Within the past year, multiple reports and sources have confirmed many different things about the handbag industry. While many are conflicting and some are misleading, one thing is certain: the handbag industry is no longer the powerhouse it used to be.
A few years ago, handbags were the fail-safe moneymakers for contemporary and luxury conglomerates. It-styles and logos were hot, and handbags sales were almost guaranteed to generate revenue for the companies that invested in them. These were the days of Kate Spade’s nylon styles, Longchamp’s Le Pliage, and Michael Kors’ logo-fied tote bags. American mid-priced and luxury companies invested heavily to produce hundreds of thousands of units. They also opened more stores and flooded outlets with merchandise.
At the time they sold—oftentimes they sold out—but then as all things do in fashion (which is a cyclical beast and easily manipulated by trend and celebrity), spending big on handbags with splashy and obvious logos fell out of style. The great recession can be held to blame as a significant driver in changing consumer habits and spending patterns. After the shock of almost losing everything, many shoppers had no disposable income to buy the once ubiquitous handbags that had come to be seen as status symbols and those who did, did not want to be seen as spending large sums of money on something as frivolous as a luxury handbag when so much of the country and world was suffering. These customers started looking for smaller, logo-less bags that fell within the $300 to $900 mark. Online shopping took off and brick and mortar retailers began to see a decline in foot traffic. More and more discount websites appeared, and outlets started filling with unsold inventory. When re-sale and online consignment stores Vestiaire Collective and The Real Real launched, they were stocked full of secondhand bags. Luxury handbags weren’t just available at lower price points; the styles customers used to spend a month’s paycheck on were now discounted, heavily.
In 2015, the $9.3 billion handbag industry saw a 1% decline in handbag sales. That’s $93 million in one year. In 2016 it grew a mere 2%. 1% when adjusted for the loss a year earlier. Currently, sales growth in handbags is estimated to decelerate to 3.1 per cent by 2020, from 16 per cent in 2012, reports Euromonitor international. There are many factors contributing to the slump in handbag sales: Expensive price points, lack of creativity, overexposure, discounting, and the resale market. In January, Bloomberg reported Macy’s had discounted 2,500 handbags the previous quarter, while both Neiman Marcus and Barneys New York marked down at least 900 items each. In July, WWD reported on The Real Real’s “State of Luxury Resale” Mid-Year 2017 report, which stated that while the site was full of handbags, footwear priced $500 or more was selling 11 percent faster than handbags with price tags of $500 or higher. Online retailers are also opposed to carrying stock for too long, thus either moving it to sale sections or selling to discount sites like YOOX or The RealReal.
Over exposure or product exhaustion is also a huge contributor to weak sales. Rather than hold out and generate buzz around a product, companies like Michael Kors, Coach, Kate Spade, and even Louis Vuitton churn out more and more inventory, oversaturating the market to take advantage of hype and fully realise the capital value of their products by avoiding stock outages. Today’s customer—especially millennials and Gen Z—is spending money on experiences and products that add meaning or value to their lives, veering away from anything that appears ubiquitous. They may show initial interest in a ‘trend-driven” bag like the J.W. Anderson Pierce bag or Chloe’s Nile, but that attention soon wanes and the bag’s success slows.
This gives exclusive, handcrafted products and emerging brands an opportunity to appeal. Brands like Gabriela Hearst, with a direct-to-consumer and made to order business model are performing well. Mansur Gavriel is a prime example of how to extend the life of a product’s cache. At the height of their success, they kept production runs small so every girl who purchased a bag still felt she had invested in a one-of-a-kind item. The 2,000+ person waitlist did nothing to hurt hype (or sales) either.
Creativity (or lack thereof), is another contributing factor to the sales decline. At the height of handbag mania, most bags looked the same. Designers either created lookalike styles with overzealous amounts of logos, or copied silhouettes from other brands whose styles were proving successful. What resulted was a marketplace full of almost-identical bags. Understandably, customers shied away from these cookie cutter bags, searching for styles that could better reflect their own personal points of view. Case in point: M2Malletier’s straight metal handles, Loewe’s puzzle bag, and Jcaquemus’ recent handbag drop, the oversized handled Le Sac. The goal here is not to blend in, but to stand out. It’s also an opportunity for emerging brands to find a niche customer and appeal to their sense of novelty and discovery.
The good news is that many of these problems are reversible given a creative approach. Hermès, Gucci and Chloé remain as popular as ever as their handbag sales see double digit percentage growth every three to four months. Through a combination of restricted production, strict control on distribution, successful brand positioning and a resistance to discount culture they are able to maintain an air of exclusivity. All are strategies that could be suzzessfully employed by other brands—to perhaps result in a sales turnaround.