It is no news: people want to signal to the outside world that they are doing well. Preferably, to show that they are doing better than well. For that, luxury goods are the perfect means to the end. It’s even better if you choose a luxury product considered a timeless status symbol — you can be fairly confident that it will retain its perceived value in the future.

So, the question is: Is that luxury bag a good investment, and should you see it as one instead of just considering it another purchase and desire? Let’s figure it out.

What makes luxury luxury?

In general, luxury goods do not primarily sell because of their superior quality or better functionalities. Instead, the primary selling point is the high price—as ironic as it might seem in the face of basic economics. The more expensive the good, the higher the perceived value these goods deliver.

However, not every expensive luxury item retains its economic value equally, nor are they seen as status symbols for the same length of time. For that reason, you need to know what you are buying if you are interested in selling it at some point; what is considered luxury today might not be perceived the same way in the future.

It’s one thing to buy what’s fashionable today and another to invest in quality and classics that maintain their value season after season.

The difference between a trend bag and a timeless classic

If you are one of those who opt for those more long lasting pieces, you might want to distinguish between the timeless classics and those that have a limited lifespan. Of course, if you really like something, go for it, but from an investment point of view, you might want to consider neutral colors with simple designs. It is largely thanks to these characteristics that have made bags such as the Chanel 2.55 or the Hermes Birkin timeless classics that fit basically with any style regardless of the trends and decades we’re living in.

Vintage and the secondary market

Unlike fast-fashion items, luxury goods pertain their value pretty well also in the secondary market. This is thanks to a bunch of different factors such as the superior quality and the fact that people take good care of them so when you find them in the secondhand market they are usually in good shape.

Overall, the worldwide second-hand luxury goods market was valued at 33 billion euros in 2021, meaning it is no joke. Generally speaking, this means two things: i) you can find and get your preferred luxury item in great condition with a significant discount, and ii) you can re-sell your luxury goods after you are done with them (if that even happens) and even get most of the price back that you paid.

Inflation and luxury goods

It’s no secret that we’re living in expensive times. For quite some time now, inflation has been running high, compounded by supply shortages and other economic challenges. Naturally, this has led to a surge in the production costs of luxury goods, which has, in turn, driven up their prices.

However, the interesting thing is that a price increase for luxury goods does not necessarily diminish demand. As mentioned earlier, these items function as status symbols, with their high prices serving as a signal of exclusivity and success. In other words, if you can still afford luxury during times of high inflation, you’re sending a message that you’re thriving, regardless of economic conditions. This is precisely what many consumers seek in luxury goods.

That said, the price increase does tend to shift the customer base away from the upper-middle class toward the top earners. Paradoxically, this exclusivity only makes these luxury items even more desirable, creating a kind of vicious cycle.

Given that consumers generally accept—and even expect—rising prices for luxury goods, you might start to see these items as a sort of “buy-and-hold” investment. Like art or other collectibles, luxury goods and their markets can serve as an alternative investment avenue.

So, should you finally buy that dream bag of yours?

Conclusion

When considering an investment in luxury items, it’s essential to approach it with genuine interest and a clear understanding of what matters to you. Collectibles like luxury goods are often driven by personal taste and sentiment, and their value can extend beyond mere financial metrics.

However, these items often represent more than just material possessions; they can reflect your identity and aspirations, adding a layer of emotional value that isn’t always quantifiable.

So, is it a good investment to buy that luxury bag you’ve been eyeing?

If you choose a timeless classic with a strong second-hand market, and it brings you considerable joy, then it could be a worthwhile purchase. Not only do you gain satisfaction from owning it, but you may also have the option to resell it later, potentially recouping some of your investment. While you might not recover the full economic value upon resale, the emotional satisfaction and personal fulfillment you gain are equally important.

Gotta love girl math: in either case, go get that bag!

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* Kapferer, Jean-Noël & Valette-Florence, Pierre, 2021. “Which consumers believe luxury must be expensive and why? A cross-cultural comparison of motivations,” Journal of Business Research, Elsevier, vol. 132(C), pages 301–313.

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