The myth surrounding Hermes' iconic Birkin bag is facing an unprecedented test. A surge in secondhand market supply and a sharp narrowing of resale premiums are shaking the core logic that has long supported Hermes International SA (OTCMKTS: HESAY) valuations.
According to Reuters, six resellers said that as the number of Birkins circulating in the market has increased, secondhand prices have continued to slide over the past year, with demand from some sellers also weakening noticeably.
UBS analysts downgraded Hermes International SA (OTCMKTS: HESAY) stock to a "sell" rating earlier this month, estimating that the global number of Birkins and Kellys for sale has reached six to seven times pre-pandemic levels, and warning that this will erode the "scarcity" business model the brand depends on.
Hermes International SA (OTCMKTS: HESAY) shares have fallen nearly 40% so far this year, making them one of the worst performers among listed luxury companies. The company is expected to report quarterly sales data this Thursday, with Visible Alpha forecasts showing quarterly revenue growth of about 5.2%, which would be the lowest in six years.
Secondhand premiums narrow sharply
The resale value of Birkin bags is retreating rapidly from pandemic-era peaks. According to auction data tracked by brokerage Bernstein, in the third quarter of this year, the secondhand transaction price for a Birkin 25 was about 1.7 times the retail price, a significant decline from the roughly 2.6 times level at the 2022 peak.
According to resellers interviewed by Reuters, an unused black Birkin 25 — one of the most sought-after styles on the market — has fallen about 4,000 pounds (about $5,336) in secondhand price since 2022 and now sells for about 24,000 pounds. Some sellers are quoting as low as 20,000 pounds. By comparison, the official retail price in the UK is 9,390 pounds.
Tsai Pao-chun, who resells Birkin bags in London, said he began selling them through Vestiaire Collective and social media platforms in 2020 and once earned substantial profits — resale prices could reach more than twice the retail price.
Now, with secondhand prices for unopened Birkins down more than $6,000 from their 2022 peak, he has stopped stockpiling. "I don't want to lose money," he said.
Supply expansion breaks the scarcity myth
The reason Birkin bags have long commanded high premiums lies mainly in strictly controlled supply and purchasing eligibility thresholds. According to resellers, customers usually need to spend $10,000 to $20,000 cumulatively on Hermes scarves, clothing and footwear before they have a chance to qualify to buy a Birkin or Kelly.
However, this barrier is loosening. In recent years, Hermes International SA (OTCMKTS: HESAY) has opened an average of one new workshop per year, continuously expanding handmade leather goods capacity. At the same time, the rise of secondhand trading platforms such as Vestiaire Collective and The RealReal, along with the spread of online stores and social media channels, has greatly lowered the threshold for reselling Birkin bags.
Sarah Davis, founder of California-based secondhand luxury platform Fashionphile, said the company's Birkin listings have grown 32-fold over 15 years, and the site currently has as many as 212 Birkins for sale.
She once described this model as a "win-win" — the secondhand premium space both encouraged consumers to keep spending at Hermes and fueled the prosperity of the resale market.
Business model comes under question
This shift is prompting the market to re-examine Hermes International SA's (OTCMKTS: HESAY) core business logic. In its downgrade report, UBS pointed out that continued growth in secondhand supply of Birkins and Kellys could fundamentally weaken the brand's scarcity-driven model. "We believe the nature of this business is changing," UBS analysts wrote.
Antoinette Hunter, founder of luxury handbag reseller Lilac Blue, said obtaining a Birkin is no longer difficult, but profiting from one is becoming increasingly hard. She noted that if Hermes International SA (OTCMKTS: HESAY) continues to raise retail prices while secondhand prices keep falling, the spread between the two will narrow further, "perhaps making Birkin bags less attractive."
Two equity analysts and two industry consultants told Reuters that demand for Hermes clothing, scarves and perfume categories is cooling — categories that traditionally serve as the prerequisite spending path for customers to qualify to buy a Birkin. This signal suggests the overall appeal of the brand ecosystem may be loosening.
Asked whether production should slow to protect brand value, Hermes International SA (OTCMKTS: HESAY) CEO Axel Dumas said in July this year that output mainly depends on the number of trained artisans and the supply of high-quality leather. He acknowledged that outsiders hold diametrically opposed concerns about the production issue.
From a financial standpoint, Hermes International SA's (OTCMKTS: HESAY) leather goods division still contributes 44% of the group's annual revenue, and leather goods revenue is expected to still grow about 10% this quarter. However, the broader slowdown in growth and the sharp slump in the share price have led the market to begin reassessing the long-term value logic of this luxury giant.
Some resellers remain cautiously optimistic about the outlook — Fashionphile's Davis said Norwegian star Erling Haaland's recent collection of luxury bags drew widespread attention, driving a modest rebound in Birkin prices on the platform. But whether this positive factor can reverse the overall trend remains to be seen.
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