As the dollar continues to suck, the prices keep rising.  When will this stop?  Is there such a thing as a retail bubble? :-)

http://www.nytimes.com/2007/08/09/fashion/09STICKER.html?_r=1&oref=slogin

When High Price Is the Allure

WHEN readers leaf through the September issue of Vogue, which arrives on newsstands next week, they will encounter a Prada mohair twin set tagged at $2,925; a chunky Giles sweater, at $3,675; and a supersize Marc Jacobs bracelet, at $2,180. And as fall looks begin trickling into stores this month, shoppers will find basic designer sheath dresses selling for $1,200, coats for just under $4,000 and designer sunglasses for $500 or more.

This is the fourth consecutive autumn season in which a weak dollar has meant higher prices for designer clothing, much of which is made in Europe or stitched from fabrics imported from European mills. As the value of the dollar shrinks against the euro, prices continue to climb, with retailers citing hikes of as much as 15 percent for shoes and bags this year compared with last.

Yet, merchants and manufacturers have seen surprisingly little resistance in recent seasons to the cost of luxury goods.

So strong is the demand for cashmere car coats and crinkled patent leather bags at Barneys New York that that two firms — one from Dubai, the other from Japan — are in a bidding war this month to acquire the store for close to $1 billion. The luxury conglomerate LVMH, the owner of Louis Vuitton, had net profits for the first half of 2007 of $1.11 billion, up 2 percent from a year ago. Profits at the parent of Gucci and at Prada are also up.

Those brands owe part of their success to shoppers with caviar taste who have come to view extravagant prices as an enduring, if unwelcome, fact of life. At the same time, another consumer cohort is driving the trend, shoppers for whom a high ticket can in itself be an inducement to buy. Just as makers of premium ice cream have persuaded consumers to pay $4 for a cone instead of 90 cents, and California vintners convince them that a $100 cabernet is better than a $50 bottle, the makers of designer clothing know that high prices can cast a spell.

“Price certainly plays into a product’s allure,” said Robert Burke, a retail consultant in New York. “For certain people, the higher the price, the more attractive the item becomes.”

An exorbitant price can confer exclusivity. “People are willing to pay a significant amount of money to make sure they don’t see their purchase on other people,” Mr. Burke said.

Or to ensure that their friends will recognize its provenance. “Price is part of the status of certain luxury items,” said Marvin Traub, a retail consultant in New York. Mr. Traub, who visited Moscow in March, noticed that people there were fascinated not by how little but how much was paid. To some extent, Mr. Traub noted, “that sort of thinking translates here, too.”

Among merchants and manufacturers, consumer psychology can be as significant as economics in setting prices. “Luxury makers are not necessarily forced to raise prices above the exchange-rate factor, but sometimes they do,” said Milton Pedraza of the Luxury Institute, a research group in New York. “Why? They know that consumers are resilient. For manufacturers, it’s really about asking for a price increase because you can.”

Those remarks resonate with Jeffrey Kalinsky, a specialty retailer who owns fashion emporiums in New York and Atlanta. Mr. Kalinsky, who is also the director for designer merchandizing of Nordstrom, does not pretend to speak for his customers. But he shares their sometimes-irrational passions. He recalled that as long as 20 years ago, when he was in his mid-20s, he would “just walk into a store and see a sweater, and something inside of me would say, ‘Oh, I hope I can afford it. I bet it’s at least $800.’ “That sweater would be $1,100,” Mr. Kalinsky confided, “but, miraculously, then I would want it more.”

In some cases, manufacturers adjust prices upward to make sure that their goods hang in good company, displayed alongside prestigious luxury brands. “They tack on a healthy premium, because they want to maintain the exclusivity of the brand,” Mr. Pedraza said. “The customer pays for that cachet.”

Susan Sokol, the president of Vera Wang, acknowledged that while it is important to maintain a range of prices within a collection, “it is extremely critical to understand price positioning and to be very strategic about it.

“If I know our customer is buying Miu Miu or Dries van Noten,” she said, “we have to price accordingly.”

The appetite for high-end wares has been a boon to retailers, who need to sell fewer of a given item to turn a handsome profit. The higher the price, the higher the margin, Mr. Burke pointed out: “It’s much easier to sell five of something really expensive than 20 of something less expensive.” Markups, he said, have remained much the same since last year.

