Does Herm?s Really Handcraft Every Stitch?... Birkin Bag Cost Revelation Video Causes a Stir [Luxury World]

Recurring Cost Controversies Sparked by Trump's Tariff War
Chinese Platform TikTok Exposes Luxury Goods Manufacturing Costs
Claim Emerges: "Hermes Logo Accounts for 90% of Price"
Chinese Factories Ramp Up "Viral Marketing" Amid Tariff Pressures
Dior's Cost Scandal Leads to Decline in Korean Sales Last Year

Recently, a video exposing the manufacturing process and cost of the French luxury brand Herm?s Birkin bag was released on the Chinese short-form platform TikTok. In the aftermath of the tariff war initiated by President Donald Trump, Chinese original equipment manufacturer (OEM) factories have claimed that "the value of the brand logo on luxury bags accounts for up to 90% of the retail price." The response has been intense. Some videos have garnered millions of views and are spreading rapidly, sparking a global debate over the cost structure of luxury goods.

According to the retail industry on April 27, a recent video posted on TikTok shows a man in a Chinese bag factory claiming, "The factory price of Herm?s is only $1,395 (about 2 million won), but the retail price reaches $38,000 (about 54.58 million won)." He asserted that about 4% of the retail price covers material and labor costs, with the remainder attributed to the Herm?s brand logo.

The man in the video explained, "We source the highest quality Togo leather from Italy, Germany, and France, and the cost includes zippers supplied from Italy, inner lining, accessories, and factory labor costs." He claimed, "When all expenses are considered, about 90% of the price is for the logo." He also introduced in another video that "the factory employs artisans and is the actual OEM factory for luxury brands."

Herm?s is considered a top-tier luxury brand. To purchase one of its popular bags, customers must accumulate purchase history by buying items such as tableware, scarves (Twilly, Carr?), shoes, and accessories. In some countries, customers must join a local store membership and achieve a high level of purchase history to be eligible to buy a bag. The 'Birkin bag,' which can cost hundreds of millions of won depending on size and decoration, requires an even higher purchase record.

A video of a Chinese manufacturer revealing the cost and manufacturing process of luxury goods on TikTok (left). A Chinese influencer promoting that Lululemon activewear can be purchased for 5 to 6 dollars (right). TikTok capture

The luxury industry views the claims of the factory as lacking credibility. Since the Trump administration imposed a total of 145% tariffs on China, Chinese counterfeit companies have engaged in 'viral marketing.' In fact, the factory exposing these details has been receiving inquiries about purchasing bags through social networking services (SNS).

However, suspicions persist that, as China is known as the factory of the world, some products are manufactured in China and then repackaged in France or Italy to be sold to consumers at high prices.

According to the audit report of Hermes Korea, the local subsidiary of Herm?s, the company sold nearly 1 trillion won worth of luxury goods in Korea last year, but the total amount paid to Herm?s International for product purchases and commissions was only 5.6 billion won. The company purchased goods worth 451.9 billion won from Hermes South Asia and traded 32.9 billion won in product purchases with La Montre Hermes, the Herm?s accessories subsidiary.

 Recurring Cost Controversies Every Year... Will the Love for Luxury Fade?

The issue of cost structure for luxury brands arises every year. In June of last year, the French luxury brand Dior was embroiled in a cost controversy, which triggered a global boycott and dealt a significant blow to its brand image.

Last year, it was revealed that Dior had been reducing manufacturing costs through labor exploitation. According to the Milan prosecutor's office in Italy, an investigation into companies that had lowered manufacturing costs through labor exploitation over the past 10 years found that Dior had operated four subcontracted factories employing illegal Chinese immigrants who worked around the clock without holidays. The manufacturing cost of a Dior bag, which retailed for 2,600 euros (about 3.85 million won at the time), was only 53 euros (about 80,000 won).

This not only exposed the cost structure that luxury brands are reluctant to disclose, but also revealed ethical and environmental issues in the production and sales process, inflicting serious damage to the brand image. Consumers are willing to pay high prices for luxury goods not only to use products such as bags and shoes, but also to consume the brand's prestige and image, which have been built up throughout the production and sales process.

As a result, Dior suffered significant brand image damage in Korea as well. Waiting lines disappeared from Dior stores in department stores, and this was reflected in the company's performance. Last year, Christian Dior Couture Korea's sales and operating profit were 945.3 billion won and 226.6 billion won, respectively, down 9.6% and 27.4%. Although the company posted sales of 1.0456 trillion won in 2023 with a growth rate in the 12% range, it failed to achieve sales in the 1 trillion won range last year.