Cai Baochun, a London-based reseller, has stopped buying Hermes’ Birkin bags as their resale prices have fallen from a peak in 2022. Previously, he made significant profits on these bags, which retail for $10,000 but could be resold for double that amount. The current decline is around $6,000, reflecting a change in the market for this luxury item, which has historically thrived on exclusivity.
The drop in prices is attributed to an increase in the supply of Birkin bags in the second-hand market, raising concerns about Hermes’ strategy that has greatly contributed to its profitability. The Birkin bag, named after actress Jane Birkin, has been vital to Hermes’ financial success, with the company’s sales tripling and operating margins surpassing those of competitors like Chanel and Gucci. The brand’s exclusivity is linked to strict purchasing policies, where customers typically need to spend between $10,000 and $20,000 on other Hermes products before being offered a Birkin.
Three-quarters of resellers interviewed noted a decline in resale prices in the past year due to increased availability and reduced demand. Antoinette Hunter, who has been in the resale business since 2007, pointed out that obtaining Birkins is no longer difficult, but profitability is decreasing. For example, the price of a highly desired unworn black Birkin 25 has dropped by about £4,000 since 2022. Although Hermes sells this model at £9,390, the resale market prices are lower now than before.
Despite continuing demand for high-end Hermes products, the lower resale prices could deter potential buyers. Analyst reports show that the average resale price for Birkin 25 bags has decreased significantly, indicating a shift in the market. Hermes’ leather goods division, which includes Birkins, is a major revenue source, but rising supply and cooling demand are impacting resale prices.
For over a decade, strong demand and limited supply allowed Birkins to command high resale premiums. The growth of resale platforms has made it easier for buyers to sell their bags, leading to a surge in listings. Hermes’ shares have declined nearly 40% this year, making it one of the worst-performing luxury brands. Analysts have lowered the company’s rating due to increased availability of products in the secondary market, suggesting that the brand’s appeal may be diminishing.
The company anticipates a modest sales growth of 5.2%, which would be its lowest increase in six years, amidst a cooling demand for various products. The CEO of Hermes, Axel Dumas, acknowledged concerns about overproduction affecting exclusivity. However, some resellers still see stability in bag prices, pointing to specific trends in celebrity endorsements that renew interest in their products.
With information from Reuters