A stroll through several high-end stores in Manhattan this week turned up prices that might be the equivalent of a down payment on a minivan. At Jeffrey, in the meatpacking district, a raglan-sleeve black jersey Lanvin dress was $2,455, a Shawn Collins thermal knit sweater $995. Barneys offerings included a Balenciaga leather bag with fancy grommets, $1,725; Lanvin leather ballet flats, $530; and Marc Jacobs cuffed leather ankle boots, $995.

At Bergdorf Goodman, a Stella McCartney turtleneck devoid of trim sells for $995, and her cable-stitched sweater for $1,495. A pair of Kieselstein-Cord sunglasses is tagged at $595. Far from daunting, such a ticket might be downright seductive to customers, Ms. Sokol said. “When you are looking at a handbag or even a pair of sunglasses, a high price can have inherent snob appeal.”

Consumers tell themselves, Ms. Sokol went on, “ ‘If those glasses are $150, I’m not going to be as interested as if they are $350.’ ”

That is not to say that consumers are indifferent to price. Many are making emotional adjustments, finding ways to balance a love of fashion with the reality of its increasingly exorbitant cost. Eunice Ward, a lawyer in Chicago with a taste for quirky labels like Dolce & Gabbana and Stella McCartney, pays full price only for items that resonate with her sense of style. During a recent shopping trip, she spied a Yohji Yamomoto sweater. “I knew it would fit with my wardrobe and update everything,” she said, “that it was going to be my workhorse for fall.

“I didn’t even check the price at first. I knew I would love it, and I didn’t care.”

At Saks Fifth Avenue in Manhattan last week, Jessica Lee darted among the racks, gazing avidly at a champagne-colored Miu Miu cocktail dress, scarcely bothering to look at its $1,250 tag. “Fashion’s gotten more expensive,” Ms. Lee said, a fact as inevitable, and untroubling, to her as the tide.

 

“The economy is good,” said Ms. Lee, who works for a private equity firm in Manhattan. “I’ve made a lot more over the past year than before, and so I have more purchasing power.”

Kate Strachan appeared to be more circumspect. As a technical designer for a fashion house, she is well acquainted with the price of style. “I know a lot of quality, craftsmanship and time goes into some of these pieces,” Ms. Strachan said.

Regardless, she is determined to put a cap on her spending. Combing the racks at Saks, she sighed wistfully: “I can’t afford these kinds of things, so usually I buy what I need most. This year that would be a winter coat.”

Then with a self-mocking smile she added, “Of course there are times when I’ll splurge.”

 

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Woe to him who is out of the ordinary -- Stendhal
http://fashion-critic.blogspot.com (Feb 15 - Margiela Interview)

“Price is part of the status of certain luxury items,” said Marvin Traub, a retail consultant in New York

This is the kind of insights corporations pay top $$$ for.

Intresting article, what does it tell you about the American luxury consumer?

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Three statisticians go duck hunting. Their dog chases out a duck and it starts to fly. The first statistician aims and takes his shot, and it misses a foot too high. The second statistician aims and takes his shot, and it misses a foot too low. The third statistician says, "We got him!"

That is a great article Faust.
If retail prices keep climbing at a much faster rate than the economy surely it cannot be sustainable in the long term! There's your bubble :-)

I read this article below a while ago and thought it would be relevant to the discussion. While it's written by an economist and aimed at small business owners it makes some great points about how uninformed buyers use price as a measure of quality, as well as how people purchase reputable brands to demonstrate success and social status.

So, for a buyer that understands little to nothing about design, fabrics, patterns, construction, tailoring, or clothing as a whole, would use the price as a measure of quality. And even if you are knowledgeable about them, add to it the "inherent snob appeal" for an item as a measure of social status and success. I think this appeal is in fact fear and greed speaking. Fear of not 'keeping up with the Joneses'. Greed of wanting to appear successful. These two emotions rule most people, as unwilling as they are to admit to it.

And there you have the perfect formula for well known labels increasing their prices. And as abundant as ignorance, fear and greed is in this world, sellers will continue to exploit it.

Well, perhaps I'm being too glum. What do you guys think?

