What is the worth of a Dior handbag? Only Rs 4700, an Italian probe reveals

Similarly, Armani's handbags are purchased from suppliers for 93 euros (Rs 8,385), resold to the brand for 250 euros (Rs 22,540), and ultimately priced around 1,800 euros (Rs 1.62 lakh) in stores

Thinking of buying a Dior item next? Think twice before spending those hefty lakhs of rupees. A recent investigation by Italian prosecutors in Milan has brought to light that Dior and another Italian luxury giant, Armani, incur minimal production costs for these handbags, which are sold at exorbitant prices.

The Wall Street Journal reported that Dior pays its suppliers just 53 euros (Rs 4,778) per handbag, which are then sold in stores for 2,600 euros (Rs 2.34 lakh). In comparison, Armani's handbags are purchased from suppliers for 93 euros (Rs 8,385), resold to the brand for 250 euros (Rs 22,540), and ultimately priced around 1,800 euros (Rs 1.62 lakh) in stores. These figures exclude expenses for materials like leather, as well as design, distribution, and marketing costs.

 

The findings have sparked a conversation about the true value of these handbags and the ethics of their pricing strategies. Dior, a prestigious French luxury fashion house founded in 1946 by Christian Dior, is globally acclaimed for its high-end fashion, accessories, fragrances, and beauty products. Dior’s handbags are particularly popular among celebrities worldwide.

Long-standing problem of luxury brands

Meanwhile, Italian prosecutors have criticised the luxury brands for inadequate oversight of their supply chains. Despite this, no charges will be brought against the firms. While Dior has yet to respond to the report, Armani stated it had “control and prevention measures in place to minimise abuses in the supply chain” and was “collaborating with the utmost transparency with authorities,” according to the Wall Street Journal.

Additionally, court documents reveal that Dior has recently submitted a memorandum outlining measures to address issues in its supply chain, the report said.

What does the Italian investigation reveal?

This investigation highlights a contemporary issue in the luxury industry. Unlike other sectors that have moved manufacturing to low-wage countries, many luxury brands have maintained production in Italy, believing it crucial to their appeal. However, prosecutors allege that some luxury goods bearing the ‘Made in Italy’ label are produced by foreign workers, many of whom are Chinese, under substandard conditions.

Luxury goods command high prices partly due to the expectation of skilled artisanal craftsmanship. In reality, while brands retain product design and development in-house, they often outsource production to suppliers. Much of this occurs in Italy, a hub for luxury clothing and leather goods manufacturing, producing 50 per cent to 55 per cent of global output according to consulting firm Bain. Despite efforts to control supply chains better, challenges persist, particularly as suppliers may subcontract work further.

The probe comes at a time when many aspirational shoppers, who have fuelled a luxury boom in recent years, are curbing their spending on high-end products due to a tougher economic environment and rising prices. This underscores the importance for luxury brands to manage reputational risks, control quality, and comply with new European regulations aimed at reducing the fashion industry’s environmental impact.

Dior, known for its elegant designs, has remained a staple in haute couture and ready-to-wear collections. Under the creative direction of designers like Yves Saint Laurent, John Galliano, and Maria Grazia Chiuri, the brand has continued to embody elegance and modernity in the ever-evolving fashion industry.