Why Are Louis Vuitton Bags So Expensive?

Louis Vuitton.

Since 1854, the name Louis Vuitton has been synonymous with high quality, high class, and high prices.

A Louis Vuitton handbag can EASILY cost you more than $2,000, with many options exceeding $3,000 and $4,000. Some even start at $20,000!

Whether or not those prices are worth it is a matter of opinion, but in this blog post, we’re going to delve into just how much it costs to make these luxurious handbags.

Okay, the truth is that no one knows for sure how much Louis Vuitton spends making their purses.

That’s not exactly information they advertise.

But there are a number of important factors we can use to estimate the markup on one of their world-famous handbags.

To begin with, the company is renowned for only using the finest exotic skins, leathers, and coated canvases to make their iconic handbags. All the hardware is made from either brass or gold.

Even when bought in bulk, these materials cost money – and that cost is passed onto the consumer.

And given the high price of these high-quality materials, it should come as no surprise that Louis Vuitton only entrusts them to highly talented craftsmen.

To make sure they’re worthy of this trust, Louis Vuitton won’t even let them work on a bag until they’ve successfully completed a year-long training process that teaches them all the necessary skills.

Of which, there are many.

That’s because making a Louis Vuitton bag requires an average of 100 steps – many take over 300! This is why each one requires 3-4 hours to complete.

All of this is done in one of the 20 Louis Vuitton workshops spread across France, Spain, and the US. The company runs 24 worldwide.

Notably, Louis Vuitton doesn’t outsource any of its work to China – a cost-cutting measure that is practically standard throughout the rest of the fashion industry.

These various manufacturing requirements ensure that a Louis Vuitton bag is unrivaled in terms of quality, but that’s also why their price tags are unrivaled, too.

Of course, as it turns out, taking a near-militant approach to creating handbags has its perks.

Namely, that people will really, really want them.

Demand for their products is so great that, in 2021, Louis Vuitton was worth $14.86 billion – up from $13.58 billion in 2019.

According to Forbes, this makes Louis Vuitton the most valuable fashion brand on the planet.

This crazy demand has also awarded another – more dubious – distinction: it’s the most counterfeited product line in the world.

In 2019, Entrupy – a company that specializes in authenticating handbags and other accessories – reported that Louis Vuitton made up 50.9% of all products they received for review.

And many people buy these knocks offs knowing full well that they’re not the real thing, even when they cost more than alternatives from other popular brands. That’s because a lot of people would rather knowingly own a fake Louis V than a real anything else.

Now that’s demand.

And a lot of this demand is thanks to decades and decades of marketing campaigns that position Louis Vuitton as the finest fashion house to ever exist.

These campaigns have not been cheap.

In 2020 alone, Louis Vuitton spent around $5.1 billion on stoking worldwide demand with marketing that featured some of the most famous people alive.

In recent years, these famous people have included mega celebrities like Emma Stone, Jennifer Connelly, Millie Bobby Brown, and Tyler, The Creator.

And while these celebrities help validate Louis V as the sought-after brand it is, these endorsements don’t come cheap.

As just one example, back in 2011 when Angelina Jolie was chosen to represent Louis Vuitton, her image cost the company a cool $10 million – believed to be a record amount at the time for a single advertising campaign.  

But those celebrity deals are nothing compared to what Louis Vuitton pays for their retail space.

As you can imagine, the world’s number one luxury fashion brand can’t exactly be seen selling its famous handbags next to a food court. Only the best, most premier real estate on the planet will suffice.

How premier?

Well, their 12,900 square foot store in Rome that’s located on the fashionable Via Condotti runs them a cool $14.6 million a year. That’s about $1,135 a square foot.

What about Louis Vuitton’s flagship store in Paris?

On average, each of its 19,375 square feet costs the company $1,368 a year, which puts its annual rent at a whopping $26 million.

But both of those are a pittance compared to what Louis Vuitton pays for its 18,800-square-foot store in Hong Kong. At an incredible $2,714 per square foot, the French fashion house is spending around $51 million a year for this one location.

These might be mind-boggling numbers, but keep in mind that these stores are literally the only locations where you can buy Louis Vuitton products other than their websites.

It also helps that…

Despite all this overhead, Louis Vuitton never discounts any of its world-famous handbags.

In fact, the company will simply discontinue bags that have hit their sales goals rather than continue manufacturing them or offering any at a reduced price if demand has waned.

The company even goes so far as to shred and burn any bags they won’t be selling to ensure they don’t end up on the black market for less than they’d normally charge.

These practices ensure that customers can’t afford to hold out on purchasing a Louis V handbag in the hopes that a cheaper price will come along. This, of course, helps drive demand and justify that price to begin with.

So far, we’ve covered all the reasons that Louis Vuitton handbags cost so much.

What we haven’t yet revealed is how much it costs to actually make one of these bags.

And there’s a good reason for that: no one outside of the fashion house knows for sure.

But let’s look at what we do know.

Years ago, CBS News reported that top luxury handbags typically carried a 20% markup.

However, in 2018, an article on Vox put the markup for Gucci – a comparable brand – at 10x.

The markup on a product is how much the company makes in profit divided by how much it costs to make the product – multiplied by 100%.

So, if the average cost for a Gucci bag is $2,000, a 10x markup means it only costs them about $180 to make that bag. That would mean each of these bags makes them about $1,818.18 in profit.

The Gucci markup is probably a lot closer to the number for Louis Vuitton, too, as Gucci is another fashion house that doesn’t outsource manufacturing. Gucci only makes its products in Italy, which means more overhead and less room for a markup.

LV tends to be a bit more expensive, which means the price to make one of their bags may also be a bit more.

Still, a markup like Gucci’s of 10x – maybe even 12x – probably makes sense, especially when you remember all of the above costs Louis Vuitton has to cover just to keep its operation running.

That would mean most of their bags only cost a few hundred dollars to make, despite their heftier price tags.

If you’ve been thinking about whether or not it’s worth buying a Louis Vuitton handbag, hopefully, this blog post helps with your decision.

But if you do decide to buy one, you should probably do so soon. Earlier this year, the luxury brand announced that its already expensive handbags would actually be going up in price as manufacturing costs grow.

And it’s not like demand is going down, either. The world-famous fashion house is showing no signs of slowing down, meaning Louis Vuitton will probably continue to rule the handbag industry for decades to come.