 

The uninformed pay the price

http://smallbusiness.smh.com.au/managing/management/the-uninformed-pay-the-price-906106083.html 

Ross Gittins | July 12, 2007 - 1:35AM

If you want to be a successful small business person, you need to think more carefully about the role of the prices you charge than your customers do.

What is the role of an item's price? To tell people how much they're required to pay? Sure - but there's a lot more to it.

In simple economic theory, the role of price is to bring supply and demand into balance. The market price is the meeting point between the seller's cost of supply (including a reasonable profit margin) and the buyer's willingness to pay.

But prices also convey information to buyers - and this is the bit canny sellers need to understand.
Simple economic theory assumes both buyers and sellers have "perfect knowledge" -of the nature of the goods being sold and of the prices being set by other sellers in the market.

In reality, although sellers are usually well informed about these matters - it's their bread and butter, after all - buyers are often not nearly as well informed. That's often because they don't buy such items often enough - or the items don't account for a big enough part of their budgets - to make it worth the time and effort it would take to be well-informed.

So there's the point: it's quite common for buyers to use the price of an item as an indicator of the quality of that item.

Consider the case of the experimenters who set up a stall selling boxes of Belgian chocolates at the annual Brussels food fair. On the first day, they set the price at 9 ($14) a box. Sales went well.
The next day they raised the price to 15 a box. An economist would expect this to lead to greatly reduced sales but, in fact, they doubled.

On the third day they slashed the price to 2. An economist would expect a total sell-out at that giveaway price but, in fact, sales collapsed.

So what on earth was going on? It's simple when you think about it. Without buying a box and tasting the chocolates, you couldn't tell how good they were.

So, in the absence of any other information to guide them, customers used the price being charged as an indicator of the quality of the chocolates.

They took the higher price to mean high quality and so they bought up. They took the lower price to mean inferior quality and so they avoided buying.

An anomalous and isolated example? Not really. Let's say you're off to a dinner party and stop off at the local bottle shop for some wine to give to your hosts. How do you pick the bottle you want?
Maybe you pick a wine you've had before and know is good. Maybe you can't find one of those but you can find a big-name brand you know you can rely on.

If so, rest assured you'll be paying a higher price for the big-name brand wine than you would for wine of a similar quality from a little-known maker.

Why? Because lots of people pick wine that way and the big-name maker knows he can charge extra for his reputation for reliably high quality.

That's the point of brand names. Firms work hard to establish a reputation for quality, which brings them customer loyalty and allows them to charge higher prices.

Should such a firm find itself with goods of inferior quality, it will seek to preserve its reputation by selling them without its brand name attached.

But let's say you scan the shelves of the bottle shop and all you see are unfamiliar bottles from unknown vineyards. How do you pick?

Since you've no idea whether any of them are any good, do you pick anything that's moderately priced? No. Because you want to make a good impression on your hosts, you buy a more expensive bottle, hoping that will ensure it's a good drop.

In other words you've used price as an indicator of quality. We do this all the time in circumstances where we're uncertain about quality.

In other circumstances, of course, where the high reputation and price of a particular brand is well known to us and our friends, we deliberately buy expensive items to demonstrate our economic success and superior status.

Then there's the case of cosmetics, where price is so entrenched as an indicator of quality that a maker who didn't bump up his prices would be asking to be spurned by consumers.

For sellers the message is that prices perform different functions in different circumstances - particularly when buyers aren't well informed about intrinsic quality or about the prices your rivals are charging.

You should be aware of the possibility of price changes leading to unexpected consequences. Where prices are used as a proxy for quality, adjust them accordingly.

For buyers the message is that price is often an unreliable guide to quality.

When you use price as a guide to quality you are assuming other buyers are much better informed than you are and that sellers aren't taking advantage of everybody's ignorance.

Buyers would get better value for money if, rather than assuming prices are always set fairly, they put a bit more effort into being better informed.

 

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Wow, this makes the battle of Comme des Garcons look like a friendly exchange over coffee.

i was going to say, they spiced baldie up with a chapeau?

Fuuma:

“Price is part of the status of certain luxury items,” said Marvin Traub, a retail consultant in New York

This is the kind of insights corporations pay top $$$ for.

