The Best One Yet - PART 2 👜Birkin: The Handbag That Costs More Than Your House

Starting point is 00:00:00 Yeties, yesterday you heard part one of our deep dive episode on the Aramez Birken bag. We told you how it started with a family in France that pivoted from horse saddles to handbags. And then it was transformed by an actress who just dropped her makeup on an airplane and became the most expensive bag in history. And now we're going to dive deep into the mysterious business of the Birkenberg. So here is part two of our episode on the Aramaze Birkenbag, the best idea yet. At the Armée's shop on Madison Avenue in New York City, jewelry sparkles under the glass. Silk scarves dangle enticingly, and sales attendants and security guards dress in dark, tailored suits. A blonde woman in a bright pink blouse strides up to the sales rep, parked in handbags.

Starting point is 00:00:47 She's come to claim the object of her desires, a cherry red, Birken 35 rouge with gold-plated hardware. She's been mesmerized by it for weeks, studying it as it sits in the display window. If she can just have this bag, it'll mean she's made it. But the sales clerk cheerfully pours cold water on her dreams and says something that will change Arme's history. It's 4,000. I know. And there's a waiting list. I assumed.

Starting point is 00:01:15 Five years. For a bag? It's not a bag. It's a Birken. It's not a bag. It's a Birken. That is possibly the most famous statement ever made about a purse. And the source is...

Starting point is 00:01:29 the HBO show Sex in the City. How could we forget? It airs August 2001, featuring a whole B-plod about Samantha scheming again of Birkin. And spoiler alert on a 25-year-old episode, her plan backfires disastrously. It's no accident that Sex in the City becomes a launchpad for the Birken. When the show debuted in 1998, it quickly became celebrated not only for its modern take on relationships and female friendship, but also for its high-fashioned name drops, as every luxury brand makes a recurring cameo. Thanks to this show, millions of viewers on Walmart budgets learn to tell a Jimmy Chu drop heel from a lupiton pump.

Starting point is 00:02:08 This media exposure becomes an accessible gateway into the world of luxury at zero marketing cost to Hermes. Even for legacy brands like Armez, getting a product on sex in the city is kind of like an author getting picked for Oprah's Book Club. It changes everything. And now we should point out, Jack, that by the time that Burke and Roos,

Starting point is 00:02:29 35 makes its HBO debut, the bag is already in a much stronger position financially than it had been in the mid-1980s. Thanks to Hermes's scarcity strategy and the bag's high-quality focus, the Birkin became more and more sought after in luxury circles throughout the 90s. And in 1998, the New York Times style section even ran a big splashy spread on the so-called bag wars. But here's the fascinating detail. It wasn't the bag wars between Armée's. is in Chanel, it was the bag wars between Aramaze and Aramaze. In one corner, the Kelly bag, popularized by Grace Kelly, and in the other, the Birken bag. The whole article is about which Aramaze handbag is the most elite.

Starting point is 00:03:14 Although, as you're describing it, Jacks, both are made by the same luxury house. The real winner here is Aramaz, clearly. But the style section, it is one thing. Sex in the City, and it's 5 million-plus weekly viewers, that is way, way more exposure. Plus, the Birken scene in the show highlights one of the bag's most controversial selling points. There's a waiting list. I assumed. Five years.

Starting point is 00:03:38 Ah, the infamous waitlist, which Hermes calls a wish list, but it's a waitlist. It becomes a sacred right of passage on the long road to getting a Birken of your very own. What the season ticket waitlist once was for New York Giants fans, the Berkin waitlist is to fashionistas. This list is what elevates the Birken bag from mere luxury good. to holy grail product. I mean, Jack, you can walk into a Rolex store and you walk out with a Rolex watch. But you cannot walk into an Armey store

Starting point is 00:04:08 and walk out with an Armeese Birkenback. But let's jump into the numbers. Actually, we can't. Because Armeys loves being coy with its facts and figures. We mentioned earlier that the number of Birkins manufactured per year is a protected company secret.

Starting point is 00:04:20 And so is the true starting price for the purse itself. But underneath, these highly proprietary numbers, is a secret. The Birken waitlist is only sort of real. What? Yeah. It's actually true.

Starting point is 00:04:36 You even see it in the episode of Sex and the City. Samantha is able to cut the Birken waitlist line by pretending it's for her client, Lucy Lou. When it's for Lucy, the wait list mysteriously disappears and the bag is delivered to Samantha's hotel. This Birken wait list feels a lot like the reservation system at a Michelin Star Restaurant. A table for some random? I'm sorry, sir, that is it 10-month wait. How about a table for Bobby De Niro? Right this way, sir.

