Sep 092011
 
One of the more popular posts is one where I compared the prices of Chanel’s iconic 2.55 bag vs. the stock prices of various securities. At the time, I was faced with what I considered monstrously high price for a new Chanel bag vs. what I’d previously paid in 2002, and was wondering how the prices of the bag had risen over time. Had it outperformed the general stock market? Should I have followed my instincts back in college and used all my savings to stockpile classic Chanel bags at their $1k price tag, like Elaine and the Sponge on Seinfeld?

Okay, sorry about that – I am a shameless Seinfeld quoter. But anyway, since that post in 2010, a lot has happened in a year – mainly, the US has had a slow, turtle like “recovery” (well that’s debatable) and Chanel has decided to raise prices, yet again. So I decided to do an update for you all…and added in Goldman Sachs as a security as well (just a little shout out to all the women in finance who read this blog….apparently there’s a lot of you!)

Without further ado, an update to my 2.55 vs. Warren Buffet chart – please see below for notes and details:

This chart assumes a $1k investment made in each security as of the beginning of 2004 (Google IPO’d later in ’04), and charts the performance thereafter based on retail price. The conclusions are pretty similar to what I showed in 2010 – the only stock that outperformed Chanel bag prices was Google, and gold by a slim margin. Warren Buffet’s Class A wasn’t even close.
My original conclusions from last year:
  • Chanel has been insatiably greedy over the past few years, riding the luxury wave to the mass market (highly likely)
  • If you want to buy a 2.55 now, you can either view it as buying at an unjustifiably high price, and perhaps hope that another 8 years from now the price will have tripled again (to a healthy $10,200).

I think those two points above still probably ring true. I’d like to add a a few more of my own conclusions here.

First is the fact that luxury cannot continue at this pace forever. Sorry, no.  China, the biggest area of growth of luxury firms, is doing fantastic (and high five to my comrades) but its growth will slow and more domestic players will enter. These luxury companies that have so far had the basic China strategy of, “Be a foreign firm. Enter Chinese market. Sell whatever we want and price at whatever we want,” will face stiffer domestic competition and resistance to these price hikes. Well…I really hope so, anyway.

Second is of course that luxury and fashion items are in my opinion, not an investment. They are highly illiquid and you can’t live in them, or put them in your Roth IRAs. When the bad Terminators arrive and the machines take over, we will not be patting ourselves on the back, having invested smartly in Cartier Love bracelets. Ultimately, you should choose what to dangle over your shoulder, or drape over your shoulders, not by if you think you’ll make a profit, but by what speaks to you and is hopefully, affordable to you. Beauty and luxury have their own personal price tag…and in the end it’s up to you to figure out what that price is :)

So go forth, shop, and enjoy…but stay educated, friends! Actually I have just heard that Chanel will be raising prices again soon – maybe I need to be doing a revision of this every year. I would love to hear comments and feedback on this topic…and of course, have a fabulous weekend!

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  66 Responses to “Chanel 2.55 vs. Warren Buffett – An Update”

  1. Huh – this is surprisingly interesting. It's funny that you posted this, I was just thinking a few days ago how most of us women like to think of these luxury items we purchase as an "investment piece" …when in reality, in most cases we don't make that much of a profit or, not much of a substantial profit off of it. So at the end of the day, a purchase is still a purchase, whatever the amount, and whatever the brand.

    That's my two cents anyways…

    However, that's not to say that I won't use the "investment piece" reasoning myself for my own purchases ;)

    http://www.atelier630.com

  2. Hi Kat! Just a question, as I didn't know if you were drawing this conclusion or not: Do you believe that Chanel's price increases are being driven by its nouveau riche Chinese consumers?

    All I can say is, thank goodness I have never liked the look of quilted bags – and let's hope it stays that way! Even as an uninterested party, these price increases are quite shocking to me. China may be doing well, but the rest of the world is not, and like you said, this just rings of unadulterated greed.

  3. This is so interesting! I love this overall picture and how luxury goods fits in, never thought about it like that before!

