Why handbag arbitrage is on the rise

It's a rising trend in the luxury goods market. People buy luxury items for lower prices in one country and sell them at higher prices in another. It's especially prominent in the luxury handbag market.

In the video above, Pauline Brown, author of "Aesthetic Intelligence" and former chair of LVMH North America, explains why it's happening and what the industry makes of it.

For more expert insight and the latest market action, click here to watch this full episode of Asking for a Trend.

This post was written by Stephanie Mikulich.

Transcripción del vídeo

We've been seeing this sort of arbitrage business that has sprung up with luxury goods where folks buy the goods in Europe, for example, handbag made in Europe at a lower price and then resell it at a higher price in the US in Asia.

And it's, that's been a growing business on the part of these third party sellers.

How is the industry viewing that?

And what if anything can they do about it?

Well, uh first of all, the industry doesn't like it for a lot of reasons.

Um The consumer loves it so far as the consumer is protected from um the uh cheaper bags actually being counterfeit bags.

And I will say counterfeits have become especially in the accessory segment.

So so good that it can be very hard even for a trained eye to see what's legitimate and what's not um of the of the legitimate products that are being resold for uh cheaper amounts.

You know, I think there's a few issues that have opened the way or a few uh uh shifts that have opened the way for that uh that new mar market dynamic and some of it is the industry's um own doing in the last five or six years, most of the handbag companies in the luxury segment have gone up in price by an average of 55%.

And when you take price that radically, you know, you're basically telling the market, you're giving them a great incentive uh to um to find arbitrage opportunities.

And you know, there was, there's always been a differential between how much a French bag costs in Paris and how much a French bag costs in New York or even more.

Uh um in terms of even more differentially in um in Shanghai.

Uh that difference though right now is making it worthwhile for any middle man to buy and sell and capture um you know, capture the profit in the middle.