Super Shrink Me: The Rise of

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LONDON, United Kingdom Sales of accessories have rocketed in the past decade and, today, account for almost 30 percent of the total global luxury market, up from 18 percent in 2003. Mostly this growth has been driven by handbags.

For consumers, handbags are cost-effective status anchors that can be mixed and matched with other items to suit a wide range of occasions. For brands, handbags offer attractive retail economics, characterised by high sales productivity (sales per square foot) and strong full-price sell-through results.

Yet, there are dark clouds on the handbag horizon.

Simply adding more retail space is no longer a sure route to growth, especially for luxury megabrands like, and Prada, which now claim their store networks are appropriately sized. Prada’s recent decision to curb its space expansion plans is just the latest evidence of this trend.

Adding to the problem, the megabrands have raised their entry-level price points in an attempt to reinforce the perceived exclusivity and desirability of their bags. But while this has reduced the ubiquity of their products, the accompanying reduction in sales volumes makes revenue growth even harder. It has also opened a wide price umbrella under which several aspirational brands, such as and, have crowded, increasing pressure on megabrands from the bottom of the price pyramid.

Meanwhile, the top of the pyramid has become very crowded, as high-end fashion players like Dior and have expanded into accessories. Simultaneously, medium-sized challengers from Balenciaga to Givenchy to Tod’s have also piled up at roughly the same price points as megabrands (and about 20 to 30 percent below this), trying to shore up their weaker apparel or footwear-based models with increased focus on handbags.

Exane BNP Paribas Infographic | Source: Exane BNP Paribas

Unsurprisingly, consumers, spoilt for choice in a crowded handbag market, are showing little loyalty and — especially in China — are swarming from one hot design to another.

Appearances are, however, deceiving. In reality, in the face of these challenges, megabrands are most certainly not moving upmarket to become high-end brands. The median price of their bags is now around €1, 500. And, indeed, they have introduced (with much fanfare) new models priced above €3, 000. But these brands are not aiming for the top of the pyramid. Certainly, they have raised their entry-level price points and largely relinquished the market below €500, but they still predominantly focus on the €500 to €1, 500 price bracket.

Meanwhile, aspirational luxury brands are concentrated in two handbag groups: totes and small bags. Totes are used to carry things around; small bags are typically bought by younger consumers with lower budgets. In both instances, price is a more important purchase criterion than for other bags. Aspirational brands deploy one of three product strategies: attempt to own a shape, concentrate on best sellers or be a lower-priced fast-follower, an approach which may be unsustainable in the long term.

For the medium-sized challengers, handbags can boost space productivity and ease the transition from wholesale to retail. These brands are therefore trying hard to break into the category. But achieving desirability at the appropriate price point is not a straightforward task and challengers seem ambivalent on product strategy, focusing on differentiated shapes on the one hand, while carrying significant assortments in more functional product groups on the other.

Even Chanel and Hermès may not be safe in the brave new world of handbags if they fail to replicate their past landmark successes with new blockbuster products.

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