Intresting article, what does it tell you about the American luxury consumer?

It tells me two things about two types of consumers.

1. The rich are immune to rising prices.

2. For the non-rich living on credit has become a part of culture, just like having a TV.  There is a growing sense of entitlement that used to not be present before. 

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Woe to him who is out of the ordinary -- Stendhal
http://fashion-critic.blogspot.com (Feb 15 - Margiela Interview)

Faust your second type of consumer brought me thinking of this documentary titled "Life & Debt".

Life and Debt The struggles of the third world under increasing massive corporate control of all commerce is studied in this excellent film about the struggles in Jamaica.

broken into 3 parts.... 

http://s152982276.onlinehome.us.nyud.net:8080/7w1305ee4049wq44pwzell9ee23/LifeandDebt1of3.wmv

http://s152982276.onlinehome.us.nyud.net:8080/7w1305ee4049wq44pwzell9ee23/Life%20and%20Debt%202of3.wmv

http://question911.hostroy.com/Life%20and%20Debt%203of3.wmv

/\ Thanks!  I'll check it out.

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Woe to him who is out of the ordinary -- Stendhal
http://fashion-critic.blogspot.com (Feb 15 - Margiela Interview)

Well, here's a point of discussion: what are your cutoff points, in general, for making full-price purchases? For example, I recall back in 1998, when Prada first brought out what is now called their Prada Sport shoe line, that a pair of shoes at $175 was exorbitant. Being much younger then, I didn't delve into prices that high, and did not even dream to buy such a pair despite wanting it desperately. However, a thoughtful boss decided that instead of getting me flowers or something upon hearing of the news that a relative had died, he would get me a gift certificate to buy those shoes, 'so I could walk away from my problems in style.' I still have those shoes (which, ironically, Prada is still making but for a much higher price).

Lately, shoe prices have been on a steady climb. Just three years back, prices of $350/pair were the norm, whereas now, paying $400 is relatively cheap compared to the $500 and up we normally pay for a pair of designer shoes. I remember thinking long and hard before buying a pair of Helmut Lang sneakers, because I thought $350 was too much then. Ann Dem & Margiela now charge over $600 -$700 for their laceless laceups, prices that only designer boots used to command. As we get used to the climbing prices, we also become immune to get them, assuming that the new pricing is the norm, and accepting them regardless of whether we invest the money in them or not. I still shop the same way: if I want something that I know I should have in the beginning of the season, I won't wait for sale time, although I will think long and hard whether or not I will make the purchase to begin with.

I also have different price resistance to different items. I will allow for coats and pants to be more expensive, but I won't buy into shirts that are similarly priced. I think it's partially the feeling that more substantial clothing can have more substantial pricing. A favorite Costume National coat was around $400 when I bought it 8+ years ago, and it still gets compliments and people stopping me on the street, yet you won't find a designer winter coat for under $1200 - $2000 now. Because this is the norm, anything under that is instantly cheap (WooYoungMi's beautifully-made wool trench sold out in two weeks because it was under $800) and if we find that the price structure is the same all around, we accept it as the current pricing.

How do SZ's posters deal with pricing like this?  I see so many people who wait for sale, but I also see so many posters grabbing things full price too. What is your threshold, or what are your criteria?  Maybe this should be a thread in itself.
 

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http://designcanteen.blogspot.com

We can leave the discussion in this thread, bakla.  It is a very interesting one, indeed.  I think it helps to think about it in terms of purchasing power.  Have you salary grown in the past years in line with prices?  I know mine hasn't.  Therefore, my purchasing power has diminished in terms of real dollar (I apologize for finance-speak).  Say before, you could afford to buy three things a season at retail, but now, purely mechanically you can afford only two, because what used to cost $500, now costs $750, and your salary stayed the same.  So, either you buy less, or you go into debt.

I rarely, if ever buy at retail anymore, not only because nothing truly impresses me, but also because I am beginning to be insulted in some way by these prices.  Maybe it's a very subjective reaction, I don't know - but it certainly has a bit of an alienating effect.  Not too much though, because I don't have a problem just admiring the garment without an overwhelming desire to buy it.

These days it's either sales, or YOOX, or Ebay.  Which in the way is sad, because I would like to support a store like Atelier, where I truly feel at home.