Starting point is 00:05:04 It's not fair, but it's life, and it is the appeal of luxury. Birken fans of the 2000s take to the Internet and start online forums dedicated to bucking the Birken system. Most of them say, if you're not famous like Lucy Lou, the best way to land a Birken is to buy your way up the food chain. Now, this may be Hermes' greatest financial hack, because it means buying other non-Burkin Hermes items first before you get your burkin. Like Jack, you got to splurge on the $100 socks, the $500 scarves, the $1,500 loafers.

Starting point is 00:05:38 It's like Hermes has a file on all of its customers, like a dossier, on how many things you've purchased and how deserving you are of a burkin bag. I was thinking it's more like a move out of the mafia. The dime is not going to help you out unless you give a little paoli, if you know what I mean. Yeah, it's a handbag pro quo. You even see this reflected in Air Maze's compensation structure. Employees make a sales commission on every Aramaze product that they sell from the boots to the belts, except for two items, the Kelly bag and the Birken bag.

Starting point is 00:06:12 They're literally disincentivized to sell you one of those bags, which of course helps the company maintain its air of exclusivity. And this practice of steering customers slowly up the Birken chain has actually put Armeys on the receiving end of a classic, action lawsuit, which we covered on our daily show, the best one yet. The plaintiffs accuse Armeis of antitrust violations. Now, because we prefer to not get sued, the case is still pending as of this recording, and we have no further comment. But in the meantime, if you do want a Birkin, you allegedly either have to be famous or accrue a collection of really swanky Arme's $100 socks. Actually, Nick, there is one other way.

Starting point is 00:06:56 So if you don't want to turn your Birkenhunt into its own escape room challenge, you do have one more option. Authorized resellers, and this becomes a whole new financial wrinkle in our story that is out of Arme's control, but they still benefit from. You see, in the early 2000s, luxury resellers start cropping up. Sites like First Dibs and Madison Avenue Couture provide ways for shoppers with more cash than patients to get access to authenticated Burkham. But in providing greater access to the bag, these new online platforms unintentionally drive up the prices even further. These ready-to-nabb Birken's cost, at minimum, double. Like a scalper that scooped up all the cowboy carder tickets, these resellers massively mark up prices on the secondary market. Basically, Jack, you're paying more to avoid the wait list.

Starting point is 00:07:49 Today, a lower-end Birken bag goes for $12,000 if you wait your turn and get it off the wait list. Every slight upgrade, though, like the Togo leather instead of the shev or gold-plated hardware instead of the brass, that's going to make it more like $15,000 and up. By contrast, the very cheapest Birken available right now on the reseller Madison Avenue Couture is $24,500. That's a 2x markup. Oh, and limited edition Burkins go for way, way more. Like the Berkin 25 Wicker Picnic Edition available at Sotheby's. This thing evokes Jane Burkin's beloved picnic.

Starting point is 00:08:26 basket purse. It can be yours today for around $80,000. Yeah, same price as a used S-Class Mercedes-Benz. So Jack, Hermes, has pulled off a retail feat, creating a holy grail product that fashionistas would sacrifice a pinky just to hold. The heritage brand, plus the limited supply, plus the mysterious purchasing process, it means the reseller price point can go way, way, way up above retail. But this also creates a real pressure cooker situation. With so few bags and so much demand and such a high price, something has to break. And something does break, Jack. So we're going to have to hang a left turn off Madison Avenue and head downtown into the back alleys of our Maze's counterfeiting rings. Did you say that dupes are a challenge when it comes to luxury

Starting point is 00:09:29 things? I'd say dupes are a challenge when it comes to anything. But counterfeits are a special challenge for luxury. And to define our terms here, counterfeits are dupes that illegally try to pass for the real thing. Like if I decide to buy some off-brand AirPods at the airport from some company I never heard of, that's a dupe. And that's legal. Okay. But if I buy knockoff AirPods that claim to be made by Apple, that's a counterfeit. Exactly.

Starting point is 00:09:55 In 2021 alone, counterfeit goods accounted for an estimated $467 billion in global trade. That is bigger than the global markets for solar and wind energy combined. Back in 2012, then CEO of Air Maze, Patrick Thomas, told the press that 80% of products online sold under the AirMays name are fakes. 80%. Now, much of that 80% involves obvious fakes. In fact, you can find dozens of helpful videos online that will help you spot the differences between a real and a fake. The cut out of the leather on the left is uneven. Whereas the one on the right is very precise.

