The price tag generates its own buzz

The New York Times reports that we’re entering the fourth consecutive fall where designers have hiked up prices on luxury brands, this season as...

The New York Times reports that we’re entering the fourth consecutive fall where designers have hiked up prices on luxury brands, this season as much as 15 percent, without deterring consumer appeal. Examples include a bidding war to acquire Barneys and increased profits at LVMH, Gucci and Prada despite the higher costs.

But why? Not to make up for lost revenue, and certainly not to vindictively depress those who can’t even afford to look at a pair of Gucci shoes in this month’s Vogue. No, quite the opposite. According to the Times article, designers are catering to a consumer psychology where a higher price confers greater exclusivity or status.
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, [Robert Burke, a retail consultant in New York] pointed out: “It’s much easier to sell five of something really expensive than 20 of something less expensive.”

Makes sense, but when will it stop? In the eighth consecutive season when the consumer demand for status enables designers to more easily generate profit from the strap of a dress than from two dresses? I guess we’ll have to evaluate consumer psychology next fall before making such predictions.

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