  4. oh man! i don't think i can buy a chanel bag anytime soon! hopefully i have 10k when i do lol

  5. Awesome analysis! Which I am NOT sharing with my husband lol…

  6. This is an awesome post Katherine! I was thinking about this the other day when I was at the Hermes store looking at Kelly bags for a mere $9K+.. And it got me thinking ok so if I put my money in stocks and in 5 years what is my return and in 5 yrs should I unload this bag…I probably will get 60%-75% of the value as I'd use it sparingly. Still on the fence but this graph is a great depiction of what is a luxury good and it's nothing more than just something to showcased on one's arm. Shoulda coulda woulda bought more gold like my mom in the 90s…$380 an ounce??? Yeah don't get me started!

  7. I've always viewed Chanel as a brand that is beyond my means- it is like the tipping point of luxury- where Dior or Dolce shades will run $350 retail, Chanel's are $600. The fact that they've tripled costs during this recession not only implies that they are greedy- also that the brand is working hard to exclude certain clientel- i.e. only those with very disposable incomes can purchase Chanel – the moderately rich are not good enough for Chanel, not to mention middle income earners. A lot of luxury brands take this attitude toward nouveau riche spenders and see them as tarnishing the brand- example rapper Jay-Z and Cristal champagne- the brand did not want to be affiliated with him as a costumer although he is a millionare several times over. As fashion lovers we often don't think enough about what kind of attitudes we're buying into.

  8. I mean I often would give myself the excuse that they were investments, but really…its insane how much the price has escalated, but the argument can also be made with a pair of Manolos, comparing their price.
    such a great post, thanks for breaking it down!

    great blog,
    Annina
    check out our Chanel Blue boy giveaway:
    http://www.cinchedatthewaist.com/2011/09/giveaway-sharing-my-addiction.html

  9. Bah. One day, that Chanel bag will be mine ;_; until then, I will gape along with the rest over the outrage in price increase. I'm secretly keeping my fingers crossed that the price will have plateaued by the time I'm ready to shell out some serious dough. Here's to hoping.

  10. Bahahaha! I love this!

    Now if only I could convince my husband that we should invest in Chanel…because as you've clearly shown – we can't lose! :)

    It is so annoying how prices are just skyrocketing. For example, LVs are $200 or more expensive than they were just a year ago. I would love a red Chanel flap, but don't know that'll ever happen!

  11. yes, you're right, better to invest in stock (tech companies like Google or Facebook now) than in a chanel bag, even if it tempts me a loooooot, but not as investment, only a pleasure for eyes and to lift style!

  12. You are brilliant. Thank you for posting this. I shared it on Twitter because not many people actually research investment pieces. They just consider that they will have them for a while and they are bound to be expensive. This puts such a smart spin on shopping.

  13. Chanel 4 Lyfe!! lol jk jk. :P

  14. very interesting perspective! thank you for sharing your brilliant insights!

    still love that chanel. haha.

  15. this is why you are hand-down my fav blogger! i love how your posts combine fashion, intelligence, and class, and your topics are so thought-provoking!
    love you!

  16. handbags are never an "investment"- brand name items have no inherent value.

  17. Kat, this is a truly fascinating and mind-blowing post! Egads, I knew that Chanel price increases were insane but I didn't realize it was even worse.

  18. Kat, this is a truly fascinating and mind-blowing post! Egads, I knew that Chanel price increases were insane but I didn't realize it was even worse.

  19. Kat, this is a truly fascinating and mind-blowing post! Egads, I knew that Chanel price increases were insane but I didn't realize it was even worse.

  20. I was JUST talking about this with a friend this morning. So many items that I used to lust over at much lower prices keep getting more and more expensive. It's crazy to me, as I feel like I see some of them (cough cough LV) so much more now than I used to.

  21. I had more fun reading this than chewing a WSJ report. There is a myth that price tag or brand is equivalent with luxury. Well, maybe it is sometimes yet other times it is absolutely not. So buy items you love only for the quality, brilliant design and craftsmanship.

    I heard Chinese government is going to finally cut loose on the luxury goods importing tax. Does that mean it will help Chanel price deflation a bit? :-) When million of Chinese purchase Chanel bag, it will become a commodity just like anything else. Let's see.

