Last weekend Teresa and I were at our vacation home in Sedona. Somehow we got onto the subject of purses and out of curiosity I asked her what the absolute best purse is.
Without hesitation, she replied “Birkin”.
When I expressed an interest in getting her one, she replied, “Good luck… they are impossible to get and they cost a fortune too.”
I was absolutely shocked to learn that the average Birkin purse costs $20,000! I thought a purse with a price tag like that must be made out of solid gold and encrusted with diamonds. Nope.
I guess I shouldn’t have been surprised to learn that Birkin handbags are super pricey based on the scarcity principle, which basically states that the more rare and unattainable something is, the more people will pay to have it.
French handbag maker Hermès created the iconic Birkin brand, which is often referred to as the “holy grail” of handbags. Every Birkin purse is handcrafted from start to finish by a single craftsman. The process takes about 40 hours to complete. One of the key features is that the stitching cannot be done by machine because it requires two needles passing through the same seam simultaneously.
Hermès controls the number of bags produced and limits the number each customer can purchase. Some people wait years to get a Birkin directly from Hermes. This company has mastered the art of increasing margins and skyrocketing profitability by leveraging scarcity and exclusivity.
Do Birkin purses last longer, incorporate super-rare materials, or stand out from all other purses in a crowd? The women I asked (none who own one) tell me no. But, they all think it would be super-cool to own a Birkin. Why? Because nobody they know does.
“Often, I feel like a cheap imitation aesthetically looks better to me than the real, out-of-reach thing. It’s amazing that brands create a whole illusion of exclusivity and luxury, and then you can go get the $5 version of a $30,000 thing and feel the same way but have a cool little secret.”- Hunx
Of course, exclusivity is not exclusive to purses. In the world of cars, Enzo Ferrari understood its power.
I have a few “Ferrari friends” who told me the following. Is what they said 100% true? I don’t know, but every time I talk with them it makes me want to buy a Ferrari.
Did you know you can’t just walk into a Ferrari dealership and buy a new one? Ferrari won’t sell you a new model. Why? Because they don’t have to.
It doesn’t matter who you are or how much money you have. That’s because Ferrari doesn’t just make cars…they make the rules for how you can buy a new model, and you must prove yourself first.
First, it’s rumored you must look over 40 years old because in Ferrari’s eyes, financial stability comes with age.
Second, you can’t own a Lamborghini. If you do, you are “excluded” from buying a Ferrari.
Third, an authorized Ferrari dealership must perform all maintenance work. If you get it serviced elsewhere, the warranty is voided and you are put on a list that never allows you to purchase another one ever again.
Fourth, Ferrari owners are a very tight community with many functions and events. If you are lucky enough to get invited, a no-show is another way to end up on the “no purchase” list.
Fifth, you cannot modify the car at all. Not the engine. Not the tires. Not the paint. Nothing. If you do and Ferrari finds out, you’re blacklisted.
Sixth, you are forbidden from selling your new Ferrari for at least one year. It’s in the contract. It’s to discourage “flippers”. And in some contracts (for special edition models), Ferrari reserves the right to buy back the car in the event you want to sell it.
Oh, you want to buy one of those special edition models? Unless you already have at least four Ferraris, you can’t.
And good luck getting on the waiting list, because even that is fraught with stringent requirements.
The thing I love most about Ferrari is they don’t sell their cars for money…they sell their cars for loyalty (and even that might not get you on the list for a new one, which is now pushed out to 2025).
Ferrari earns more by selling less. To put it in perspective, Ferrari makes as much selling one car as Ford does selling about 900.
Ferrari is the most profitable car manufacturer in the world by profit margin, and it became that way through exclusivity. The company’s ever escalating prices, regardless of the state of the economy, are a testament to the power of exclusivity.
Are you thinking about building a business? Think about “building a Ferrari”.