Legend has it that a married couple once asked the painter Pablo Picasso whether the painting they had just purchased was part of his oeuvre or not. Without further ado, Picasso simply asked them, “How much did you pay for it?” and upon hearing the figure from the aforementioned couple, the brilliant painter, without a doubt, affirmed that it was indeed his. But it’s been a long time since price was an essential part of determining the exclusive value of a luxury good. In Picasso’s case, the incalculable value of his work is due not to the price of his paintings but to the experiences and narrative behind them. Price is the consequence. But let’s not get ahead of ourselves yet.
When we talk about investing in luxury pieces, this anecdote often comes to mind, laden with symbolism, which in turn captures the true value we attribute to certain objects, granting them attributes that make them unique and unattainable in most cases. Without going any further, we have a clear example in Chanel dresses or Hermès handbags, true collector’s items thanks to their timeless approach and other elements that I will address in this article.
Although many people frequently ask me about the criteria for determining whether a luxury item is an investment item, I am not going to make investment recommendations, nor do I intend to act as an expert on investing in high-value objects. What I do want to do is address a question that is of vital importance in the luxury industry and that ultimately constitutes the difference between a high-value object and one of incalculable value.
So, based on my professional experience in the field of marketing, how can we know if a luxury item can be a good investment? How can we evaluate the true investment potential of luxury brands?
The brand’s story is the first element to consider
A large part of a luxury brand’s value lies in its history, and something I will never tire of emphasizing: is its narrative. The brand’s approach to telling its story must connect emotionally with the customer, reflecting not only its values and attributes but also knowing how to establish the connection that story has with the customer, who feels captivated by the fascinating aura surrounding a unique luxury item.
For example, Chanel is a brand that has always known how to define and establish that emotional connection through a story not only filled with elegance but also charged with an empowerment that undoubtedly leaves its indelible mark over time. When you wear a Chanel dress, you are not only wearing a luxury garment, but you are making a statement of independence, elegance, and sophistication.
The customer experience, the second step towards eternity
Well, let’s move on to the second element that undoubtedly defines whether a luxury good is suitable for investment. Once, a customer told me about her experience visiting a Hermès boutique, which led me to affirm that every interaction, from the warm welcome upon entering the establishment to the precise and discreet service, reinforces the brand’s inherent value.
I’ve already spoken on GenexiGente about the fact that brands don’t sell on their own; they must earn that prestige interaction by interaction.
For example, purchasing a Hermès Birkin isn’t simply owning an accessory. It’s becoming part of an iconic story: that of English actress Jane Birkin, who in 1984 met Hermès CEO Jean-Louis Dumas on a flight from Paris to London. On that flight, the actress lamented that she couldn’t find a shopping bag tailored to the needs of a new mother. It was then that a companion, displaying innate creativity and a clear vision, designed a rectangular, flexible, and spacious travel bag that also included a compartment for baby bottles. That experience was the origin of the now legendary Birkin. These kinds of stories enrich the emotional connection with the brand, thereby increasing its perceived value.
Constant innovation without losing sight of tradition
A luxury brand’s ability to balance innovation with its history and legacy is critical to its continued success. This harmony between past and present is mastered brilliantly by brands like Louis Vuitton, companies that have maintained their relevance over the years thanks to their ability to almost constantly surprise their customers. This approach, which combines tradition with the cutting edge, keeps customers engaged and eager for more. Louis Vuitton’s limited editions and visionary designs exemplify this synergy, ensuring that its products maintain a high level of demand.
In summary
For those looking to invest in luxury, whether as consumers or investors, these three elements I just discussed—a compelling story, an unparalleled customer experience, and constant innovation—are vital to ensuring that their acquisition appreciates, both emotionally and financially, over time.
In my opinion, understanding these principles allows consumers and investors to navigate the complex luxury market with a certain level of confidence. Volatile brands, that lack clear stories, or rely excessively on short-term advertising campaigns to stay in the consumer’s mind will inevitably lose their value. And, returning to the Picasso example I mentioned at the beginning of this article, if you notice a brand lowering its prices or offering discounts, stay away from it because that policy is the quickest way to lose long-term value.
But there are other elements worth mentioning. In the world of luxury, as in other areas of life, patience, and meticulousness are essential to ensure a solid investment and an emotionally rewarding experience.
Smart investment in luxury brands
Again, I want to draw on my marketing experience and not try to evaluate an investment strategy from a financial perspective when I state that luxury brands that equate high prices with prestige without offering real value are destined to fail. The recent fall of Burberry, as well as the inconsistent strategies of Gucci and Balenciaga, are clear examples that focusing solely on marketing without a substantive foundation is not sustainable in the long term.
We live in a generation that brands are underestimating and with which they expect to engage through an easy-to-digest message aimed at a target audience that no longer has the same expectations as previous generations. But luxury customers don’t follow these parameters and not only maintain their level of demand but also expect much more from a narrative that must be capable of offering content of much greater value than some brands are interested in providing.
Similarly, investing in a Chanel dress or Hermès shares follows the same rules. By focusing on brands with consistent stories, exceptional customer experiences, and constant innovation, investments appreciate over time. The convergence of emotional value and financial return is where true luxury lies, turning each piece into a timeless investment.