Hermès bag gang buys up half the supply

[AnnaE]

“All are suspected of money-laundering and undeclared work”
I cannot access the article but they were arrested for tax evasion non?

Tax evasion for sure. I mean, it did get Al Capone, and the French are serious about their taxes. Could have been immigration violations, too (e.g., if you are doing this while being in a student visa). Probably a host of other labor laws.

What this means is that it will be much, much harder to get a Birkin or a Kelly without any history. All SAs everywhere will be on high alert.

Regarding this part - “Employees have themselves been approached by the network and, for some, dismissed by the house in case of doubt about their integrity.” - For what it’s worth I have long heard the rumors that some SAs are in on it - they know about the fake customers but sell to them willingly to have the bags flipped, and get kickbacks in return for their help.

Also yes, the whole hiring people to buy the bags in Europe is something I’ve heard about for a long time. I have read about how they recruit buyers on SNS. I believe someone posted one such hiring ad in the “why so many Birkina available on secondary market” thread, you can go check it out.

The dress up part I’ve heard of too. I even remember coming across posts of an ex-buyer who did it as a part time job when she was a student in Europe; one funny detail I remember is that she said it’s actually nice to have some non-Hermès RTW on like Chanel, since that makes it look like you have money to spend on other brands besides just Hermès.

Also some of these people use the bags / goods they get for this flipping operation to make social media posts, posing as if the goods are their own, to pretend to be very rich people living a luxury life. Some may even amass a decent following, causing their fellow buyers to become jealous and expose them (if you follow a lot of Hermès posts on RED aka China’s Instagram, you probably had a chance coming across such an incident recently).

There is a reason that this is based in Europe - European pricing is significantly lower compared to that of other places e.g. Asia. As for three times retail, currently for the very desirable bags (say a size 25 in Noir GHW) the prespend is in fact more than 2:1 in some crazy competitive markets. So paying 3x the European price is actually still less than what one would have to spend to get it fresh from boutique in those places! They also don’t just do Hermès by the way, because of the pricing difference between different markets they also do similar things at other luxury brands; even without a “prespend” difference, the cheaper European prices can be enough to allow a profit by itself.

ETA: I too wonder what exactly is the illegal part. I have no doubt that Hermès can try to ban these people and not allow them the bags (which is probably why they hire people so you get fresh faces eh?) but police arrests...? I’m no legal export though. Yeah maybe that show room has sth to do with it...

France and some other European countries are also much easier for walk-in shopping. I was offered a Birkin (or maybe a Kelly) randomly in Frankfurt once when looking for a Bastia (euro coins were getting to me and I left mine at home), and obviously people go to FSH all the time.

The way to put an end to this is by not buying from resellers. If resellers had no customers, they would go out of business. As long as they have a market, they will continue with these kind of schemes.

Easier said than done. Say someone sells a Birkin on eBay and says this is their old bag — how do you know they are not a reseller? Or someone sends it to TheRealReal — do you know if the Y stamp bag was bought to be resold or was, say, a gift that didn’t work out? Similarly, what if you want to sell something — are you now a reseller?

The demand is clearly there if people are paying 3x the price...

The thing that bugs me personally about this is that people are SO desperate for a Hermes quota bag that they are willing to pay 3 times (allegedly) the retail price to have one and have one NOW!
I see posts on this forum from new members about 'playing the game' desperate for a Birkin or kelly-I do wonder how many of these people actually do genuinely LIKE the design of the bags, or thought about wether its their style or not? or wether they want them as a status symbol-which I find kind of sad and actually puts me off the idea of buying a new Birkin should one become available to me.
I Love the bag, I love the workmanship, the leather, the simplicity of it -the heritage of the brand but I find I'm veering more towards buying a Birkin that has been well used so it looks less of a 'status symbol' more what it was designed to be..a bag to carry 'stuff' that just so happens to be so beautifully made it will last a lifetime.

