Wondering what economics and handbags have in common? There is a connection between any kind of luxury goods and the economy, and so it is with exquisite handbags. However, the question is how you can understand this tenuous connection without using big economic terms that only economists seem to understand?

Principle of demand and supply

A common principle in economics states that if there is more demand the supply will be less which will tend to make the product price go upwards. Similarly, if supply is more, the demand will go down which will result in the price going down.

Interestingly, even during the times of recession in America during 2008, the sales of luxury bags didn’t see a sharp slump and remained steady.

Let us first understand what the effect of a recession has on handbags:

1. Designer houses start to focus more on usefulness than just on luxury. Louis Vuitton, for example, had a hot selling-product – a watch studded with so many diamonds that it became difficult to tell the time. But during the 2009 recession, more emphasis was laid on design than plain luxury. Similarly in handbags, leather makes a comeback and other materials take a backseat.
2. Brands and designer houses go along with the psychological shift of the buyer. While before they might have emphasized their beautiful stores in marketing, a weak economy leads back to the basics – emphasizing that the design of the designer bag is impeccable.
3. People start buying one statement piece instead of going in for a collection during the bad times. It helps them rationalize the spending in their head. ‘I am going to buy one classic Gucci’ sounds better than ‘I will buy one Prada for parties and a Louis Vuitton for the office’, even though that one item may cost more than several others combined.
4. In Hong Kong, luxury handbags can be taken as collateral. Instead of the papers for your home or the keys to your car you can handover your collector handbag, and after assessment, you will be given a loan. Asia is one of the largest markets of such luxury goods, and Hong Kong is among the top consumers.
5. Exquisite handbags are one of a kind, which means the market never faces complete collapse even when there is a falling economy. The supremely rich still keep on buying and though the middle class reduces its spending, it interest and buying does not stop.

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