The Story of a $10 Million Handbag

The Birkin bag origin story started on an airplane with Ms. Birkin complaining about her handbag to her seatmate, Hermès former CEO, Jean-Louis Dumas in 1984. Perhaps on a napkin, the two sketched a design and the rest of the story is history.

Jane Birkin’s original Birkin bag just sold at auction for $10 million.

The Birkin Bag

You can get a new Birkin bag at a Hermes boutique for as little as $10,000.

So yes, the secondary market for a Hermès handbag is the hottest:

Birkin Bag Prices

We could say that there are three markets for Birkin bags. According to WSJ, a high quality fake Birkin bag goes for $500 to $5,000. With fakes, I suspect we have normal supply and demand interacting:

Then, we have resale markets. Limited supply elevates and shortens our supply curve. At auction, the Kelly was most expensive before Ms. Birkin’s original sold for $10 million. Also though regular retailers are online resellers. Not knowing an average price, , I just chose $30,000:

And finally, there was the market for the original. One of a kind, Ms. Birkin’s handbag composed the supply side.

Our Bottom Line: Conspicuous Consumption

A Birkin chronicler once told us, “That Birkin on your arm tells other women your place in society.” More than 120 years ago, Thorstein Veblen explained why.

In his Theory of the Leisure Class (1899), Thorstein Veblen (1857-1929) told us that the affluent pursue useless activities like excessive shopping to convey their power and wealth. Servants and employees help the affluent do less while their money lets them signal their status by buying more. The Birkin bag is precisely what Veblen was talking about.

In a 2010 paper, scholars at USC’s Marshall School of Business used the following diagram to convey some of what Veblen taught us. They could easily have inserted the Hermès Birkin bag in the Parvenu slot below:

Thorstein Veblen was rather eccentric. I once read that his let his dirty dishes accumulate until none remained. Then he sprayed them with a hose and started all over again. This is Veblen:

He would have lots to say about the luxury index:

My sources and more: My new discovery, the Wealth Report had a treasure trove of facts. Meanwhile, recent Birkin bag articles in WSJ,  here and here, and the NY Times provided a new perspective. But if you go to just one link, do head for Sotheby’s for the six most expensive Hermès handbags.

Please note that most of today’s Bottom Line was in a past econlife post.