The Price of Fashion: The American Dream Is a Birkin Bag

The fashion house Hermès prices its famed Birkin 25 bag between $25,000 and $35,000 — enough money to send over 400 emergency care packages to families in need through the World Food Program. If a few wealthy socialites diverted their trust funds from luxury accessories to humanitarian aid, there’s no knowing how many lives could be improved or environmental catastrophes mitigated. But then economists wouldn’t have noticed a fascinating paradox in the market for luxury goods, and life would be a little simpler, putting quite a few of the aforementioned economists out of a job.

The process of purchasing a Birkin bag is a complex one. In addition to possessing a small fortune, eager buyers must establish a relationship with a Hermès salesperson, and have a long history of purchasing from the brand, according to Sotheby’s. Unlucky buyers who lack connections or a disposable fortune worth roughly a year of college tuition must turn to the secondary market, where strange laws govern, yet do not decrease, the prices of these desirable products.

Luxury items — like their wealthy owners — tend to break the rules. One of the most fundamental concepts in economics is that demand decreases in response to rising prices. Many people would be able to afford a sandwich that costs $2, but not $2,000. Price is the way that markets match buyers and sellers; it is a quantitative reflection of the labor and material costs that go into the object’s production as well as the utility a consumer receives from its ownership.

Now imagine that more people want the $2,000 sandwich than the $2 one. Imagine that a brand has built their image around it, and flocks of eager socialites and influencers rush to the sandwich shop in the hopes of purchasing The Sandwich. The company begins to charge $2,700, and, once again, the demand increases. What are people gaining from The Sandwich? Nothing, really. Only something intangible and infuriatingly elusive. The Sandwich, with its exorbitant pricing and absolutely mundane interior, represents the American Dream. We’re all Jay Gatsby, reaching out for the green light, which comes in shades of Hermès bambou, vert vertigo, and kiwi.

Average luxury prices have risen 25% since 2019, a rise that various companies have attributed to inflation and supply chain issues caused by the war in Ukraine and the lingering effects of Covid-19. The reality is much simpler: The more expensive something is, the more social clout it transfers to the owner. But at what point will the social distinction of the Birkin Bag fail to exceed the enormously high costs of ownership?

Although brands like Hermès are seeing even higher prices in the secondary market than in the primary one, many trend-driven high fashion houses are in trouble. These companies — imitating Chanel and Hermès — have raised their prices, but the people who attempt to sell lesser-known brands on the secondary market are at risk of losing money. This could lead to the idea of the luxury brand bursting, causing prices to fall and fashion to become more affordable to the masses.

Luxury fashion has strong pricing power because of its ability to charge incredibly high prices without negatively impacting demand for its products. This phenomenon is not limited to the fashion industry, as companies like Visa, Marriott International, and Airbnb have a similar strength. What makes luxury fashion so fascinating is the social and psychological aspect that has such a large influence on popular culture.

Fashion has been used throughout history to broadcast various aspects of one’s identity, from social class and cultural background to personality. The House of Worth, a French fashion house that specialized in haute couture, dominated 19th-century fashion culture, coming to represent the wealthiest strata of European society. From Empress Elisabeth of Austria to the Viceroy of India’s wife Lady Curzon, women wore Worth gowns to symbolize their wealth and good breeding, furthering their social ambitions.

Wearing luxury goods to intimidate, impress, and even assimilate into certain circles is not unique to any particular period of human history. The current trends — Birkin bags and Burberry duck hats, for example — are merely another iteration in the endless cycle of symbolic clothing that can be used to preserve or elevate one’s social status.