The economics of the Birkin bag (2016)
economist.com
economist.com
> This led me to a Reddit community of replica enthusiasts, who traded details about “trusted sellers” capable of delivering a Chanel 2.55 or Loewe Puzzle or Hermès Birkin that promised to be indistinguishable from the original, and priced at a mere 5 percent or so of the M.S.R.P.
> ...
> What was once a sly novelty has bloomed into a gigantic market. In 2016, a Virginia woman was sentenced for buying $400,000 worth of designer purses from department stores, returning high-quality knockoffs and reselling the real bags for profit; the stores went years without catching on.
There are amazing counterfeit watched to be had. For better or worse, suits don't work like this. Instead, you find a Tailor in Vietnam or Colombia, who will make you something great for $2-300. But the best materials/fabrics aren't accessible without paying thousands. That said, these days, I rarely have the opportunity to wear suits.
A few weeks later, the suits were shipped directly to my home.
He also had several customers in Germany and did the same for them.
I have seen that there are pros and cons (with this particular tailor, others shops can be more professional, but they are also more expensive, sometimes much more).
Pros: hard-to-beat price ($35 for a classic or sporty cotton shirt, $60 for wool/cashmere/denim/cotton pants, $150 for a wool or cotton sport coat, $200-250 for a suit) for something that is somewhere between bespoke and made-to-measure, opportunity for low-cost explorations (let's say I have a few unique garments), playing with details and fabrics.
Cons: communication is often challenging (most speak broken English, which demands a good deal of patience and intuition), they are not very detail-oriented (some of the uniqueness of the garments were not sought by me, e.g., e.g., bizarre button placement or pocket shape, etc.), quality of garments can vary unpredictably, and they are always asking for more business, which can be tiring.
The other option is to buy on eBay, as I have been doing for some time. Although most pieces are priced correctly, some are much cheaper than they should be. I have bought fantastic, semi-current suits (say, suits that are 10 years old, but with classic features, meaning they are relatively "timeless") that have been used sporadically (the color of the ink on the label is a tell, some have been used once or twice) for $150 when new they would have cost 10 or 15 times that.
But I get much more satisfaction when I order clothes from my tailor. Those are pieces "designed by me", for me.
Then I spent a good while where suits weren't the 'style', didn't order and lost those contacts. Not that I need one now, but it'd be nice to have 1 suit that really fit and looked good for less than US$1k.
As I see it, it is more fun to have distinctive garments made. I had a shirt made inspired by a shirt I saw Fonda wear in a Western movie, a denim jacket seen in a Paul Newman interview. It was a lot of fun, but dealing with the tailor took some tenacity and a certain unusual desire to wear those clothes.
On a trip to Korea, one of the team had an entire suite of outfits made inspired by the movie "Electric Cowboy". Outstanding quality. These apparently made him wildly popular is several SFO clubs, esp in the Castro.
Just sending your measurements will essentially give you something semi-custom. When a tailor takes your measurements, you usually go back and they do a little bit of nipping and tucking of a suit before you take it away. Other articles of clothing like coats require less precision.
https://en.wikipedia.org/wiki/Emeco_1006
I bet some large majority can identify an Hermes bag as an expensive bag, logo or no.
And perhaps more importantly, there are circles on which an obvious G, LV or C is infra dig. It is a sign of a deprived childhood.
So yes, the bag is absolutely about conspicuous consumption.
However we may be able to educate people that 'you cannot buy class'.
Its interesting how many lower income people have iphones, Jordans, Teslas/Mustangs/Corvettes but as soon as you hit the upper-middle class, these disappear in favor of the more practical/functional items of similar prices. Not to say that some in the upper-middle class don't waste money on a Ferrari/Lambo, but I imagine its the same thing, 0.1ers don't buy those products.
What I remember finding the most curious on first glance is that people in the lower-upper income group are the most likely to be bankrupt within five years of hitting that income band. Bu the explanation made sense to me: at that income level, you begin to compare your lifestyle to those who are much wealthier than you are, so you feel poor by comparison. Therefore you're more likely to start spending at rates that the income level can't actually sustain, in an attempt to live like the wealthier people you have begun to compare yourself to.
> The Diderot Effect is a phenomenon that occurs when acquiring a new possession leads to a spiral of consumption that results in the acquisition of even more possessions. In other words, it means that buying something new can cause a chain reaction of buying more and more things because the new item makes one feel like one needs other things to go with it or to keep up with it. This can lead to overspending and accumulating more possessions than one actually needs or uses.
This didn't have disastrous effect as most purchases were smaller kitchen tools (<100 dollars) and most expensive was computer ( < 2500 dollars). After that I've been little more conscious.
The insight on mirrored surfaces was especially interesting. I remember seeing a staged photo of some Trump kid & spouse with their own kid playing in a living room with a spotless mirrored table and was like "oh, hey!" Lots of fun bits like that.
... Actually, the entire Trump thing was fascinating with Fussell's instruction guiding one's experience of it. "Prole" fit on expensive suits. Middle-as-fuck taste in home decor ("if you're rich it means everything's huge and covered in gold, right?"). Still haven't figured out how much of it's genuine and how much of it's an affectation for marketing/personal-branding reasons.
He got his hope-for-the-future "Class X" all wrong—just an upper-middle youth fashion wave, mostly—but otherwise it's still a surprisingly-useful tool for analysis, considering how old and half-jokey it was.
Looks shitty if it's even slightly dirty, gets dirty if you so much as look at it, requires very thorough cleaning to make it look good (no smudges or streaks).
