LONDON, United Kingdom — If a customer walked into a Chanel store today, for the first time in five years, looking for a Classic Flap bag, they’d be forgiven for doing a double take at the price tag. From 2009 to 2014, the cost of a Classic Flap skyrocketed by 70 percent. Indeed, a Boston Consulting Group study of seven major luxury brands found that, from 2002 to 2012, the prices of their handbag offerings increased by an average of 14 percent each year.
By hiking their prices, brands like Chanel and Louis Vuitton have pushed entry-level customers out of the luxury handbag market — and into the path of accessible luxury labels, such as Michael Kors, Tory Burch and Coach. From 2010 to 2015, when sales of handbags in BRIC countries grew at a compound annual growth rate of of 6.6 percent, according to Exane BNP Paribas, accessible luxury labels presented less of a threat to luxury houses. Today, the market for high-end handbags “is more subdued,” says Mario Ortelli, senior luxury goods analyst at Sanford C. Bernstein. “One of the fastest-growing segments is customers [who] are entering the market,” he explains. “They’re buying their first handbags… so they are looking for something with a price that is not so high.”
As a result, many luxury brands have introduced smaller versions of their best-known bags — with a scaled-down price tag to match. While the entry-level consumer might not be able to afford a full-size Fendi Peekaboo (18cm by 31cm and priced at $3,950), the micro-version (5.5cm by 11cm) is a more wallet-friendly $1,550, while prices for the mini (11.5cm by 18cm) start at $3,150. Brands such as Gucci, Givenchy and Dior also offer their most iconic styles in micro, nano and toy sizes, for a fraction of the original price. The toy edition of Saint Laurent’s Sac du Jour costs $1,350, compared to $1,990 for the mini version and $2,750 for the original. Likewise, shoppers can save more than $800 by opting for Gucci’s mini Bamboo Handle Shopper over the full-size version.
Retailers such as Selfridges, Saks Fifth Avenue and Barneys are also tapping the trend, and have launched dedicated mini bag sections on their e-commerce sites. At Selfridges, overall sales of mini bags rose by 100 percent in 2015 and online searches for mini handbags increased by 50 percent year-on-year.
“If introducing handbags at a lower price is allowing you to tap into consumer segments that you’re typically not serving today, then chances are that sales per square foot would go up,” says Luca Solca, head of luxury goods at Exane BNP Paribas. Smaller products also require less material and craftsmanship than their larger counterparts, making them less expensive for brands to produce. “You’re reducing the cost of the handbag and supporting margins at a time when there is this pressure on the category,” he adds.
However, brands must ensure mini bags don’t replace sales of higher-priced products, warns Solca. “If you are replacing large and more expensive handbags with smaller and lower priced bags… down the road, your profitability will suffer,” he says. “It all depends on whether this is additional volume or a reduction of what you’re selling.”
By reducing prices and expanding entry-level product offerings, brands also risk eroding their image and deterring exclusive customers. In the case of mini handbags, Solca believes this is not an issue: most mini bags are replicas of an iconic luxury handbag style, meaning they benefit from the desirability that surrounds the original. Mini bags also mean brands do not have to resort to discounting their core handbag offering to boost sales. "A brand is justified in doing a lower-priced bag without losing exclusivity through the perception of making a discount," adds Ortelli.
Ultimately, the success of the mini handbag strategy “all boils down to brand desirability” and is a luxury available to only the most exclusive labels, says Solca. “It would be much more difficult for Michael Kors and Tory Burch to sell a handbag for €2,000, than for a €2,000 brand like Prada to sell handbags at €700 or less,” he says.
However, not all brands are relying on mini bags to boost sales. Last June, after net income in the three months through April fell to €58.7 million ($65.7 million) from €105.3 million, Prada announced it would launch a range of lower-priced full-size handbags, priced from €1,000 to €1,200 (about $1,124 to $1,348). Others have doubts about the longevity of the mini product category: “It may appeal from a point of view of price, and it can be humorous or sweet, but when it starts to be duplicated across brands and becomes the substitute for introducing new development in order to create price-point reach, it becomes meaningless,” says Peter Harris, president of Pedder Group, a footwear and accessories specialist in Asia that works with over 300 international brands, including Christian Louboutin and Stuart Weitzman.
“It is the business of fashion,” adds Ortelli. “Now is the phenomenon of mini bags, but maybe in a few years, we will come back to large bags.”
Editor’s note: This article was revised on 12 February, 2016. An earlier version of this article misstated that last June, Prada posted a 40 percent drop in Q1 revenue. This is incorrect. Last June, Prada reported that net income in the three months through April fell to €58.7 million ($65.7 million) from €105.3 million in the same quarter of the previous year, a drop of approximately 44 percent.