People buy luxury stuff all the time as a status symbol without much thought. At least one can carry stuff in a bag. Jewelry is a pure status item (I suppose there is some gold bullion value there) — very few people truly appreciate the history of the house of Cartier, but millions buy the Love bracelets. Same goes for the cars — I see G-Wagens in Silicon Valley all the time. No one needs that for their office commute, but people buy them. Sure, some people are car enthusiasts, but most drivers are not. And those cars are much more expensive than bags.

 

[BagLady164]

I agree with you about being cautious that the value of a B or K will grow. It seems to me that most people who resell with the expectation of making a profit, basically flip it to meet immediate demand and do not hold them long term. The other thing is that tastes change over time. No gaurantee that the B or K will be as coveted as now in 10 or 20 years.

It’s not so much about making a profit as it is limiting the loss from a consumption expense. Scarcity and a strong secondary market are critical for that to happen and may influence one’s decision to purchase 30 versus 1 or none. It does mine anyway. Whatever your circumstances, however, don’t buy one or 30 if you can’t afford to lose all your money. They are ephemeral investments at best.

 

[lulilu]

Any fool who pays 3 times the original price definitely has money and I bet has enough of it that they can shop at Hermes. How much of what we hear and see written are the facts sans exaggeration. As as as Hermes goes or any other retail, I really don’t think they care If the piece is resold once or a hundred times. They sold an item; it is out their door.

I don't believe 3x retail, unless perhaps it's 3x Euro retail and sold in Asia where prices are higher. But still seems excessive. One always reads these fairy tales about how much bags are sold for on the resale market. I think they are written by reseller businesses and auction houses to drive up prices. They often incorrectly state the true price of a birkin at the boutique to buttress their stories.

They are making it sound like the buyers descended like a swarm of locusts to buy up half the inventory. Sounds to me like the buyers posed as regular customers and successfully purchased bags like any other customer. And they were highly successful.

 

[CarryOn2020]

I don't believe 3x retail, unless perhaps it's 3x Euro retail and sold in Asia where prices are higher. But still seems excessive. One always reads these fairy tales about how much bags are sold for on the resale market. I think they are written by reseller businesses and auction houses to drive up prices. They often incorrectly state the true price of a birkin at the boutique to buttress their stories.

They are making it sound like the buyers descended like a swarm of locusts to buy up half the inventory. Sounds to me like the buyers posed as regular customers and successfully purchased bags like any other customer. And they were highly successful.

The entire operation only took 8 months.
Those bags were readily available. I’m guessing the issue is the money laundering. This time it was Hermes (seems to happen a lot to them), next time it could be Dior, LV, etc.

 

[TankerToad]

@BagLady164, the idea of a license to carry H had me laughing. Would look fabulous! Imagine what kind of crazy LE items they could come up with, embossed with your name as an ID tag. @AnnaE, I feel you and am the same! I don’t buy as investment because I tend to fxxx up my items if I try to baby them.

Re the secondary market, I don’t think H has a problem with it, as long as it is done by genuine clients who have purchased their items with the intention of using them. And from what I heard, corporate disapproves of “the game” as a principle and method to obtain a bag, albeit that as @cravin put it, they are in the business of making money.
Otherwise, they’d go after every auction house that sold pieces, and probably refuse service at the spa unless you could prove a personal purchase. But that’s not the case and they are even so happy to see multi-generation pieces come back for service.
Many of you have also experienced the complimentary looks or comments from the staff when you come in with older designs and vintage pieces. If you happen to sell a piece here or there, they don’t care.

The issue here seems to be “fake showroom,” as I imagine the gang presented themselves as related to H in an official capacity, probably saying they are the VIP branch.

Good post

 

[breakfastatcartier]

I don't believe 3x retail, unless perhaps it's 3x Euro retail and sold in Asia where prices are higher. But still seems excessive. One always reads these fairy tales about how much bags are sold for on the resale market. I think they are written by reseller businesses and auction houses to drive up prices. They often incorrectly state the true price of a birkin at the boutique to buttress their stories.

