This is how much it costs Dior to make handbag that's sold for over Rs 2 lakh

Ever wondered exactly how much it costs a luxury brand to make a handbag which it sells you for lakhs of rupees?

An investigation by Italian prosecutors in Milan has revealed that Dior, a subsidiary of French conglomerate LVMH paid a supplier merely $57 (Rs 4.7k) to produce bags that retailed for about $2,780 (Rs 2.33 lakh).

The costs, however, do not include raw materials such as leather.

According to a report by Business Insider, the sweeping revelations have come to fore during an investigation into the alleged exploitation of workers by a Chinese-owned leather bag supplier of luxury brand Dior.

The prosecutors, after investigating Dior's use of third-party suppliers in recent months, said that these companies exploited workers to pump out bags for a miniscule cost as compared to their store price.

In a report published last month, news agency Reuters cited the examined the prosecution documents and said that the unit of Dior in question did not adopt "appropriate measures to check the actual working conditions or the technical capabilities of the contracting companies".

The report further mentioned the pathetic conditions under which the workers were reportedly forced to meet the deadlines. During March and April investigations, the investigators found evidences that the workers were sleeping in the facility, working during holidays and nights to produce bags round the clock, it said.

Another shocking revelation in the report said that safety devices on gluing and brushing machines were removed so workers could operate them faster.

Another Italian brand Giorgio Armani and its contractors have also come under investigation. The brand has been accused of not properly overseeing its contractors. According to the Reuters report, Armani paid contractors $99 (Rs 8.2k) per bag for products that sold for more than $1,900 (Rs 1.58 lakh) in stores.

The prosecution said that violation of labour laws has become a common practice in the industry as the luxury giants rely on them for higher profits.

Units of both the companies have been put under judicial administration for a year by the Milan judges.

It is noteworthy that Delphine Arnault, the CEO of Dior, is the daughter of LVMH CEO Bernard Arnault. Bernard is the world's third richest person, according to the Bloomberg Billionaires Index.