Luxury prices soar! A phrase everyone loves to hear, don’t they? Over the past couple of months there have been a series of events that, along with a barrage of press, have brought certain questions to light. They concern not only the inquisition into celebrity drama, but also and moreover, about when and why did a designer bag come to cost so much?
Of course this is in reference to the Oprah scandal back in August where the sales lady apparently acted in a
prejudiced manner – something unacceptable either way. However, for the sake of this article, the focus is on what she was purchasing, and not, why she wasn’t able to do so. The bag costs an estimated $38 000; a hefty sum regardless of her impressive kind of paycheck.
This transaction ignited a slew of articles and information regarding the luxury industry and whether or not their currently inflated prices are par for the course, or just downright stealing. What is interesting about these findings is that they are not black and white, and even more interesting is the fact that some of these bags actually are worth their price tag – or at least according to an objective list of definitions, real costs and adjustments for global inflation.
As it turns out, there are basically 3 categories for Fashion (and other various consumer goods), they are as follows:
Luxury brands are actually a very specific and limited group of items, believe it or not. Lately the trend seems to be to call everything luxury – Chanel, Jil Sander, Michael Kors, you name it. But actually, a luxury brand is defined by its absolute material quality, its proper payment and training of the craftsmen and laborers, and its classic-always-needed-always-useful angle. The product will also be, generally, quite expensive for the above reasons and also to maintain both an air of exclusivity and a promise that whatever you buy is life-time guaranteed.
An example of this would be Chanel. A Chanel bag genuinely costs approximately $1000 (if not more) of the $2000 price tag to make: they provide education to their craftsmen to ensure attention to detail and immaculate production; they bought their own tanneries and farms to have a monopoly over the best leathers and animal products, and they are produced in a wealthy country – something considered by the majority around the world to signify luxury, today. This hits all luxury components, according to experts. More examples for this category include, but are not limited to, Louis Vuitton and Hermes.
A Premium brand is categorized by having high quality materials, attention to design, and excellent craftsmanship. However, it is also categorized by its level of marketing (since luxury products don’t need as much) and by the fact that they outsource production. This category comprises a range of brands; some considered luxury by most except for the fact that they outsource certain lines.
Take Prada for example, a company that stemmed from quality leather goods crafted in Italy to become a billion dollar empire. They are one of the most respected and pricey of the brands, putting them technically in line with its luxury counterparts. Prada, however, straddles the line of luxury versus premium due to some of its lines being outsourced , while having the rest kept within the country. This type of structure is becoming one of the fastest growing models for many Premium brands simply because it is just too expensive to maintain the requirements of a luxury good.
On the other end of the Premium scale is Coach, a company synonymous with the idea of “affordable luxury.” Their leather goods and ever-expanding line of clothing and accessories are of good quality but are outsourced, accessible and trendy. In effect, its price tag is reduced as is its consequent status.
Fashion is the final category, with an inclusive list of companies ranging from H&M to Mango and Zara’s to Guess and even Target. All of these places outsource production, use materials of varying quality, and are trend-based and turnover focused. Although they can have excellent products and have opened the doors to fashion for many, they often deal with a variety of problems that lower their luxury appeal, including labor disputes and environmental issues.
Incidentally, ‘luxury’ industry predictions were just released to reveal that 2013 earnings will be up by a couple of percentage points – a feat not originally expected for this year. However, if you look more closely you will see that there are two reasons for this: one is due to Asia’s increasing market share, and two is because of the growth in affordable luxury goods aka from companies like Michael Kors, Coach, Alexander Wang (Ready to Wear vs. Runway), etc. These are the Premium brands, the ones that will continue to push the market forward by appealing to the middle class and to younger demographics, thanks to their high quality and attractive pricing.
To wrap up, let’s return to the subject of Oprah and the expensive, though no doubt beautiful, Tom Ford handbag. It’s really a close call; on the one hand, crocodile skin is an expensive product and no doubt requires an expert’s care in production. Also, Tom Ford, according to luxury market research, is more or less considered to be at the high-end of the Premium section or right up there with the luxury one. Thus, according to these points (among others), this bag would undoubtedly be expensive as its cost of production and high status would make it so.
However, what this also looks like is a matter of objective criteria versus subjective value, and if that’s the case, when a bag begins to cost more than an already insane amount of $10 000 you begin to wonder how much thought people actually put into their purchases. It begs certain questions, including whether or not we are blindly letting producers of luxury items charge us through the nose for things that, while of high quality, aren’t worth prices inflated above and beyond the norm? Or, regardless of your income bracket, have we lost our understanding of value when it comes to material things? Is it worth shelling out hundreds or thousands of dollars for items that really aren’t that important? Maybe it is.
That’s really the underlying point of this article: know your brands, know your values and you can’t go wrong. Especially in this economic climate, it is important to approach things thoughtfully: for example, it’s okay if you buy a $20 000 watch, and it’s okay if you buy a $100 shirt, but know what it means to you and understand when you are being taken advantage of. Otherwise, go nuts!
What do you think?
- New Luxury Goods Research, Part I: What is it telling us? (euromonitor.com)
- Crocodiles Bites Show Why Your Birkin Bag Is So Expensive – Bloomberg (bloomberg.com)
- Where does the money go? (yaweny.wordpress.com)
- Shanghai Couple sell baby for iPhone and luxury goods (gizchina.com)
- Inspirational vs. Inane: Is the lure of the luxury good worth dreaming about? (myfashionlife.com)
- Luxury brand Burberry and outsourcing giant HCL applied this management strategy to reinvent themselves (qz.com)