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Luxury handbags…for your feet?
Fashion collective recently announced they will be creating “(t)he most exclusive sandal ever made.” Known for their creative, avant-garde fashion designs, their latest creation is known as the “Birkinstock.” The design is a take on the traditional Birkenstock (with an “e”) sandal, but is made from destroyed Birkin bags. Birkin bags, made by luxury fashion house Hermès, are seen by many as the pinnacle of luxury handbags. Despite price tags starting at around $10,000 (and going much higher), there is an extensive waiting list to purchase them, and they often appreciate in value over time. One recently sold at auction for $380,000.
In order to produce the sandals, MSCHF purchased four pre-owned Birkin bags for $122,500. The bags were then disassembled, and the materials cut into the pattern to make the sandals. The new creations are expected to sell for between $32,000 and $76,000 per pair. Kylie Jenner is reported to already own a pair. Undoubtedly, a few other celebrities are competing to get their hands…er, feet…on the other pairs.
Discussion Questions
- Based on the information in the NY Times article, what can you say about the price elasticity of supply, price elasticity of demand, and income elasticity of demand for the Birkinstock sandals?
- Based on your answer above, suppose the government decided to implement a luxury tax on designer sandals. Who would bear the biggest burden of the tax, consumers or producers?
- Birkin bags often resale for prices higher than they originally sold for. Sketch a supply and demand graph to show the equilibrium price and the retail price. What are some reasons that Hermès would not want to raise the price and/or increase supply?
Sources: VOGUE: The world’s most expensive bag: a ‘Diamond Birkin’ bag by Hermès; Birkinstock; Hermes: The Birkin, teenVOGUE: Kylie Jenner Has the “Birkinstocks” Made From Hermès Bags; Birkenstock.com , The New York Times: $76,000 Birkinstocks Made From Actual Birkin Bags?; Photo by Modern Affliction on Unsplash
