Wednesday, January 2, 2013

High End Fashion - I Just Don't Get It

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).

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