  22. wow, this is really interesting and informative! i've never thought of looking at it that way. and man, chanel just keeps raising their prices. i guess i should buy one now? ;)

    <3, Mimi
    http://whatmimiwrites.blogspot.com/
    $25 Apothica Gift Card Giveaway :)

  23. This is amazing! Thank you so much. I cannot wait to show this to my husband as justification for my Chanel purchases. :)

  24. what a fun read! I just watched Wall Street 2 last night, and so finance is fresh on my mind hahaha
    it makes me wonder whether the high prices reflect more genuine quality or if it's all just a big mind game. A little of both perhaps?
    And the last paragraph rings so trueee…
    love this post~
    xoxo Diana

  25. Chanel is in a special niche market so it is har to compare with overall economy or general stock market. Wealth is concentrating to fewer people and their appetite for top notch arts and products are growing faster. Their psychology and wealth will keep fueling the luxury market. Still, will never doll out that kind of money for a just a bag…

  26. This is hysterically funny in a really intelligent, dry, sarcastic sort of way (and I totally got the Sponge reference…I spent college watching Seinfeld 1994-1998). I just showed this to my husband and he loved it. Great post.

  27. Such an interesting post! I wish we had great comparison articles and case studies like this to read when I was in business school :P But now you're making me worried. If I wait until I can actually afford a Chanel bag…will it have continued to "ride the luxury wave". Fingers crossed it doesn't!

    Thanks for stopping by my blog – you have a lovely blog! Fabulous content!
    Tasia
    http://rufflesandsequins.blogspot.com

  28. LOVE this type of post, Katherine! Well done!

  29. Fascinating post! I love reading professional (business, law etc) themed articles that use fashion as an example. Also I love a good Seinfeld reference haha.

  30. You are an absolute genius I wishI had a quarter of your savvy.
    And you are right this "investment piece" philosophy is utter tripe!

  31. You are an absolute genius I wishI had a quarter of your savvy.
    And you are right this "investment piece" philosophy is utter tripe!

  32. You are an absolute genius I wishI had a quarter of your savvy.
    And you are right this "investment piece" philosophy is utter tripe!

  33. Very interesting and thank you so much for the info! I should have read your post in 2010 – bought 4xChanels early this year so I feel responsible lol!
    I have to agree with you about the current prices and the proposed increase in November (?). That is why, although I dream of another bag, cannot bring myself to part with the asking price – afterall the product is the same – materials are worse not better. So it's silly – like flipping property – sooner or later reality has to set in.

  34. Also – is that why you're inseparable from your Birkins? lol!
    Can you do an analysis for Hermes please?

  35. nice chanel jumbo bag!

    http://www.mysticlipstick.com/

  36. I am so glad you posted this, I was discussing with one of the shop owners how Chanel recently raised their prices again. I love this article thank you for taking the time to research this. I hate to do shameless self promotion but it does relate to this post. I have decided to open an online store and feature some of the Chanel bags currently in this market, will let you know when it goes up. But seriously if it wasn't for consignment shops I probably not be purchasing any luxury fashion items at this time.

    Veronica

  37. That's hilarious! I have sometimes wondered about these things myself…

  38. This is one of the coolest fashion posts I've read in a while – thanks for this!!! ;-)

  39. Thank you so much! This post is incredibly interesting and informative! I am certainly a fan!

  40. I loved this post; you are an amazing writer and the ideas of this post alone is smart, thought provoking and informative. Yes, I love Chanel, yes I have quite a few bags, but in the last 5 years I have not purchased one due to the outrageous prices that they are now. Great points and makes me think twice before putting down a couple thousand on a bag.

  41. I love your perspective and analysis, so interesting!! but you are right, purses are illiquid and also get worn down, so they lose their value depending on their use, unless you really know how to sell on ebay!

    ~Pau
    http://www.lilbitsofchic.com

  42. this is such a great post. i totally agree with you. fashion can be so fickle, i don't think its wise to invest in something as pricey as a chanel bag unless you can totally afford it. even if it's a classic, i get tired of looking at it too after awhile and after seeing it on so many people :)

    join my ongoing giveaway!

  43. this is such an awesome post!

  44. Thank you so much everybody….I am so glad that there are so many awesome Seinfeld lovers out there, woohoo!!

    @couturecoco I love my Chanel bags! I just tend to use the Birkins more because they are bigger and I lug lots and lots of stuff around…

  45. @Kyes I definitely think so – I spoke with quite a few people at major luxury brands and right now the demand is seriously insatiable in China (if you've been you will have seen the lines I'm sure) – and a lot of luxury brands want closer price parity so they have been raising prices…it'll be interesting to see how this evolves.

