 million. The more basic Birkin bags retail for between $6,000 and $7,000. Forbes listed a crocodile Birkin (with nearly 10 carats of diamonds on the hardware) as being one of the world's most extravagant handbags when it sold for $120,000 at auction house Doyle New York.Like so many luxury items, the Birkin has recently been reborn everywhere from magazine editorials to the fashion blogosphere as the emblem of good value for the money. But how good of an investment, in the literal sense, is the Birkin?
Let's say that you are in possession of one of these creatures, a relatively modest one: a blue, 30-centimeter bag made from togo leather with silver hardware that you purchased for about $7,000 in 2007.
You decide to sell it through an elite designer resale boutique -- such as New York City's Fisch for the Hip, which recently had 15 secondhand Birkins for sale -- which then decides to retail it for $8,300. (The uptick in price is because would-be buyers are circumventing the notorious Hermès Birkin bag waiting list, the fashionista's version of cutting in the lunch line.) It sells after five months on the high shelf, and the store takes a 25% cut, leaving you with around $6,000 -- a 15% loss.
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That's not so bad, you might say, but remember that the Birkin is the gold standard of luxury goods. Other more easily obtained luxury "investment" items being touted today would take a much greater hit. For example, Celine's Boogie bag, which retails for around $700, hovers on the secondhand market for about $300. Try selling that $995 Burberry trench coat at Fisch for the Hip. It might go for $500, and with a 50% commission for apparel, your "investment" has dwindled by a staggering 75% in value.
Even jewels don't hold up
Not even jewelry can be considered a reliable investment. As Unity Marketing's Danziger points out, "Even if you melt down the gold and sell the emerald, you're still not getting back what you paid for it, because there was the initial design element that you paid for."And yet, at a time when the word "investment" conjures up images of a flattened cake, maybe the luxury marketers have a point. After all, for people who've been beaten within an inch of their lives by stocks, a five-figure bag that loses a mere 20% of its value might look like the golden ticket.
This article was reported by Lesley M.M. Blume for The Big Money.
Published May 13, 2009
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