Why is the luxury handbag market increasing?
What’s in a bag? Plenty if you ask Chanel, Dior, Louis Vuitton, and Coach. Inflation might be on the rise, housing costs are increasing, and contrary to what some might believe, the global COVID-19 pandemic isn’t over. Despite this, projections for the global luxury handbag market exceed a valuation of 35.4 billion dollars by 2031. Luxury handbag manufacturers are attracting customers by providing bags that are a combination of fashion and technology.
Estimates for the global luxury handbag market growth are a rate of CAGR of 5.9 percent from 2021 to 2031, as per a research report by Transparency Market Research. While there has always been a love for a good handbag, how, despite economic factors not favoring fashion growth, is the luxury handbag market doing so well? The answer lies in one of the most powerful economic forces in the world: working women.
A rise in working women globally is increasing sales for luxury handbags
A global increase in the population of working women is leading to more disposable income, and disposable income is always great for luxury fashion. During the global COVID-19 pandemic, the total number of women in the workforce declined, with the global workforce of women declining from 50.1 percent in 1990 to 46.9 percent. However, this is being offset by the number of women pursuing higher education globally.
As companies operating in the global luxury handbag market are focusing on developing innovative and cost-efficient products, they are looking at target markets for growth. Asia continues to be a key market for luxury handbag growth. The biggest factor in getting working women to buy more luxury handbags is social media.
Major players in the luxury handbag market, including Dior, Gucci, Louis Vuitton, Versace, and Chanel, continue to dominate the social media landscape with engagement scores of 8 million and up as ranked by Listen First Media. The comeback of Dior’s Saddle Bag can be largely attributed to social media and influencer culture.
Major influencers, including Susie Bubble, Bryanboy, and Chiara Ferragni, have all sported the Dior Saddle Bag. The bag quickly rose to become one of Dior’s best sellers, and did wonders for the brand’s bottom line. For young working women, particularly in the Asia Pacific, the luxury handbag market is looking lucrative.
Ricardo Rubi, a senior partner at luxury brand consulting firm Simon-Kucher Partners, told FashionUnited that the growth in the luxury handbag market is most obviously people finally going out again after the COVID-19 lockdown. People are also returning to the office. Revenge shopping is still alive and well, and there has been growth among categories including apparel and cosmetics.
With inflation, luxury brands have also increased prices, which also leads to increased revenue. “When we are discussing sales dollars, people need to remember we are talking volume,” Rubi said to FashionUnited. “Rarely do companies talk about sales units. Within those dollar figures, take prices into consideration. Companies that used to be very conservative about increasing their prices are taking risks because they have higher budgets and shifting budgets. Until things start looking murky again, which could happen with increasing interest rates, brands might be very adventurous when it comes to price increases.”
The Asia Pacific market will continue to be imperative to luxury because there is still growth potential there, as China has a rising middle class. “All eyes have been on China for a very long time,” Rubi said to FashionUnited. “From a luxury standpoint, China has been able to command some of the largest margins that have been historical in Asia.”
While there is an increase in working women in emerging economies, Rubi told FashionUnited, “One of the challenges with emerging economies is they oscillate. If one emerging economy is doing really well, some of the others might not be. What you want to look at are economies that are becoming more stable as others are destabilizing. We all see what’s happening with Russia right now, and that’s going to have an effect on the luxury market for a while. Russia had a niche market of very high spenders.”
He added, “India is one market that has a lot of room for growth in the luxury market. Looking at Latin American markets is very difficult because every country is such a different economic situation. The one thing all countries have in common is COVID-19 having a negative impact on these economies. Now, we have to look at if their governments taking place now will allow for economic growth.”
Rubi says for luxury brands looking to raise prices, now is a great time to raise prices because, “Demand is going up. Supply shortages are also stemming from China. Luxury brands can use that as an excuse to increase prices. There’s also a lot of money out there in the market right now because the European Central Bank and the Federal Reserve have released tons of money into the economy, increasing disposable income. Demand is going up; supply is going down. There is the expectation prices are going up, and that’s what ends up happening. Until interest rates can control inflation, curtail demand, and we solve the supply chain issues, prices will likely continue to increase.”
With brands like Chanel and Louis Vuitton continuing to increase prices, now would be a good time for that investment piece before they go up in price again. The luxury handbag market is at its peak as we speak.