Starting point is 00:10:36 TLDR, the differences come down to quality, quality of materials, and quality of craft. Most knockoffs are made in factories using substandard leathers and metal, so the fakes have some obvious tells, even if they're not obvious to your besties at brunch. But what happens when even experts can't tell the fake from the real? This is what makes the Birken counterfeit rings of the 2010s so devious, because they're inside jobs. Remember earlier we mentioned that Aramaze allows its artisans to create bags for their own personal use? Well, they call this policy Bono Personnel, or good for the staff. And this does seem good for the staff, right?

Starting point is 00:11:16 This kind of policy discourages employee theft. If you're allowed to make your own burkin for yourself, there's less incentive to swipe one when no one's looking. Here's the plot twist. In 2008, a handful of Aramais employees decide they're less interested in the best. bags for themselves and more interested in making those dollar-dala bills in that secondary market. So they work together to funnel hundreds of bono personnel bags to buyers in Asia. Over four years, these insiders sell around 800 of these personal bags in the Asian market. And because it works, they go further.

Starting point is 00:11:52 And they set up secret workshops in France and Hong Kong to make more unsanctioned bags with stolen materials. The employees in the factories of Armease start squirreling away extra leather and hardware here and there. They're going full Shawshank redemption on this thing, and they're siphoning off materials bit by bit. One employee supplies them with Arme's signature orange boxes, another gets them hooked up with a dealer of exotic animal hides. They charge around two-thirds of the retail price, say $30,000 for an exotic hide bag that's worth $45,000 in the store. It's totally illegal, but it is clever pricing. It's enough of a markdown for luxury shoppers to be interested,

Starting point is 00:12:33 but it's still high enough to be believable. Right, if I see a Birken on sale on Canal Street for 50 bucks, I know it's a fake. But a $45,000 bag marked down to $30,000 seems like this is probably the real deal. And remember, in all material ways, these counterfeit bags are the real thing. Same leather, same hardware, same expert crafters.

Starting point is 00:12:55 But instead of being sold by, Armease, these rogue employees have set up URLs that seem like outlet stores, like Armeaseoutletstore.com, or this is real, the fake non-profit, Armease burkin-bags.org. By the way, don't bother typing in those URLs. Because if you do, you'll see a message telling you that the websites have been shut down and that Armez has taken legal action. Speaking of legal action, of course, these guys get caught. In fact, there are two different trials in France in 2020 involving Arme's counterfeiting.

Starting point is 00:13:27 Rameses is actually awarded more than $13 million in damages, and 33 people, including 16 ex-Aremays employees, go to jail. Still, the French government estimates that the amount made by the counterfeiters was more than $22 million. Armez continues to do battle with the fakers to this day, under the leadership of current CEL, Axel Dumont. That's the son of Jean-Louis Dumas, Jane Berkin's seatmate from the beginning of our story. And that battle wages on thanks to products like the working bag. That's Walmart's attempt at a Birken dupe, and it retails for just $78. It's still kind of a legal gray area there. You know, it's a working man's Birken. Its official name isn't the working, by the way. It's the Kamugo genuine leather handbag,

Starting point is 00:14:10 but whatever the name, when it hits Walmart's website, this dupe immediately sold out, and we know why. Is it possible the working gets a scarcity bump of its own? Only time will tell. Even with the counterfeits, the dopes, and the knockoffs in this market, even after 40 years, and half a dozen recessions, Birken bags have grown sales every single year, and they have never been more coveted than today. Just ask our buddy, Shibuzi.

Starting point is 00:14:42 Real Burkins, along with their sister bag, the Kelly, have helped launch Airmaze the company to the very top of the luxury sector, and these two bags now account for 25% of Arme's total revenue. The other 75% covering every, everything from jewelry and fashion to home furnishings and fragrances. This past April, Hermes surpassed LVMH Louis Vuitton to become the number one luxury stock in the world by market cap.

Starting point is 00:15:11 And here's why that's so notable. Armeas is a much smaller company. They do a fraction of the sales of LVMH, and yet they just surpassed LVMH in valuation. More specifically, Armeis did $15 billion in sales last year, while LVMH did six times that. And yet, Air maze is basically worth the same amount. And Armease is accomplishing all of this without selling any Kelly or any Birken bags online. And Jack, that only fuels the demand even more, since you've got to plan a trip just to get on the wait list. I mean wish list. But if you do finally secure that holy grail handbag, oh, it pays for itself.

