WSJ Reports on Herm?s Birkin Bag's 'Crazy Economics'
"40 Years Since Launch... Now Established as a Social Phenomenon"
A bag that you cannot buy immediately no matter how much money you have. It is the Herm?s Birkin bag.
On the 22nd (local time), the U.S. Wall Street Journal (WSJ) reported on the 'crazy' phenomenon where Herm?s Birkin bags are sold in the secondhand market at 2 to 3 times the retail price in an article titled "The Crazy Economics of the World’s Most Coveted Handbag."
Herm?s Birkin Bag (Photo by Gmarket)
WSJ explained that in the U.S., the basic black leather Birkin bag 25 has a pre-tax retail price of $11,400 (about 16 million KRW), but if you buy this bag and immediately resell it to an online luxury secondhand dealer like The RealReal, you can get $23,000 (about 32 million KRW) in cash, which is double the price. If The RealReal purchases this bag, it almost immediately resells the item on Instagram or at a Las Vegas pop-up store for $32,000 (about 45 million KRW). WSJ noted that the manufacturing cost of this Birkin bag is only $1,000 (about 1.4 million KRW), calling it an 'enormous margin.' This is a peculiar phenomenon caused by the luxury boom and is difficult to explain with conventional economic theory.
The Birkin bag is one of the hardest bags to buy worldwide. The Birkin bag is a tote bag introduced by Herm?s 40 years ago in 1984. This handbag is handmade from leather and is named after Jane Birkin, a British-French actress and singer. The price of a Birkin bag varies from $10,000 to $1,000,000 (about 13 million to 1.3 billion KRW), depending on the leather and materials used.
The late singer Jane Birkin, after whom the "Birkin bag" is named.
WSJ diagnosed that the Birkin bag has now become a social phenomenon. Carrying a Birkin bag itself shows that one has the means to invest $10,000 to $100,000 in a bag. The Birkin bag's popularity increased as celebrities like Christine Lagarde, President of the European Central Bank (ECB), Kim Kardashian, and Victoria Beckham were seen carrying it.
Gift Offensive to Store Staff to Buy a Bag
As a result, the power dynamics between customers and store staff at Herm?s stores have changed. At Herm?s stores, the staff are the dominant party, and the customers are subordinate. Even the wealthiest female customers bring homemade cookies to charm the store staff, and reportedly, Beyonc? concert tickets, private jet tickets to attend the Cannes Film Festival, or even envelopes of money are used to gain favor.
Meanwhile, Herm?s was recently sued by U.S. consumers over its Birkin bag sales strategy. The plaintiffs claimed that Herm?s does not sell Birkin bags to just anyone and induces customers to purchase other products as a condition for buying a Birkin bag.
On March 19, two consumers from California filed a lawsuit against Herm?s in the San Francisco District Court, alleging that Herm?s violated antitrust laws. The complaint states that Herm?s' practice of screening customers to determine if they have a 'sufficient purchase history' before selling Birkin bags is unfair. Herm?s has created a system that prevents just anyone from buying Birkin bags, selling only to some loyal customers.
The plaintiffs argued, "Herm?s store staff encourage consumers to buy other items such as shoes, scarves, and accessories," and "then show the Birkin bag (in a separate space) only to consumers deemed qualified to purchase it." They added, "This practice artificially inflates the effective product cost, violating antitrust laws."
The plaintiffs shared their failed experiences in trying to purchase Birkin bags. One plaintiff, Tina Cavalleri, said, "In 2022, when I inquired about buying a Birkin bag at Herm?s, I was told, 'We only sell to customers who have consistently supported our business.'" Another plaintiff, Mark Glino, said, "I tried to buy a Birkin bag but was advised by sales staff to purchase other products first." Herm?s did not respond to local media requests for comment regarding the lawsuit.
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