Is The Luxury Designer Handbag Market Over-Crowded?

The sales of fashion accessories have increased substantially during the past decade. Fashion accessories now make up approximately 30% of world-wide sales in the luxury-market. This is up from 18% in 2003. The bulk of this growth can be attributed to the sale of the luxury designer handbag. So what mega-brands are selling the best and why has the luxury designer handbag market grown so much in later years? Statistics publicized by Exane BNP Paribas account for mega-brands such as Louis Vuitton, Gucci, Prada, Chanel, Hermes, Coach and Burberry. But all other brands are reported as a broad group under “others”. This “other” group took a larger market share, growing from a 38% share of the market in 2004 to a 41% in 2013. This is due in part to other high end brands entering the luxury designer handbag market.

1)     Luxury Designer Handbag are Seen as a Status Symbol.

Bags are an affordable status symbol.Women and now also men are judged by the quality of her handbags. For both men and women, a luxury designer handbag can be mixed and matched with other trendy fashion accessories and to a wide variety of events. Fashion accessories such as a luxury designer handbag can dress up or dress down an outfit.

2)     A Luxury Designer Handbag Has Become More Accessible & More Affordable

For brand-names, the retailing of a luxury designer handbag offers clever retail economics. The sales of bags result in high sales productivity as well as selling at full retail price in their branded stores. Brand stores are usually located in larger cities such as London, Rome, New York, Paris, Milan and Sydney and thus have restricted convenience to those who live outside the cities. Through the arrival of the internet, the acquirement of a luxury designer handbag has been expanded. People can purchase over the internet from anywhere in the world, with their purchase delivered to their door. Consumers look for bargains when they purchase online, specifically on sites such as E-Bay and Amazon. This has had the effect of driving down prices.

3)     The Luxury Designer Handbag Market Has Become Much Talked About

The dawn of social media brought about a transformation in the way fashion trends are set for both men and women. A new release of a luxury designer handbag is talked about on sites such as Facebook, Twitter and Pinterest. The dress code of celebrities and royals has become a day-to-day topic of conversation on sites such as Facebook, Twitter and Pinterest. Many bloggers and fashionistas put their personal fashion views across online using blogs and forums. More and more people are up-to-date with the latest fashion trends and what is new and where to get it. I follow the Business of Fashion, Purse Blogs, Purse Stories and the Large Purse Shop Blogs. Fashion information is freely available on these sites.

4)     Third world Market Places Such As China Have Expanded

Third World Market places such as China have opened up to the call for the sale of a branded luxury designer handbag. This has occurred due to the growing middle class in these countries with a higher disposable income. They are particularly fashion aware and see these branded bags as a status symbol. I saw evidence of this when I recently visited Guangzhou. Branded stores were located throughout the city in glamorous shopping centres scattered among the busy traditional Chinese marketplaces.

5)     More High End Brands Now Produce A Luxury Designer Handbag

The market selling a luxury designer handbag is becoming more and more over-crowded, as high-end fashion houses such as Dior and Saint Laurent have expanded into the fashion accessories market. In fact the Prada set up a new brand called Miu Miu which produces a luxury designer bag range aimed at celebrities and a younger audience. This has led to more and more availability and choice for branded bags.

6)     Medium to Lower End Fashion Brands are Challenging the Mega-brands

Other emerging fashion brands such as Zara, Michael Kors, Kate Spade, Oroton, Tory Burch, and many others are challenging the luxurydesigner handbag market. The bags produced by these companies are just as smart and classy but the price tag is usually much less making them more affordable. To match this challenge, some of the Mega-brands have produced what I would call a second tier of luxury designer handbag which they also retail at a lesser price. The lower priced bags are still sought after by fashion conscious consumers.

6)     Generation Y Has A Bigger Disposable Income

Generation Y who have grown up with computers, cell phones and technology are often seen as self-entitled, overly precocious, demanding and just plain rude. They change their jobs readily and spend money more easily. I have 4 generation Y children who love to shop online, and do not blink an eye to pay the price of a new luxury designer handbag. Although they do their research first in order to get the best bargain. Unlike their baby boomer parents who were more frugal and were taught to save rather than to spend.

Exane BNP Paribas Infographic | Source: Exane BNP Paribas

7) Has the Luxury Designer Handbag Market Become Over Crowded?

To offset the mounting pressure of the ambitious new brands, some of the mega-brands increased their entry-level price points to highlight the exclusivity and desirability of their own landmark luxury designer handbag. Unfortunately this back fired a little because although they experienced a rise in exclusivity, it was accompanied by a reduction in sales revenue. Consumers who are spoilt for choice in an over-crowded market, have little loyalty and alter from one design to another. This is particularly apparent in the Chinese market.

It seems apparent that the mega-brands have increased their entry-level price points, but abandoned the market range below $500, and prefer to focus on the $500 to $2,000 price range. The median price of a luxury designer handbag is now around $1,500. Some fashion houses have designed innovative more extravagant models priced above $3,000 so as to retain exclusivity at the higher end of the market. Some of the high end brands have a signature luxury designer handbag which became the landmark by which they became recognized. However they still need to concentrate on developing new landmark products with iconic shapes which emphasis sophisticated design. However discretion often goes out the window when these high end mega-brands are produce full logo bags as a means of status distinction.

The up and coming brands sell a more functional, luxury designer handbag to younger consumers with lower budgets where price is a more important buying benchmark than for the higher end brands. Emerging brands position themselves by using one of three product strategies: attempt to own a shape, concentrate on best sellers or be a lower-priced fast-follower. This approach may not be sustainable in the long term. These brands often go for easy-to-spot logos and canvas prints.

It is obvious that this is no time for any of these companies, mega-brand or not, to be relying on previous success. In a market oversupplied with choice, a tactic based on past success and reputation, whether associated with a logo or not is a recipe for failure.

Consumers these days are very knowledgeable because they can research online before buying. They look for new and exciting products and get bored quicker than in the past. The manufacturers of a luxury designer handbag has to keep on their toes and watch what social media, blogs and forums are saying about fashion trends. They have to be innovative and not rely purely on their past success. Consumers want to be trend setters and want to be admired and talked about and even envied especially on social media.