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Woe to him who is out of the ordinary -- Stendhal
http://fashion-critic.blogspot.com (Feb 15 - Margiela Interview)

I feel the same as Bakla, if it's something I have to have, I will pay retail for it. But, that piece basically goes through a checklist in my mind before actually putting the money down for it. Honestly, I'm kind of a dork when it comes to this specific topic; I'll typically give myself an amount, then figure out what pieces will best compliment my current clothing while at the same time updating it. A lot of times I'll write this all out in Word so I don't stray far away from that goal. I also tend to statistically think about what will hit sales and what will not, so I know I can take more chances on getting or not getting certain items that I want.

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"his mens is thrasher, sun soaked and burnt out in all its glory. he brought haute to the compton swap meet."

"Goth ninjas all up in the yacht club."

Fantastic (if depressing) discussion, Bakla and Faust.
I am at the point where I am completely priced out of the retail market. It angers me how much prices have shot up in the past 3-5 years. Yeah, I am insulted by the price gouging. What I would like to know is who is getting the additional money--if a Ann D boot sold for 500 five or six years ago and is now selling for 1200, who (the designer, the marketers, the store?) is making the biggest increases in revenue?

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...spiderwebs of intricate relationships seeking a form.

Well, don't be too angry, Seventh.  After all, it's not bread prices that are being inflated :-).  In 2001 1 Euro bought 85 cents.  Today 1 Euro buys $1.4 dollars.  That's about a 70% increase.  Most US stores have to buy in Euros when they go to Paris and Milan.  So it's not like designer greed all of a sudden disproportionally increased.  And yet, and yet...

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Woe to him who is out of the ordinary -- Stendhal
http://fashion-critic.blogspot.com (Feb 15 - Margiela Interview)

Avantster:

The uninformed pay the price

 

 

That's a very important concept that's prevalent in many consumer product segments.  Bose is particularly well known for this in the consumer audio industry.

 

Faust:

Well, don't be too angry, Seventh.  After all, it's not bread prices that are being inflated :-).  In 2001 1 Euro bought 85 cents.  Today 1 Euro buys $1.4 dollars.  That's about a 70% increase.  Most US stores have to buy in Euros when they go to Paris and Milan.  So it's not like designer greed all of a sudden disproportionally increased.  And yet, and yet...

 

well at least until Whole Foods buys Wild Oats...

I hadn't realized how low the Euro was in 2001--good point. But it still is frustrating... 

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...spiderwebs of intricate relationships seeking a form.

The interesting thing is when we come to accept these price structures as a given, especially if they're consistent across the board, across countries. This is easy to tell nowadays when you can compare pricing globally via the internet.If the price of an item, no matter how high, is the same in the US and abroad, then I think I mentally go into a state where I just accept that as a given, and then it becomes a new benchmark (again, for example, in the case of shoes). I can subsequently decide whether or not to take the plunge and buy at that level. But the problem is I'd have reached a new threshold for pricing, which isn't necessarily good for my wallet. Nowadays, I look at $2000 coats when I never used to think of purchasing anything above $800, and I think, well, that's reasonable, when it shouldn't be, considering it's more than I pay for rent.  But because it's the general price for all around, it's relatively reasonable, in that there's a reason it's priced that way. Everyone else is. At least, in the designer category. I wonder if the dollar should stabilize, will prices go down?  I have never seen prices drop. It always just seems to climb.

This is why I'm excited about someone like Robert Geller, and similarly, The Generic Man: they're in the contemporary category, but they're infusing it with the kind of energy and contemplative design that you usually see only in designer. It's more thoughtful, less commercial design than, say, Kenneth Cole or DKNY >shudder!< are giving you. While it's not as exclusive due to its pricepoint, it still offers value. Obviously you won't get finishes like CCP, but you can dress well and interestingly if you're an informed consumer and investigate the right brands and mix them in with your wardrobe. It makes one rethink paying designer prices.

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http://designcanteen.blogspot.com

On that note, I think Robert Geller's line is long overdue and not because it's him but I think there needed to be an 'avant garde' designer-ish clothing line that hit a different target market. I honestly think if Cloak did that off the bat, they might've been more widely excepted (honestly, some of Cloak's quality was sketchy for the price point). But I'm straying from the topic...

