Not so long ago I went on a date and a conversation about clothes and fashion happened. My date told me, "You know a lot about fashion and brands." I responded, "Haha, don't read too much into it, everything I learned I learned in the last two weeks."
With the opening of the Livermore Outlet Mall, I became personally curious about fashion, brands, and the retail business of it (see previous post).
One thing I still find personally curious is how some of the high end fashion can simply cost so much. I simply struggle to understand how it can be so many multiples higher than what I buy.
For example, I looked up the following retail prices for standard white crew neck t-shirts.
Old Navy - $9.94
Gap - $16.95
Banana Republic - $24.5
There are always sales (the Old Navy one is actually $8.00 as of this writing), but we're going to use these retail values for the discussion.
I specifically picked these three stores b/c they are all within the Gap family. I find it very interesting from the lowest priced brand (Old Navy) to the highest end brand (Banana Republic) the t-shirt price is only a multiple of 2.5X.
While I don't fully understand everything about clothes, I can believe better quality cotton and better quality manufacturing can make a plain white t-shirt softer and better, so a 2.5X multiplier on price doesn't seem that unreasonable.
What spurred this analysis was this white crew neck t-shirt I saw on Armani's website.
Yup, that's a $125 plain white t-shirt. At first I thought maybe this t-shirt was made out of something fancy like cashmere. Nope, it's just plain 100% cotton that you can machine wash. At first it didn't look like this t-shirt even had a logo or branding on it, but if you look very closely there is a white silhouette of the Armani logo on the front. It's only barely noticeable (it's not like a different colored Polo or Lacoste logo).
So that shirt is a 12.5X multiple over Old Navy and a 5X multiple over Banana Republic. The law of diminishing returns convinces me that this shirt cannot be of such a quality that it is worth 5X over Banana Republic.
Personally, I just don't understand how the brand of Armani can be worth such a price to someone. As someone who has lived so practically for most of his life, the concept of a veblen good is just foreign. It's the same reason I cannot understand why someone will buy Cristal.
What spurred this blog post was a flip flop I saw on Zappos just by chance. Yup, Salvatore Ferragamo flip flops for $170. They have a rubber sole (which might be better than the cheap flip flops I normally buy). But there is absolutely no quality difference than can make me think they are worth a 34X multiple over what I normally pay for flip flops (i.e. $5).