PARIS, France — Despite luxury fashion's recent successes outside the realm of leather goods — with hit products including Balenciaga sneakers, Moncler puffers and Givenchy pool slides seizing the spotlight — handbags remain the industry's biggest and most profitable category.
Bags will therefore be critical to any post-Covid sales rebound. This may seem worrying for brands at a time when fresh waves of coronavirus cases in the US and Europe are prolonging work-from-home arrangements and cancelling social events, leaving consumers with fewer places than ever to actually carry a bag.
And yet, luxury handbags' biggest player, LVMH, the owner of Louis Vuitton and Christian Dior, saw its fashion division roar back to growth during the summer months. Sales in fashion and leather goods surged 12 percent year-on-year while watches, jewellery and cosmetics continued to tumble, the company reported last Thursday. The following day LVMH shares surged, as did those of rivals including Gucci-owner Kering and Hermès, as investors suspected a broader leather-goods renaissance was underway.
A swift comeback for handbags might be hard to reconcile with lingering economic uncertainties, as well as the fact that in the streets of many fashion capitals, hardly anyone seems to be carrying one. Over a sunny October weekend in Paris, ladies with a proper handbag, the kind you carry instead of wearing, and can actually fit things inside — as opposed to less-expensive crossbodies, mini-bags, and purses on chains — were a rare sight.
Categories like luxury jewellery and footwear have often grown faster than accessories in recent years, and as handbags became more competitive, brands hedged by diversifying into products like beauty at Hermès or fine jewellery at Vuitton.
Still, the handbag’s mix of utility and status-conveying power make the category difficult to unseat. "Bags remain the easiest product to carry around to prove a point. When you carry a handbag from Louis Vuitton or Chanel, everyone's going to know what it is," said Erwan Rambourg, luxury analyst at HSBC. "It's more difficult to put a big logo on a ring."
So who are the clients driving the rebound in accessories, which styles are they carrying — and why? BoF unpacks the key trends shaping luxury's most crucial category.
Smaller bags continue to dominate
Many shoppers may have already satisfied their desire for a small bag in recent years, be it with one of Yves Saint Laurent’s Lou camera bags, Prada's reissued nylon baguettes or a Louis Vuitton pochette. But don't expect the needle to swing back to the heftier totes of yesteryear just yet. A number of forces are expected to conspire to keep smaller, if no longer truly tiny, styles in the forefront.
For one, Asian and particularly Chinese clients are driving growth for the sector more than ever since the region managed to get Covid-19 largely under control, buoying consumer spending and allowing for a quicker return to shopping. Luxury brands have been catering to China's rising Gen-Z shoppers, who often have no siblings and can draw on their own salaries as well as the undivided resources of parents and grandparents.
The focus on Asia's first-time luxury buyers and Gen Z should continue to support the momentum around smaller styles, due to their more accessible prices and easy-to-carry nature. "We've seen a massive rejuvenation of the consumer," Rambourg said. "Your reservoir to recruit new clients from is basically unchanged post-Covid."
Body type and culture can also play a role. "For Asians, we’re not as tall, and people in the cities still use public transportation wearing their Chanel or Hermes bag, so smaller is better," said Maiko Shibata, creative director and buyer for the luxury boutique Restir in Japan.
Other forces supporting the success of smaller bags are worldwide. The increased use of smartphones has meant more consumers prefer to keep both hands free, as well as not needing as much space in their bags for documents, agendas and books.
The hands-free imperative has prompted brands to reissue top-handle classics with additional long straps, and often in smaller sizes. Gucci's reissued Jackie 1961 hobo bag, named for its most famous wearer, Jacqueline Kennedy Onassis, is now sold with a shoulder strap that turns it into a crossbody. It's another iconic shape joining the ranks of swinging miniature Lady Diors, Prada Gallerias, and "nano" Celine Luggage totes.
"Luxury brands want to develop big, proper handbags you can fit some A4 papers in. But this isn't necessarily what's working."
"Luxury brands still want you to develop big, proper handbags you can fit some A4 papers in, because they're seen as nice and luxurious, and they look good in stores. But this isn't necessarily what's working," said Maxime Congost, an accessories designer who has worked for Chloé and Proenza Schouler. Giant propositions like Bottega Veneta's $6,250 oversized hobo bag can make for surprising photos and spark conversation online, but are less likely to be broadly adopted by clients than the brand's $2,800 crossbody "Cassette".
Price inflation is another factor that could keep tastes stuck on smaller styles. As the share of small bags nearly doubled between 2015 and 2018, growing from less than a quarter of sales to nearly one-half, according to Bernstein analyst Luca Solca, top-end brands were quick to increase prices to offset the shift to less expensive items. In the name of coherence, larger shapes followed suit.
The price of a medium Lady Dior bag, for example, has risen roughly 22 percent to 3,900 euros ($4,600) since just 2016 —out of the range of many new buyers driving growth. This May, Chanel raised prices for some of its most popular styles by as much as 17 percent at the same time that coronavirus lockdowns caused OECD economies to shrink by 10 percent, their quarterly drop on record.
First-time buyers, resale favour top brands
The importance of first-time buyers, as well as an increased drive to show off online, is reinforcing the position of the biggest and most recognisable brands, like Louis Vuitton, Chanel, Gucci, Hermes and Dior.
With unmatched marketing firepower to recruit new customers, these brands have already been vacuuming up demand in recent years. But a shaky world economy has only intensified that trend, as clients are more concerned about whether they are spending money wisely. An influx of first-time buyers is likely to go to the biggest brands not just because they know about them, but also because they're more confident the products won't go out of style.