Starting point is 00:15:51 Because get this. Analysts have found that the value of Birkins has grown faster than the S&P 500. Just owning a Birken bag, it gains value. It appreciates between 14 and 38% per year. You would have a better return owning a Birken bag than investing in the stock market or in Fine Art. Okay, so what you're saying is to pull all of my assets out of insurance companies and railroads and double down on these handbags. I think I'm saying that, Nick, Birkins are officially the Bitcoin of bags. One sec, Jack, I got to call my broker. This isn't financial advice. but the Birken is my new 401k. So Jack, now that you've heard the story of the Birken bag and Air Maze,

Starting point is 00:16:36 what's your takeaway? The formula for making a holy grail product, scarcity plus quality times friction. Scarcity just means you don't make that many. Like when Enzo Ferrari insisted on making one fewer car than the market demands. Okay, and then Jack, there's quality, which is what makes your product valuable long term. Scarcity alone can drive up short-term demand when a product's on trend.

Starting point is 00:17:01 Think the Beanie Babies. But without elevated product quality, the trends move on. Demand collapses, and what was trendy turns into a fad. Finally, there's friction. How hard does your customer need to work to get your product? Now, most of the time, friction is considered bad for business. You want to make it as easy as possible for your customer to buy your product. But when you're also leveraging scarcity and quality, friction is key.

Starting point is 00:17:26 to selling the experience. Scoring a Birken becomes more than a transaction. It's an adventure, like Indiana Jones trying to get to the holy grail, scarcity plus quality multiplied by friction. That's it. What about you, Nick? What's your takeaway?

Starting point is 00:17:41 Time is our greatest weapon. It's a quote from Jean-Louis Dumas, the former head of Aramez, the one who sat beside Jane Birken on that plane ride. You see, everything about Armeis really comes down to time. From the 18 hours it takes to craft a Birken To the two years it takes to train the artisan, to the nearly 200 years that the brand has been around. And don't forget the years you might spend on the wait list.

Starting point is 00:18:04 Sorry wish list. Yeah, it's five more right there. They refuse to rush their product or their process. And in a world of Timo, Shian, H&M, Amazon Prime, and same-day delivery, Armease insists that you take your time. Don't call them, they call you. In a fast fashion, instant one-click world, time is hair. It's the ultimate brand differentiator. You can change price, you can change in design,

Starting point is 00:18:31 but you can't change the founding date of a company. Time, and every sense, is Armazza's greatest weapon. Before we go, it is time for our favorite part of the show, the best facts yet. These are the hero stats, the facts, and the surprises that we discovered in our research, but couldn't fit in the story. All right, Jack, what have you got in your bag? Open it up over there, man. Remember Jane's very first burkin, the one she was gifted by her maze? Well, after using it for years, she donated it to a French AIDS charity in 1994. Then she bought a new burken bag and used that one until it was beaten up and ready to be donated. She kept doing this to raise money for good causes. In 2011, one of her burkins raised $162,000 for tsunami relief after the Fukushima disaster

Starting point is 00:19:18 in Japan. But the story of Jane's original bag, it is. ain't finished, is it, Jack? No, it's not. Because just this past July, that very first Berkin, the one she auctioned off in the 90s, was auctioned again by Sotheby's in Paris. Final price. $10.1 million, making it officially the most expensive handbag ever sold at auction. When Jane Burkin died in 2023, she was remembered with loving fondness by everyone. And every obituary for Jane had to mention the famous bag. A priceless bag named for a priceless person. And I got one surprise for you, Jack.

Starting point is 00:19:57 I put in a little request. What? I called up that Arameh store on Madison Avenue. Am I on the wish list? I asked if they would make a flannel-lined burkin for my co-host best friend over there. And you know what they said? What did they say? They said, buy some $100 socks and we'll call you.

Starting point is 00:20:13 Oh. You're on the list. This is a legendary surprise. Thank you. And that, Yeties, is why the Hermaze's burkin bag is the armée's. The Best Idea Yet. Coming up on the next episode of The Best Idea Yet, we're stepping up to the plate and taking a swing at the most beloved and most be hated.

Starting point is 00:20:34 Team in baseball. We're talking about the Yankees. Yeties, you looked fantastic during that entire Birkenbag episode. Honestly, you should model for Armease. I'm still on the wait list, by the way. I got eight months to your birthday, man. I got a flight book to Paris, too. Wait, are you buying me the bag, too?

Starting point is 00:20:54 Oh, well, now I've committed on a recording. Now I've got to make some moves, man. Besties, if you love this episode, you got to get more where that came from. Check out the Best Idea Yet podcast page so you can tap and follow to get us every week. We got a link in the episode description for you to follow the best idea yet.

Starting point is 00:21:10 By the way, Jack and I got one more bonus episode whipped up for you for our vacation slash paternity leave week. And then we'll be back on Monday with your usual daily tea boy and the name of Nick's child. Birken.

The Best One Yet - PART 2 👜Birkin: The Handbag That Costs More Than Your House

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.