50 Times Profit – Your $2,800 Christian Dior Handbags Cost Only $57 To Make, And Made By Workers Paid $2 An Hour

 Ever wonder why women love designer handbags so much, to the extent they willingly eat instant noodles – even skipping meals – just to save money for the luxury items? Many are prepared to spend more on a handbag than a holiday or even a car. Why? That’s because they want to flash our handbags so that the rest of the world, or at least friends or colleagues, know it.

 

Women find bags so desirable and irresistible largely because they represent a woman’s status, fashion savvy and earning power. It wasn’t like that some 200 years ago, when a woman’s  role was largely domestic. Everything changes when women started leaving the home, both for leisure and work. Bags naturally became a useful way of carrying a woman’s possessions.

 

Therefore, it’s not a coincidence that many of today’s most luxurious handbag design powerhouses, such as Louis Vuitton, Gucci, Prada and Hermes, originated in the late 19th and early 20th centuries as travel became more common. As women gained financial independence, handbag industry exploded. Some say not only it feels luxurious, but also feels like wearing sexy underwear.

Many men don’t understand why women need a handbag, or were curious about what they actually carry as some handbags could weight a tonne. Essentially, a bag contains a woman’s survival kit for daily life – from mobile phone, power-bank, tampons, make-up, hand sanitizer, tissues, money and keys, to pepper spray, laptops, chewing gum, condoms, umbrella or even a change of clothes.

 

While some women would gladly beans on toast for a month in order to stretch their money, paying a hefty amounts of hard-earned money for luxury bags, do you know how much profit LVMH Moet Hennessy Louis Vuitton makes for its iconic brands? There’s a reason why Bernard Arnault, CEO of LVMH, briefly became the world’s richest person in May 2024 – excessive profiteering.

 

The 75-year-old French billionaire once said – “As long as I’m not the richest man in the world, I won’t really be happy”. Operating the world’s biggest luxury conglomerate worth nearly US$400 billion with 6,097 stores worldwide, the company which was formed in 1987 through the merger of fashion house Louis Vuitton with Moët Hennessy, has been aggressively gobbling up real estate and luxury brands.

 

The Hermès family has called Arnault a “wolf in cashmere” due to an aggressive approach toward takeover targets and cost-cutting measures. But that was not the only cunning way the family-based business makes its fortune. Its subsidiary Dior, which Louis Vuitton acquired from Christian Dior in 2017 in a US$13 billion deal, is now being investigated by the Italian government.

 

A court in Milan, Italy, was told how a US$2,800 Christian Dior handbag costs only US$57 to make – a 50 times profit. The costs, however, do not include raw materials such as leather. But even if the cost of the leather and hardware are included, it would add only another US$160. Of course, there were advertising fees, rental on the most exclusive shopping streets, head-office costs and other expenses.

 

The price increases didn’t stop there. A mini Lady Dior bag that cost US$3,500 in 2019 (before the Covid-19 pandemic) will cost consumers an arm and a leg as it skyrockets to US$5,500 today – a 57% increase. After deducting everything, the pure operating profit for a Dior handbag is at least 50% margin. Thanks to capitalism,excessive profiteering was just the beginning.

While the retail price for the goods of major luxury brands is typically between 8 and 12 times the cost of making the product, there is something worse. Workers were exploited to the extent that they were paid as little as US$2 an hour to make handbags. The stunning revelation of human exploitation was discovered after police conducted a series of raids on workshop and factories.

 

Yes, workers exploitation actually happens in Western nations. Some of Dior’s production was contracted out directly to a Chinese-run low-cost factory in Italy, where workers assembled the bags in unsafe conditions. For example, safety devices on machines were removed to increase worker speed, producing more goods even though illegally reducing production costs.

 

Not only the workers – Chinese migrants and other foreign workers – were forced to sleep in the workshops, they are made to work from dusk until dawn (24 hours a day), including on holidays and weekends. That was how the brand greedily makes a very high profit margin, according to a 34-page court ruling. But Dior was not alone in its quest for profitability at the expense of human rights.

Italian fashion empire Giorgio Armani, who has been struggling to avoid the fate like fellows Fendi, Loro Piana and jeweler Bulgari – all were swallowed by LVMH – paid contractors US$99 for a bag that sold for more than US$1,900 in stores. Armani outsources the manufacturing of its products to GA Operations, an in-house production company which has denied wrongdoing.

 

Interestingly, Italian police said it was part of a system of “caporalato” – the illegal intermediation and exploitation of workers most often associated with the agricultural sector. While GA Operations is not under investigation, it has been placed under judicial administration for up to a year as part of a procedure to ensure legal operations.

 

Last month, Italian judges ordered a subsidiary of Dior, Armanti as well as Alviero Martini Spa, another luxury fashion maker known for map-print bags and other items, to be placed under court administration after ruling that their manufacturing units mistreated migrant workers. The prosecution said violating labour rules was a common industry practice that luxury giants relied on for higher profits.

For years, luxury companies have been linked to forced-labour claims in countries like China and India. Now, it appears Italy – home to thousands of small manufacturers that account for 50% to 55% of the global production of luxury clothing and leather goods – isn’t any better. Previously, Swedish H&M was caught in similar activities in Myanmar, making it the subject of an investigation and ultimately pushing it to wind up operations there. - financetwitter