here is the article incase the link doesn't work in the future
September 2, 2007
Money bags
The profit on a top handbag can be 13 times what it cost to make.Dana Thomas, in a new book, looks at the lucrative business of luxury goods
LOOK at a woman today, any woman, and what do you see? Clothes that are more or less anonymous. Shoes that are more or less anonymous.
And a handbag. It could be made of leather or canvas or nylon. It could be a tiny clutch in her hand or a back-pack slung over her shoulder. Never mind what’s in it. More than anything else today, the handbag tells the story of a woman – her reality, her dreams. And thanks to luxury-brand marketing, that handbag changes every few months, like the seasons, like her moods.
Since the late 1990s, handbags and other small leather goods have joined perfume as “entrance products” to a luxury brand. They come in a wide range of materials, from nylon to crocodile, and an abundant number of styles at prices as low as $200 (£100).
Unlike perfume, handbags are visible on the body, and – like Air Jordans for teenagers – give the wearer the chance to brandish the logo and publicly declare her status or her aspiration. “[They] make your life more pleasant, make you dream, give you confidence, and show your neighbours you are doing well,” according to Karl Lagerfeld. “Everyone can afford a luxury handbag.”
Today, when you walk into a luxury-brand store anywhere in the world, you will find yourself surrounded by handbags. They are the easiest luxury fashion item to sell because they don’t require sizing or trying on: you look at it, and if you like it, you buy it. Done. They are easier to create and produce than perfumes, and the profit margin is astounding: for most luxury brands the profit is between 10 and 12 times the cost to make the item. At Louis Vuitton, it’s as much as 13 times.
Handbags are the engine that drives luxury brands today. According to annual consumer surveys, the average American woman bought two new handbags a year in 2000; by 2004, that number was more than four. At Vuitton’s immense four-floor store in Tokyo, 40% of all sales are made in the first room, which sells only monogram handbags, wallets and other small leather goods.
“With the bag . . . there are no left-overs because there are no sizes, unlike shoes or clothes,” said fashion designer Miuccia
Prada. “It’s easier to choose a bag than a dress because you don’t have to face the age, the weight, all the problems. And there is a kind of an obsession with bags. It’s so easy to make money. The bag is the miracle of the company.”
In 2004, luxury brands sold $11.7 billion worth of handbags and other leather accessories, and the segment is getting still stronger. While the luxury market grew by 1.2% each year from 2001 to 2004, leather-goods sales increased by 7.5% each year. A large share of those sales are “It” bags: the latest hot designs that – thanks to luxury-brand advertising campaigns and fashion-magazine articles – become the must-have of the season. Recent “It” bags include the Louis Vuitton Murakami, with the signature monogram stamped in rainbow tones on white leather, and the
Gucci Flora, a pretty floral print taken from a scarf originally designed by the house for Princess Grace of Monaco in the 1960s.
Handbags have become so important in fashion today that an English journalist wrote during London Fashion Week in 2006: “Everybody – everybody – is talking about handbags with the intensity of cardinals appointing a new pope.”
The “It” bag phenomenon is young – less than 20 years old – and has been wholly created by the marketing wizards at luxury-brand companies. In the early 1990s fashion magazines declared that if you couldn’t afford to change your wardrobe each season, you could update your look with a new handbag. And luxury brands have been pushing the message, and the product, relentlessly. “It’s like you’ve gotta have it or you’ll die,” said Tom Ford, the former Gucci designer.
Leather companies launched ready-to-wear lines to make the brands – and therefore their handbags – sexier. Fashion companies pushed handbags to the forefront of their offerings and made them the centrepiece of their increasingly provocative advertising. Handbags became an intoxicating lure.
And women got hooked, some disturbingly so. There are Japanese girls who work as prostitutes to earn money to buy Louis Vuitton, Chanel and Hermès bags. In September 2005, victims of Hurricane Katrina used their Red Cross cards to buy $800 bags at the Louis Vuitton boutique in Atlanta. Websites such as Bagborroworsteal.com have cropped up for women to rent luxury and designer handbags for a fashionably short time instead of buying them – that way, they can change their bags more often.
In the world of luxury-brand handbags, as in cars and clothing, there is a pyramid of quality: made-to-order down to mass-manufactured. The best – the equivalent of a Rolls-Royce or Chanel couture suit – is a Hermès handbag. Made of the finest leather and fabrics, sewn by hand, and with starting prices of more than $6,000 and year-long waiting lists, Hermès handbags are considered by many to be the last true luxury goods in the luxury fashion industry. They have long been the bag of choice for those who can afford to choose. Jackie Onassis was photographed so often with her Con-stance bag slung over her shoulder that customers would ask Hermès sales staff for “Jackie O’s bag”.
Maryvonne Pinault, wife of Gucci Group owner François Pinault, raised fashion eyebrows when she attended the Paris womenswear shows in the autumn of 2001 not with a Gucci or a Saint Laurent, but with a large alligator Hermès Birkin bag on her arm. Martha Stewart showed up at her insider-trading trial in 2004 carrying a buttery brown Birkin and was taken to task by the press for her indiscretion. Carrying into a jury trial “a bag that is surrounded by such a thick cloud of wealth and privilege was ill-advised”, opined Robin Givhan in The Washing-ton Post.
Today, buying a luxury-brand handbag is often an exercise in banality. You walk into the shop past the chic-suited security guards, peruse what’s on display, choose, pay, and walk out with your purchase. The shopping experience may have been pleasant, but in the end it was no different from going to Gap, except for the price. There is nothing unique about the product: the brand has churned out thousands of them, absolutely identical. Unless you place a special order to have something custom made – and that is a very limited business, available at only a few companies – what you get is a ready-to-carry bag.
Buying a Hermès handbag – or saddle, or luggage – on the other hand, is still a true experience in luxury. Hermès boutiques do receive a few bags each season to sell to customers who walk in – a bit like a good restaurant always saving a table for a regular who drops in without a reservation. But generally, if you want to buy a Hermès bag, you have to order it. The bags on display in the store are just that: display models to show you the options. You choose the material: cowhide, reptile, ostrich, or even canvas. You choose the colour and the kind of hardware: silver, gold, diamond-encrusted. And for the Kelly, you choose if the seams are on the outside of the bag or turned in. And then you wait several months while it is made to your specifications. When it arrives in the shop and you are invited to pick it up, it is your bag. Another woman may have a navy blue cowhide Kelly with gold hardware and turned-in seams, but that was her idea, just as yours was yours.
Hermès handbags are the antithesis of an “It” bag: most of the designs have been around for almost a century and are coveted not because they are in fashion but because they never go out of fashion. They don’t bear ostentatious logos; the bags themselves are sufficiently recog-nisable. Hermès handbags convey old money and refinement – even if those who carry them have neither. They are a discreet symbol of wealth and success.