In a report on an LVMH subsidiary in Italy that was placed under court-appointed administration for the working conditions of production staffers, Reuters revealed how much one of Dior’s bags costs to make, and how much it is sold

One of the popular Dior models, the Lady D-Lite Bag

The mark-ups of luxury bags have always been a major trade secret. With unabated price increases, such as those seen at Chanel, it is hard to know how much brands actually make on their in-demand bags. But, in a recent Reuters report on a human resource matter, we may finally get an inkling of the base cost of one of those bags luxury brands retail with considerable success. A few hours ago, the news agency published an editorial that revealed a court in Italy has placed a commissioner to oversee the operations of Manufacturers Dior SRL, an Italian subsidiary of brand owner LVMH that makes (or farms out the production of) Dior bags. The court order was the result from investigations into staffing arrangements at four suppliers that Dior outsourced the manufacture of its bags to. The conditions in which they work were not, to put it mildly, exemplary.

Reuters quoted from the court documents they saw: “It’s not something sporadic that concerns single production lots, but a generalised and consolidated manufacturing method.” That the problem is systemic is not surprising. But what was quite the eye-opener was the reveal that, in the competitive business of bag manufacture, Dior could be billed as little as €53 (or about S$77) for a bag that would retail for €2,600 (or S$3,783) or 50 times the production cost. The Dior bag cited goes by the model number PO312YKY. Which bag that is exactly was not identified. Unknown too is what material it is made of. It is not unreasonable to assume that the mind-boggling retail markup is applicable across Dior’s bags and accessories. Indeed, for most bags under the LVMH umbrella.

The newish Dior store at ION Orchard

Fashion, including luxury fashion, can’t seem to abrogate its responsibility in the better treatment of production workers. You’d imagine that with the prices luxury brands charge, they would be able to offer better wages and working conditions. But, apparently not. In the case of Dior, the Italian court found that the four Chinese-owned suppliers had staffers work “in hygiene and health conditions that are below the minimum required by an ethical approach”. Additionally, workers were required to sleep in their work quarters so as to have “manpower available 24 hours a day”. Data that had mapped electricity usage in the factories revealed “seamless day-night production cycles, including during the holidays”. News reels in Italy showed disturbingly deplorable living conditions. It is not reported if Manufacturers Dior SR was aware of the conditions those production staff faced, but they apparently did not have in place “appropriate measures to check the actual working conditions or the technical capabilities of the contracting companies”.

Neither Dior or LVMH has issued a statement in response to press enquiries. In an era when even luxury brands—in its quest to go massive and global—are operating from shaky reputational foundation, back-of-house operations are just as important as those consumer-facing, department-store size flagships built on the world’s most expensive retail belts, such as Avenue des Champs-Élysées in Paris. When consumers are already paying staggeringly steep prices, which allow brands to enjoy astounding margins, knowing that questionable labour practices are behind the production of these items, beckoning from gleaming shelves, would not enhance the appeal of the products. For many brands, the halo effect that results from high pricing and hype could begin to wear thin. Exorbitant may begin to be just that: costly and little else.

Photos: Chin Boh Kay