A fierce, 4-year long battle between two rival auction houses has been put to rest. Dallas, Texas-based Heritage Auctions slapped Christie’s with a $60 million lawsuit in a New York federal court in June 2014, alleging that the London-headquartered auction giant had poached three Heritage employees and stolen millions of dollars’ worth of trade secret information in the process. The fight – which was settled on the heels of the parties’ first day of trial – centered on the most expensive and coveted handbags in the world: Hermès Birkin and Kelly bags. These are bags that fetch hundreds of thousands of dollars at auction.
According to Heritage’s complaint, in 2014, Christie’s – which is known far more for its $180 million Picassos and a world-record breaking $450+ million Salvator Mundi painting than its handbag offerings – poached Matthew Rubinger, who was just 26 years old at the time and was Heritage’s foremost Hermès expert. More than that, Christie’s also lured away two other high-level associates, Rachel Koffsky and Caitlin Donovan, who, along with Rubinger, made up Heritage’s entire luxury accessories team.
Christie’s was in expansion mode, looking to build out a high fashion accessories division, which would mostly consistent of Hermès bags, and the 252-year old auction house was willing to go to great lengths to do it, as indicated by Heritage’s complaint, which paints Christie’s as willfully interfering with the three Heritage employees ‘contracts and stealing millions of dollars of proprietary information.
Beyond the legal claims at play, the case – which spawned millions of dollars in legal fees, over 700 separate document submissions, and dozens of pre-trial motions – sheds light on more than a budding fight between two auction houses looking to bank on the established market for pre-owned luxury accessories. It speaks to the dynamics of this market, which is currently experiencing a “big boom,” according to Harvard Business School, with an estimated value of $25 billion and growing.
Yet, despite the headline-making prices that Hermès’ most coveted creations go for at auction, the Heritage v. Christie’s case reveals that this is a market in which neither entity is thriving. As Heritage Hermès expert-turned-Christie’s employee Caitlyn Donovan, who was named as one of the defendants in the case, stated in an affidavit last month, “Since I started to work for Christie’s in the summer of 2014, Christie’s has struggled in the U.S. handbags market. Our profits have been de minimis.”
Donovan further revealed that “each year Christie’s sets a budget for expected sales performance and revenues to be generated by each department in the various markets in which they operate.” The U.S. handbags division “has failed to meet budget for each year.”
“Christie’s U.S. struggles can be traced, in large part,” Donovan says, “to the proliferation of the secondary handbags market … e-commerce platforms, such as The RealReal, Vestiaire Collective, Rebag, and Poshmark continue to gain substantial market share in the secondary handbag market.” Christie’s and Heritage, according to Donovan, “continue to lose buyers and sellers to them.” And it makes sense. The RealReal, for one, is actively transforming second-hand shopping by offering up pre-owned designer clothing, alongside no shortage of Hermès bags, online, and consumers and investors, alike are on board.
The RealReal and Vestiarie Collection are not the only ones dominating this space. There is an additional player in this market, one that is bigger – when it comes to Birkin bags – than both of them combined: Privé Porter.
According to an impending book penned by Privé Porter co-founder and CEO Jeff Berk, entitled, Moneybags, Privé Porter got into the luxury handbags market via Instagram in December 2012. Unlike the market’s buzzy consignment sites and its well-known auction houses, Privé Porter deals almost exclusively in Birkin and Kelly bags, such as the record-setting Hermès Braise Porosus Crocodile Birkin with 18K hardware and 10.8 carats diamonds, which Privé Porter sold for $298,000 in 2016.
“We know how huge the luxury goods resale marketplace has become,” Berk told TFL. “Sitting atop all luxury goods, in terms of cost and cache, is the Hermès Birkin.”
What Privé Porter adds to the equation is availability, since it is not as simple as walking into an Hermes store with $10,000+ and getting a Birkin bag. It also brings immediacy, which Berk says “is very important to offer to the seller.”
Unlike the typical consignment site, Privé Porter – which gets brand new Birkin and Kelly bags from their owners – pays its sellers upfront. “We agree to take a bag over the phone. We then wire money to [the seller] and give them a shipping label,” or in some cases, Berk will hop on a plane and pick up the bag in person. That is very different than the way consignment sites work and also differs from the auction house model, in which a seller “gives a bag for a December auction to Christie’s, for instance, in September, and then in January get a check based on the auction price,” per Berk.
That same immediacy applies to Privé Porter’s buyers. “Instagram brings an immediacy that the auction does not. At auction, it takes months for the event to happen, and you can end up being outbid.”
Instagram has also been an integral part of how Privé Porter built its business, which has seen the company sell over $60 million in Birkin bags by way of the Facebook-owned photo-sharing app. “Instagram has made [Hermès] desirable to a much younger demographic than would ever been collectors before. Young women see Kylie [Jenner], Khloe [Kardashian], and Keisha Ki’or carrying these bags. These women would never consider the time investment of an auction.”
The timeline of the auction model is unrealistic in the digital era, says Berk. “Our customer is very affluent and motivated. She wants the bag now. If she knows the seller is real, she can negotiate a price and pay with her phone in less than ten minutes, and it is delivered to her the next day.” And just like that, an Instagram-centric company is able to sell the world’s most expensive bags via Instagram.
As for The RealReal, Vestiaire Collective, Rebag, and Poshmark, the re-sellers that Donovan lists in her affidavit as the key players that are stealing market share away from Heritage and Christie’s, Berk says it is true. He also notes that while these companies are thriving, in terms of Birkins, alone, they are all vying for the second place spot behind Privé Porter and its arsenal of bags, including a 30cm Gris Cendre Niloticus Himalaya Birkin with diamonds and 18k white gold hardware. In plain English: That is what might be the most expensive bag in the world.
Berk says that Privé Porter has already passed on an offer of $500,000 for the bag, opting to hold it for auction this winter. It seems that in some cases, the auction block is still a worthwhile home for bags – even for the likes of an Instagram seller.
By Julie Zerbo, The Fashion Law
September 12, 2018