Are investment and fashion correlated? Can it be possible to spend more than you month’s rent at Gucci, Chanel, Hermès and other high-end stores and have a positive Return on Investment (ROI)? The answer is definitely “Yes”.
One way to make an efficient fashion investment is to buy something that will very unlikely go out of fashion (“long-term”). These pieces also tend to last longer, as they are ‘quality pieces’. Fashion is pretty cyclical in nature, but some things are just ‘classic’ and never go out of style. Typically, this rank includes goods like Hermès Birkin purse, Louboutin shoes, Burberry trench coat, Chanel clutch and similar high-end things which do not undergo depreciation and have the most resale value. Seasonal commodities do not fall under this category, as with the ending of the season, its price ceiling decreases dramatically – like Steve Madden square-toe shoes. In times of stagnation, there can be a liquidity trap for these items, as consumers’ spending decreases due to the worsened economy. People tend to buy less luxury goods and substitute Gucci and Hugo Boss with Zara and J. Crew. Economic downturns make expensive indulgences less attractive. So when trying to sell your pair of Manolo Blahnik pumps, you can experience some devaluation of your good and forced price adjustments, which will obviously make you reconsider reselling your goods at this time.
On the other hand, there are some fashion pieces that are more likely to bring you some income in the short term. Fashion is a fast industry that waits for no one and constantly changes. Sometimes irrational customer behaviour leads to increased price volatility and speculation (in a secondary market). This often happens when ’scarcity of resources’ gets in the way. As an example: limited edition seasonal items, like the annual H&M collaboration with well-established designers, such as Balmain (2015) or Kenzo (2016). These pieces sell out really fast, and lines usually start days before the collection arrives in stores. The stir often lasts for quite a while, so those who had luck to buy those exclusive pieces can wear it and before the end of the season sell on eBay or other resale websites. Trends play a huge role in this type of ‘fashion speculation’. Just as new IPOs start appearing on the market and create an agiotage around, same way new designer’s limited editions make people go crazy. Everyone wants to buy it, so as long as the stir continues, the value is going up. ‘Buy low, sell high’ they say. Just as it is with the stock market: as soon as the newness and interest fades, the price goes back down (like it was with Nintendo stocks when Pokemon Go was just released and you could see everyone trying to ‘catch‘em all’ ). Though, good sales do affect stocks’ prices. We can clearly see it in January, when companies report their profits from December, especially Boxing Week. But this all is not even close to serious investments like accessories. As Karl Lagerfeld said, “shoes and accessories are important because with these everybody is model size”. Take high-end couture purses like Louis Vuitton. Even though so many people have it now (real or fake), prices on them go up every year. So if you were lucky to buy that $700 clutch two years ago, now it would cost you more than a thousand of dollars. Luxury watches, such as Cartier and Rolex, accumulate its value over time as well. Not even talking about vintage pieces that are 10 or sometimes even 100 times more pricey now than they were originally. Continuing the metaphor with the stock market, we can draw a parallel between Tiffany’s stock and Tiffany’s diamond rings. According to the Rapaport Diamond Index, a high quality, one-carat diamond that went for around $6,000 in 1987, would be worth nearly $13,000 today. But if you bought their stocks in 1987 (which were approximately $2 on the New York Stock Exchange), you could have accumulated the return 45 times more than your initial $6,000 investment (given that today’s price is around $90). But stock market is not for everyone, so this does not actually lead to the conclusion that stocks are better than diamonds.
The bottom line is that fashion tightly correlated with the current state and global economy. If you want to get some profits out of your goods, you need to figure out the right timing and research the market. Both short- and long-term investments apply to fashion. The key is find your own strategy and act accordingly.