With expanding social media presence, there has been an increase of pressure to present yourself better, to own luxury brands and to show off these collectables. With this, there has been an emergence of brands taking advantage of this irrational consumer behaviour by raising their prices. As stated in the Fashion Law “prices in fashion are extreme and becoming increasingly out of control”. The question is to what extent can we allow this to happen and should there be more regulation on what prices can be set on certain items.
This is all linked to the Veblen effect or the ‘snob effect’ where products in this category have high demand even if their prices are high. Consumers will pay any price for such products due to the additional value they see in the item which could be the brand reputation or the perceived notion that it is better quality. This is an example of irrational herding behaviour on the side of the consumer who simply buy things that are ‘trending’ or have some sort of value in terms of their social status. The ignorance of consumers is one of the reasons why brands get away with having ridiculously high prices. As quoted by Vogue “The average shopper doesn’t know any of that; she might assume the price is an arbitrary number the brand came up with to maximize its profits”.
It is also quite ironic that the cost for producing clothes has significantly decreased with the increased capacity of technology and the ability to outsource production in countries with looser regulations on labour, as mentioned in The Fashion Law. As High Snobiety investigated they spoke to key players in the luxury brand industry, they explored the cost of production of a Valentino shirt which costs $390 and it was found by an ex- production manager Giuseppe Iorio that it costs $3.40 to produce. This large disparity truly reflects the margin the brand marks up their prices as a cost for the value of their brand.
While many people question these high mark ups for goods that are priced at a significantly higher price than that of production, it is hard to take action on this knowledge as the brands’ value is so much more than the cost of producing the good. But there are questions as to how far the brands value can go in terms of the difference in price and cost of production, as Grana states in his interview with the Huffington post “Luxury t-shirts, for instance, can cost more because they have detailed and expensive trimmings and generally a luxury brand name has a reputation. But what’s not true is the price you pay. Yes, it does cost more to make, but it doesn’t need to cost 6-8 times more.”
The ultimate concern with this is the ethical basis of such prices. It is clear these profits do not trickle down to the labour that has gone into the production of the good. There should be a point where we say enough is enough. The main issue with this area is the lack of transparency in fashion brands. Many choose not to disclose things “particularly when it comes to money and profits” as Vogue has reported.
Some argue that while manufacturing costs for the items is marginally much lower than the price set, the brand itself carries a high value. They justify the mark-up with things like the costs of opening stores, marketing their products and the brand reputation. Brand equity is the measure, as consumers want to buy products from these particular brands as it acts as “outward indicators of status” according to The Fashion Law. And shouldn’t consumers have the right to spend however much they want on fashion? Why should the government impose restrictions if the people who are buying the luxury brands are not complaining?
There is a clear lack of regulation in this industry that is a “polarized market of extremes” (The Fashion Law) and it ultimately hurts consumers. However, the question is how someone would even begin to regulate it. Luxury brands span the globe and it is difficult to regulate something that cannot be materialized, so how would you even begin to consider the ‘value’ of a brand, if you cannot quantify it?
As such, luxury brands have been given too much power and have been taking advantage of consumers who have grown numb to the rising prices. As Business of Fashion notes “prices of luxury fashion products have grown at more than twice the rate of general inflation” and this is a clear issue because it is evident that we are not keeping up with the rise in prices. Regulation is a possible solution in this area, but it would be extremely bureaucratic to manage and to enforce. Alternative solutions could be to increase consumer awareness but how far can this truly go? As High Snobiety puts it, “We have been conditioned, partly by the craftsmanship narrative spun by luxury brands, that when we pay a premium for luxury, we pay for superior materials, ethical, skilled labour, and differentiated design. And while this isn’t untrue in some instances, the question is how much of a premium do we exactly pay for this?”