They are making it sound like the buyers descended like a swarm of locusts to buy up half the inventory. Sounds to me like the buyers posed as regular customers and successfully purchased bags like any other customer. And they were highly successful.

Plus, those criminals had to have people on the inside to help hook them up.

 

[Bob Loblaw]

The French government gets lots of money by taxing luxury goods. It doesn't get that money if luxury goods are counterfeited or resold 'under the table' (in this case at a fake boutique). Presumably, since there was so much deception at point of sale with the actors etc., we can guess that the resellers weren't including the French government's portion of the luxury tax within the x3 price.

The article also mentioned that some of the bags were sent directly to China. We can guess this happened without observing French duties and taxes. So it seems (to me) like a taxation issue, and possibly money laundering if the profits were funneled though many different platforms to obscure their origin.

 

[Perja]

I went back to the Le Parisien article, and there are 2 things:

• The reason why the gang was investigated and arrests were made is because of money laundering and undeclared work. Hermès just happens to be the brand involved. It certainly makes for catchy headlines, since they also make one of the most expensive handbags in the world.
• Hermès regularly files legal complaints for the image part (infringement, etc.) to protect their reputation. I wonder if this is to signify their disapproval with the speculative resale circuit.

 

[duna]

Many Rolexes aswell sell above retail price....As others have said, I don't see what's illegal about it: maybe there's more to it than we know.

Oops, I just read @Perja's post above!

 

[CanuckBagLover]

Le Parisien:

"False" buyers recruited from theater schools

It appears that the network was recruiting "mules" responsible for legally buying the bags in the 21 Hermès stores throughout France, and even in Europe. They were sometimes selected in theater schools or on social networks in order to give credibility to the image of wealthy customers and to defeat the vigilance of employees. So some small hands - mainly women - even wore Hermès clothes and recited scenarios to justify their interest in these highly prized luxury pieces: it could, for example, be a gift for a terminally ill loved one. 'cancer…

Because to become the happy owner of a Birkin or a Kelly, you have to show your white paw: make a good impression, register on the waiting list, explain your wish ... The demand is greater than the supply: each piece is unique and handcrafted by one of the 7000 Hermès artisans, without a sewing machine. It takes a week for them, all settled in France, to make a bag. These accessories sell on average between 7,000 and 8,000 euros each. Some models can reach astronomical prices - a Kelly bag in white crocodile skin has just been sold for 365,545 euros in Hong Kong.

According to investigations, these bogus clients for a day were paid up to 500 euros by the network to act and were constantly replaced. Nearly half of the bags sold in recent years by Hermès could have been acquired by "mules", despite the very great vigilance of the shops ... Some "false" customers have thus been "burned" by sellers, who then pretended no longer be able to place an order. Employees have themselves been approached by the network and, for some, dismissed by the house in case of doubt about their integrity.

Why would any one want to gift a Birkin to terminally ill loved one? What a silly story!
This makes me believe too that SAs were in on it. They must be getting kick backs from the operation. Otherwise why sell? I didn't think that SAs got commission for selling B or Ks. If I'm wrong please let me know. I also thought B & K purchases had to be approved by managers.

The fake store front purporting to be a legitimate Hermes store I could see triggering fraud charges, which could also trigger tax evasion, money laundering charges (it the operation is likely "offf the books" so highly doubt they filing taxes etc.) and maybe other charges I can't think of.

I don't really feel sorry for Hermes though. I don't fault them for reserving a B or K, that is produced in limited quantities and highly coveted by consumers, to their loyal customers. Or that they may define "loyalty" be how much you spend on other products and that the "spend" threshold may very depending on the market.- its there business, its up to them how they want to sell/market their products. But they should be consistent and not offer B and Ks to walk ins with no prior purchase history or histories that don't meet their spend threshold, just because they look rich.

Hermes knows what going on with the resale market. They can't complain about it but then do nothing on their end to stop the practice.