"When you're in an environment of buying less and buying better, you go to one of the iconic brands"
"When you're in an environment of buying less and buying better, you go to one of the iconic brands," Rambourg said.
The rise of resale platforms like The RealReal or Vestiaire Collective has also made shoppers less likely to turn away from the handful of top brands where they feel confident they can get their money back if needed. "A customer who has a place to sell something buys differently," said Tina Craig, a social media influencer and founder of the blog Bag Snob.
Also supporting the expansion of big brands is a crop of Gen-Z clients who are unabashed about pursuing "clout" — the status conveyed by brand recognition and logo-driven products — whereas many older Millennials and Gen-X clients had in the past fuelled the rise of discreet propositions, like Celine and Mansur Gavriel. "For Gen-Z, it's all about the clout," Craig says.
Men's bags have become a force
While the importance of shiny briefcases declined in importance, the luxury industry was slow to generate an alternative. The past two years have finally seen big brands hit their stride with new leather goods propositions for men, be it Kim Jones' $2,900 Saddle bags at Dior Homme or Virgil Abloh's $4,500 "soft trunk" bags at Vuitton.
The products represent a major step up from wallets, phone cases and monogrammed pouches, and are more closely aligned in terms of price with the houses' womenswear offer. Those products could help maintain momentum in a tough market.
‘K-shaped recovery’ in the US drives sales
Accelerating coronavirus cases in many states, months of social justice protests and millions of Americans who have lost their jobs due to the pandemic makes the US sound like an unlikely engine for growth for luxury leather goods sales.
But spending on fashion is expected to surge among households that managed to maintain their income levels, some of whom also saved thousands of dollars by spending far less on restaurant meals and travel. Indeed, sharply diverging fortunes — what economists are referring to as a "K shaped" recovery — are already playing out for luxury fashion brands.
"Ladies in the U.S. are trying to choose their first handbag, or maybe their first one in years"
US fashion sales rebounded "extremely well" for LVMH, Chief Financial Officer Jean-Jacques Guiony said in a call with analysts last week and might continue to gain pace during the holidays.
"I get messages all the time from ladies in the U.S. who are trying to choose their first handbag, or maybe their first one in years," Craig said.
The global trends for hands-free, entry-priced and recognisable bags are relevant to the US luxury market, particularly among Gen-Z shoppers. But tastes remain heterogeneous, and some former luxury clients who still favour the logo-free propositions of Bottega Veneta and Celine may be reactivated as they shift their budget away from experiences.
Brands are also seeing some renewed interest from the US for larger totes and backpacks as remote working booms. Many white-collar workers have yet to return to the office (at least not full-time) but still want to get out of the house, so styles that lend themselves to lugging a laptop and notebook to cafes and coworking spaces could make a comeback.
"Our tote business is quite strong right now. Backpacks are very strong right now," Capri Holdings chairman John Idol told investors in August. "People are moving around in society. They may not all be going back to the offices, but they're definitely moving around."
A narrow path for accessible luxury & smaller brands
Even if the company's share of bigger and pricier styles rose, analysts still estimate that Capri's revenues fell 38 percent year-on-year from June through September, highlighting the difficulty in the market for "accessible luxury" holdings like its Michael Kors and Versace Jeans Couture units. The contrast with double-digit growth at houses like Louis Vuitton and Dior would suggest that clients increasingly prefer the social currency and pleasure they obtain from buying a single small luxury bag— even when it costs them as much as two or three more accessible options.
"Heritage has become really key. People are looking for thoughtful product that isn't trend-driven."
Many smaller luxury houses are also struggling in the current market, though some have managed to renew their appeal by focusing on craft and expanding their range of prices, MatchesFashion's accessories buyer Cassie Smart said. Hand-woven raffia and wicker options from Loewe's "Paula's Ibiza" line performed well over the summer by "offering emotional escapism at attractive price points" including $450 and $650 dollar bags.
Kering's Bottega Veneta house also took market share since the pandemic — without relying on a logo or monogram print — by feeding the market revamped designs that still leaned heavily on the houses' signature intrecciato leatherwork. "Heritage has become really key," Smart said. "People are looking for thoughtful product that isn't trend-driven."
(Much-larger Burberry, by contrast, whose luxury credibility lies principally in outerwear, has struggled to radically increase the share of its leather goods business during a turnaround attempt by former-Celine Chief Executive Marco Gobbetti and star designer Riccardo Tisci.)
Emerging designers can still make it in accessories, too, though the success stories are rare. For these small companies, an "it-bag" design is unlikely to work on its own, but should rather be a way for fans to appropriate an entertaining or emotional fashion story, or to feel like they belong to a community. Paris designer Jacquemus — whose mix of poetic runway images and selfies from the South of France have made him an international social media star — cracked the market with the extremely tiny Chiquito bag, popularised by pop singers Rihanna and Lizzo. His brand now capitalises on that buzz by selling the bags in more practical sizes. New York designer Telfar Clemens also managed to secure momentum in bags, in his case by steering fans of his runway creations to a utilitarian, affordable tote (limited supplies of which only helped fuel interest).
"Handbag brands that have recently broken into the space understand the need for integrity, authenticity and the power of community," said Stefano Martinetto, founder of the distributor and brand accelerator Tomorrow London. "Additionally, they entertain their consumers through clever social media and brand experience."
Disclosure: LVMH is part of a group of investors who, together, hold a minority interest in The Business of Fashion. All investors have signed shareholder’s documentation guaranteeing BoF’s complete editorial independence.