Tuesday, August 6, 2013

How luxury brands Increase there prices to increase appeal

Every girl longs for a Chanel bag, a pair of Manolo Blahniks or something amongst the means of luxurious, within her lifetime. So why are luxury brands so expensive? and is it to any surprise that luxury brands have raised prices by 60% in a decade, just to increase their appeal? 

In thirteen years the price of an Hermes Kelly bag has gone from $4,800-$7,600 and Carrie Bradshaws notorious Manolo Blahniks have also jumped in price from $485-$755. Stumbling upon an article published by the Daily Mail, I decided to research more about the drastic raise in prices.

According to the US bureau of Labor and Statistics, luxury goods have increased 60% in just 10 years. While many people in the industry blame the growing costs of raw material (such as crocodile skin) other say designers are strictly raising prices to increase their appeal.

According to Business Of Fashion Burberry is one of the fashion house's that admitted in March that they would increase their prices, just to attract new, wealthier customers after more "exclusive" products.

For other brands, It is necessary to raise retail costs in order to have seasonal markdowns. "Designer brands repeatedly going on sale may eventually be forced to artificially inflate prices to counter the margin pressure" Stated Matthew Walker, Creatures of the Wind chief executive, and former president of The Row.

While some luxury brands, such as: Hermes and Louis Vuitton do not have discounts, many others do. High end fashion labels such as: Alexander Wang, Isabel Marant, Prada and even Celine mark down "last seasons" product in order to clear inventory.

 New York retail consultant Robert Burke said that "A brands biggest fear is having to mark things down". Most savvy shoppers know that after three months of a new product being released, retailers offer almost 70% off. This makes those exclusive $1400 Christian Loboutin heels, a much more reasonable $300, catering to a larger market.

"People who are on the really cutting edge of fashion might buy pre-season (at full price) but many folks wait for the discounts," stated journalist Ellen Ruppel Shell the author of "Cheap: The High Cost of Discount Culture."

But is the increase in designer products because more people can afford them? According to a report by Capgemini, (a management consultancy) the number of high net worth individuals in the world has increased by 9.2 percent in 2012 to 12 million people.

 According to the Daily Mail, more high-net-worth individuals live in North Amercia than anywhere else in the world (3.73million people, up 11.5 percent year-over-year), but the number of wealthy individuals in the Asia-Pacific region also increased during the same period, to 3.68million.

"These are people who have their jets outfitted in Hermès leather and Loro Piana vicuna. If demand is there, brands will continue to move up" states Mr Burke.

The question is, how high is to high?


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