  46. @Susan SUCH a sweet comment…thank you! Also I know you had an issue with the sandals – I don't know if you went back to the post but an employee of fibi & clo said that you could send them back or exchange them…hope that helps!

  47. Katherine: Thanks for your lovely comment, I'm a bit of a plain Jane when it comes to my fashion choices!

  48. Katherine: Thanks for your lovely comment, I'm a bit of a plain Jane when it comes to my fashion choices!

  49. Katherine: Thanks for your lovely comment, I'm a bit of a plain Jane when it comes to my fashion choices!

  50. Thank you so much for revisiting my blog and for your lovely comments. I really appreciate you following my blog, Katherine! I'm following you via bloglovin' now :)

    Tasia
    http://rufflesandsequins.blogspot.com

  51. The prices just go up and up and to be honest – the quality – not so much -but hey they have a captive audience – you wonder where they will end?? thanks for your comment x

    http://fashionandfrank.blogspot.com/

  52. So interesting, great post!

    Ƹ̵̡Ӝ̵̨̄Ʒ

  53. this is one of the most interesting posts ive encoutered as i blog walk !!
    im glad u brought up this topic.. my mom has even told me that buying a bag can be considered as in investment hahaha

    http://WWW.GLISTERSANDBLISTERS.COM

  54. Great post! My one and only Chanel handbag was purchased back when the prices were more reasonable. Thank you for reminding me that I made the right choice by not buying any others after the prices increased!

  55. Great post/analysis. Very interesting. I don't have Chanel yet and probably never will.. lol.. :-)

  56. Very interesting post! But Chanel is way out of my price range, so, I guess it doesn't matter much for me.

  57. fabulous post! I'm pretty turned off by all the price increases so don't think i'll be investing in another bag anytime soon. I may just be going vintage/pre-owned from now on!

  58. Very interesting post, Kat. I agree with you – buying a luxury item (or any item for that matter, except maybe a house) is not an investment. My husband NEVER lets me get away with saying an item is an investment. "They always depreciate!" he says. LOL, yes, that could be why I don't have any luxury items. ;D

  59. Interesting post. I've realized about the ridiculous price rise too.. I've always wanted a Chanel bag 2.55 since like 5 years ago.. and I always thought, Maybe when I'm older, I'm still young.. bbut now the price.. Don't think I can get one anytime soon… >.<

  60. Sigh! Sad but true.. thankfully I am quite happy with my collection for now, unless I found the vintage flap that is in my wishlist, not buying anymore bag from Chanel.

    Good observation, Kat

    http://mrsjackofalltradesdaily.blogspot.com/

  61. The phrase "investment piece" has been fed to you by the fashion industry. Prices have gone up in every sector, not just luxury. The value of the dollar will continue to inflate, along with consumer goods. Granted you bought the the bag at a cheaper price back then, but it would be interesting for you to find out if $1k spent in 2004 would get you the same amount of stuff in 2012. I have a feeling it won't be much different. All in all, there are no returns in buying luxury items other than confidence and envy. It's simple, don't buy out of your means. If you have to save up for a handbag, you probably shouldn't buy it :) Ask Suze Orzman hahah

  62. I think you should do an every year updated post. Chanel is increasing their prices again! now a jumbo is over $5000.00, the timeless clutch I purchased back in 2007 for $845.00 is now over 2000.00. The greed is insane!

  63. I came over this article you wrote to late or I am reacting too late but the theme (Chanel price raising twice a year!) is very present. I was arguing lately with my husband about continue to buying luxury items for me telling him it is about investment. He is in banking (risk manager) and he has completely the same opinion as you mentioned above a luxury and fashion items are not an investment! They are highly illiquid.
    So I came to conclusion there is no reason at least for me to feed these companies anymore and when possible to have a look around in luxury consignment shops if I can find something and recycle!:-)
    Suzi

  64. […] Feather factor: Chanel 2.55 vs. Warren Buffet: an update; Business of Fashion: Fashion inflation: why are prices rising so fast?; Hapsical: How fashion works 1: pricing. […]

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