 

[chicinthecity777]

The article is a typical click bait! What's illegal is NOT they were buying Hermes bags and reselling them. They were done for money laundering and tax invasion! It just happens the commodities in this case were Hermes bags!

 

[classybags4ever]

I agree the only way to curtail this is for H to stop offering bags to walk-ins/no purchase history. But this may also limit H from reaching/enticing new customers who may fall in love with H after the first B/K, bc I am one of them, so I am ambivalent on what the recommendation should be... I was lucky to have been offered a K32 on my first trip to Paris and after that I am addicted to H! I am sure H knows the statistics on how successful their practice results in getting loyal customers like me Vs. the risk of selling to resellers and angering their loyal fans. If they don’t, they should hire consultants to run the statistical models. It’s all part of running a good business.

No the way to stop this is to STOP buying from resellers. That's the only way to put them out of business. That will in turn increase supply for true customers and the regular boutiques. I'm sure so many of their "VIPs" are actually resellers.

 

[classybags4ever]

The way to put an end to this is by not buying from resellers. If resellers had no customers, they would go out of business. As long as they have a market, they will continue with these kind of schemes.

Why would any one want to gift a Birkin to terminally ill loved one? What a silly story!
This makes me believe too that SAs were in on it. They must be getting kick backs from the operation. Otherwise why sell? I didn't think that SAs got commission for selling B or Ks. If I'm wrong please let me know. I also thought B & K purchases had to be approved by managers.

The fake store front purporting to be a legitimate Hermes store I could see triggering fraud charges, which could also trigger tax evasion, money laundering charges (it the operation is likely "offf the books" so highly doubt they filing taxes etc.) and maybe other charges I can't think of.

I don't really feel sorry for Hermes though. I don't fault them for reserving a B or K, that is produced in limited quantities and highly coveted by consumers, to their loyal customers. Or that they may define "loyalty" be how much you spend on other products and that the "spend" threshold may very depending on the market.- its there business, its up to them how they want to sell/market their products. But they should be consistent and not offer B and Ks to walk ins with no prior purchase history or histories that don't meet their spend threshold, just because they look rich.

Hermes knows what going on with the resale market. They can't complain about it but then do nothing on their end to stop the practice.

Not selling to walk ins isn't going to solve the problem. So many VIPs pretend to be true customers and also build up a purchase history by buying other things and creating a relationship with an SA. How else would so many brand new fresh from store B/Ks end up on reseller websites?

 

[Perja]

An update in the saga... Le Parisien published an article today about one of the actors posing as a customer.

For French members:

Trafic de sacs Hermès : les confessions de Léo, acteur et «faux client» du réseau

L’audacieux trafic de sacs de luxe Hermès, démantelé fin janvier à Paris, avait recruté des centaines de «faux clients» pour charmer les ven

www.leparisien.fr

Apologies for the quick and dirty summary, typing it on my phone on the go. I can pop a more complete transcription later if any interest.

In a nutshell, “Leo” (name has been changed) wanted to support himself while launching his career as an actor without damaging himself. He is quoted as saying he was aware of the money laundering and mafia ties, but he had no ethical problems with that. He felt participating in the scheme was taking a moral stance against Hermès and its inhuman commercial practice of selecting its clients and creating scarcity of material goods.”

The rest of the article describes Leo’s experience as one of the fake clients, dressing up and going to the stores. He also alleges most clients at FSH are fake clients.

What’s interesting is that the very end of the article concludes by addressing a topic I’ve seen here quite a bit, which is whether Hermès can be considered a victim in this. Quoting a source close to the investigation, they write Hermès, as a business and regardless of any moral stance (on what type of goods H sells and at what prices), should be considered a victim since protecting their brand equity is within their right.

 

[AnnaE]

He is quoted as saying he was aware of the money laundering and mafia ties, but he had no ethical problems with that. He felt participating in the scheme was taking a moral stance against Hermès and its inhuman commercial practice of selecting its clients and creating scarcity of material goods.”

That is honestly an extremely French thing to say