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"his mens is thrasher, sun soaked and burnt out in all its glory. he brought haute to the compton swap meet."

"Goth ninjas all up in the yacht club."

bakla:

The interesting thing is when we come to accept these price structures as a given, especially if they're consistent across the board, across countries. This is easy to tell nowadays when you can compare pricing globally via the internet.If the price of an item, no matter how high, is the same in the US and abroad, then I think I mentally go into a state where I just accept that as a given, and then it becomes a new benchmark (again, for example, in the case of shoes). I can subsequently decide whether or not to take the plunge and buy at that level. But the problem is I'd have reached a new threshold for pricing, which isn't necessarily good for my wallet. Nowadays, I look at $2000 coats when I never used to think of purchasing anything above $800, and I think, well, that's reasonable, when it shouldn't be, considering it's more than I pay for rent.  But because it's the general price for all around, it's relatively reasonable, in that there's a reason it's priced that way. Everyone else is. At least, in the designer category. I wonder if the dollar should stabilize, will prices go down?  I have never seen prices drop. It always just seems to climb.

This is why I'm excited about someone like Robert Geller, and similarly, The Generic Man: they're in the contemporary category, but they're infusing it with the kind of energy and contemplative design that you usually see only in designer. It's more thoughtful, less commercial design than, say, Kenneth Cole or DKNY >shudder!< are giving you. While it's not as exclusive due to its pricepoint, it still offers value. Obviously you won't get finishes like CCP, but you can dress well and interestingly if you're an informed consumer and investigate the right brands and mix them in with your wardrobe. It makes one rethink paying designer prices.

I agree (about Geller).  This is why I first loved Cloak - even though there were quality control issues on some pieces (btw, just looked at my FW04 dress shirt today, and it's going at one seem - frustrating), the prices WERE reasonable before FW06 (and SS07 was just absurd - worst value for money).

Maybe not in fashion, but I have seen prices drop because of currency.  When I was buying my bed at the all time low Euro/$ (2000), it was $100 less then a month before because of the exchange rate (the bed was being made in Milan).   Now, that I look at furniture prices, I think how lucky I am that I bought all my furniture that year.  Yea, it seemed on the expensive side then, but it's a goddamn bargain now.

As far as looking at prices across the board, and feeling reasonable - I wonder if the word reasonable is proper?  I feel helpless, and accepting sometimes, but I hardly find these prices reasonable.  It's more of a feeling of giving up, because there isn't much you can do in terms of hunting.  So, while I can accept these prices as a norm, it does not mean that I will buy into them. 

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Woe to him who is out of the ordinary -- Stendhal
http://fashion-critic.blogspot.com (Feb 15 - Margiela Interview)

BTW, Avantster, thanks for the article - sorry a bit late reading it.  I completely agree with it.  That's why economics cannot be a pure science, no matter how much higher math they throw at the poor MBA students to obfuscate that fact.  Emotions are inevitable when it comes to pricing, and not the best emotions at that.

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Woe to him who is out of the ordinary -- Stendhal
http://fashion-critic.blogspot.com (Feb 15 - Margiela Interview)

When making purchases my studies in economics actually can become useful.  For some reason, utils, or the unit of measurement in rating the satisfaction of the consumption of a good always comes to mind.  ( ex. Yohji coat = 200 utils.  $1,500 dollars sitting in a bank = 150 utils.  Solution? Purchase the Yohji coat for greater satisfaction! ). The fact that economists try and quantify satisfaction is really quite funny, but it can almost help a person make smart decisions when it comes to purchasing something. 

Of course I'm just making light of the situation as I'm sure a lot of big ticket purchases are more based on quick emotions from being in a store/pressure from society/SA's than calculated measurements.  I'm sure we're in the minority here of the whole who purchase expensive clothing.   

/\ No doubt.  This is why stores usually buy one thing of each size (yes, of course, it's riskier to sell more than one thing at a high price, but it's mostly done to play on people's desire for exclusivity).  Just look at the CCP leather buying frenzy at Lazarri.

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Woe to him who is out of the ordinary -- Stendhal
http://fashion-critic.blogspot.com (Feb 15 - Margiela Interview)