Luxury Bags – What Are They Really Worth?

Have you ever stopped to consider how much the things that you buy are actually worth? Right now, the fashion industry’s obscurity means that it’s difficult to gauge prices. Considering that luxury brands run profit margins of over 30%, you can rest assured that the manufacturing cost is only a fraction of what you pay for it.

Fashion has always had a curious relationship with value. As the paragon of how capitalism values brand over function, a pair of shorts can now cost more than a washing machine – if they have got the right branding. You can also apply this notion right up to the more extreme cases whereby a pair of shoes can these days easily cost as much as a University degree. And let´s not forget about luggage; a full set of baggage from luxury houses such as Chanel or Louis Vuitton can easily set you back the price of a family car.

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Hermes Birkin

Let´s take for example the Hermes Birkin; this is a handbag which currently attracts a two year waiting list which will allow you to pay a five figure price tag to take it home. But, why do these bags cost so much? Well, according to the Parisian brand Erstwhile, it’s because “there’s always one craftsman responsible for the whole process of the bag, from the start to the end. To create a single bag, it costs around 15 to 20 hours.”

Bear in mind that these bags start off at around £10,000 (and can rocket high above this ´modest´ amount with customisation). That converts to around £666 per hour for the most basic model. So, is this hourly rate a fair investment for an ´It´ bag? According to the founder of new brand Oliver Cabell, probably not.

 

Is it Really Made In Italy?

“There are essentially three large conglomerates that control around seventy percent of the $220 billion market,” states Scott Gabrielson, who established Oliver Cabell to give a greater awareness on how they manufacture their products. The brand was born in an Asian fashion accessories factory, where luxury bags labelled ‘Made In Italy’ were being sewn on by women (and their families) who only earned a few dollars a day; a figure which was sometimes less than the legal minimum wage.

“These types of bags cost less than $100 to make and were selling at the shopping malls close by for $1,200” Gabrielson recalls. “It turns out that legal loopholes allow you to do 90 per cent of the origination in a certain country, then finish the handle or what not in another country and claim origination.” So while the customer thinks they’re paying for the intricate handiwork of a Milanese Maestro, he’s probably only sewn the handles and the ´Made In Italy´ tag on.

From day one, Gabrielson set out to do things differently whilst exposing how the fashion industry actually operated. He primarily concentrated on bags, ¨because they had a the highest mark-up in luxury fashion.¨ Luxury bags sell for between 12 and 20 times more than the cost of basic manufacturing; a characteristic that he hoped to avoid so that his consumers could buy Oliver Cabell products for as near to the manufacturing cost as possible.

Selling Direct

Selling directly to the public consumer isn’t a new principle. The internet has eroded the walls between maker and buyer, however for most luxury brands, these mark-ups have proved less solvent; a Prada bag is still as much from Prada.com as on the rack in Harvey Nichols. It was Gabrielson’s pioneering idea to publicise every cost of the process, from materials to manufacture and mark-up, so consumers can decide whether that’s a price worth paying.

This is an approach that’s already allured Italy’s best factories, which are traditionally off-limits to everyone except the biggest, most luxurious brands who produce the biggest volumes. “They like the fact we’re being transparent about precisely where everything is made,” says Gabrielson. “Because it means that unlike other brands, we can’t just move production to other, cheaper countries.”

This notion is good news for the factories and good news for consumers. Because of the size of the world’s biggest brands (and their priorities – now that the demands of shareholders are at least as important as customers, a factor which brings along extra ancillary costs). As well as the leather, the labour and the shipping, you also pay for the brand’s marketing campaigns, which can involve expenditures from everything within its Parisian head office to its seasonal runway shows. Many times, the consumer will be spending considerably more on the label stamped on the bag than the actual bag itself.

Oliver Cabell

Thanks to Oliver Cabell´s new philosophy of ´manufacturing transparency´, the costs are clear. Using as an example their Kennedy Weekender (which is one of the two products that launched, alongside a third minimalist backpack). From your $285 price tag (although the brand is US-based, it ships world-wide) exactly $71.57 goes on materials (including the leather which is tanned in the Italy’s Monte Urano district and all cotton is sourced from a mill which was founded in Montappone in 1936). Onto this, you can add extra price considerations such as $69.95 on labour, $7.29 on shipping and $8.92 on tax.

On top of this final figure, the brand then adds an 80 per cent mark-up to cover its own cost and make a profit). Even taking all these factors into account, Cabell´s bags are still a fraction of the $1,695 French luxury equivalents. With regards to ethics, you can also rest easy because you’re buying something that is actually made where it claims to be – not in a Bangladeshi sweatshop, and that peace of mind alone is priceless.

 

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