Means you don't do your own cleaning—like, at all. Once-a-week housekeepers can't keep a mirrored coffee table looking tidy. Probably also helps if you have whole rooms you barely use, but even dust'll have it looking shabby faster than, say, wood. If you buy such a piece and do your own cleaning—and especially if you actually use it—you'll probably regret it in a matter of days.
It's the kind of thing someone without that can only own (without it looking way worse than almost any alternative material) if they're so dedicated to it that it'll be the thing people remember about them. "Aunt Gertrude and that damn table. You remember that? Wouldn't let anyone touch it, and damned if every time you came to visit, she wasn't cleaning it. She had a whole process. Drawer of different towels, three or four cleaning bottles she had to put on in order. One time my kid touched it with a cookie-greased hand and she saw me getting the Windex, nearly bit my head off."
It's the humungous branding that makes the LV and Gucci goods tacky.
They're still veblen goods though even if they're table stakes. Because they became table stakes due to their price.
On the other hand, I can absolutely imagine that a lot of the people who buy supercars would be less likely to buy a Lambo, given it's downsides, if it were something any upper middle-class household could afford if they wanted to.
I think I agree with your point about who’s consuming positional goods, but… iPhones are a weird entry in your list of luxury goods.
It is not actually possible to directly buy the fancy Ferraris. No matter how much money you have. It's a whole thing. You don't call them, they call you.
Also...every major wireless company offers iPhones free or heavily discounted. iPhones aren't the luxury goods anymore, they're the cheap alternative.
When Apple do entire device replacements, this is simply because for weird issues it's a quicker and easier on-the-spot resolution for both the end user and the Genius Bar than spending days depriving the owners of pretty vital devices trying to reproduce odd issues. Articles abound detailing how exacting Apple are with suppliers, e.g:
https://www.theverge.com/23743095/apple-watch-band-release-x...
Samsung Galaxy A14 5G - £15 per month + £9 upfront
£563 in total (3yrs no inflation)
Apple iPhone 11 - £32 per month + £19 upfront
£1191 in total (3yrs no inflation)
https://www.boostmobile.com/stores/offers?intcid:HP:BF:Banne...
Yeah all those food stampers buying Corvettes and Teslas is so annoying. Lolwut
As an ex-Android user who held out as long as I could: these aren't a Veblen good.
1. iphones aren't meaningfully more expensive than android alternatives, except at the very bottom of the market, and even then the difference isn't huge, even for lower income earners, when you finance.
2. There are actual product differentiators between Apple and Android. There are very real issues like privacy and app availability/quality; even when an Android version of an app exists, it's not always as functional.
3. But far more importantly, the newest range of Pixel phones are absolute garbage and barely work. After two top of the line androids in less than a year, I got sick of missing text messages and dropping phone calls because of shitty software. I was forced to switch to a (cheaper!) iphone.
> ...as soon as you hit the upper-middle class, these disappear in favor of the more practical/functional items of similar prices.
iphones are also an exception to this rule.
> The authors of “Signalling status with luxury goods: the role of brand prominence”, which appeared in the Journal of Marketing in 2010, do so by dividing the rich into two groups: “parvenus”, who want to associate themselves with other rich people and distinguish themselves from have-nots, and “patricians”, who want to signal to each other but not to the masses. They theorise that more expensive luxury goods, aimed at patricians, will have less obvious branding than cheaper ones. Sure enough, they found that Gucci and Louis Vuitton charge more for quieter handbags and Mercedes slaps bigger emblems on its cheaper cars. People who cannot afford luxury but want to look as if they can (“poseurs”) go for big logos: counterfeiters usually copy louder goods.
What is deeply amusing is that the whole "ludicrously capacious" meme has taken off to the point where you can buy large bags with "ludicrously capacious" on them.
Not to the extent you'd think, I bet. The designs of the Hermes bags are designs that have been widely copied by far less expensive manufacturers.
I went on the Hermes site and looked at some bags (they don't show prices on their website), then looked up the prices of the bags. They were all an order of magnitude more than I would expect for the item I was looking at.
So, sure, most people could look at a bag and think "That bag cost hundreds of dollars". But I don't think that most people could look at the bag as think "that bag costs thousands of dollars". Spending several thousand dollars on a handbag is so far outside the realm of normal for people that it wouldn't occur to them that it would be that expensive.
I don't think I'm their target consumer.
https://www.amazon.co.uk/Bringing-Home-Birkin-Pursuit-Covete...
This comes up in tech as well. The cost to manufacture, say, a CPU, is very low compared to how it is sold. But you are paying for a lot of R&D that guided the CPU design. How are these things factored in? I'm sure that there is a word for this factoring in of R&D, mgmt, and other costs, but I don't know what the term is to start learning more. Does anyone else know?
The problem is that it means something more specific to accountants and lawyers in practice.
Outdoor-themed Veblen goods are the new hotness for certain segments of the upper middle class. Yesterday I saw a guy with a haulbag... themed?... backpack that had a laptop sleeve and couldn't help but giggle. Remote work is great but taking a conference call from Big Sandy seems a bit silly, lol.
(At least it's only $99 which actually isn't bad at all for a quality backpack, but still.)
> First, it gives Hermès a buffer: even if demand drops, sales will not.
> Second, it creates surplus demand for the bags, which overflows into demand for other Hermès products. Much of the firm’s business consists of selling consolation prizes: wallets, belts, beach towels and so on. As J.N. Kapferer of the Inseec Luxury Institute in Paris observes, the wait induces “impatient buyers to switch to other products of the brand, to calm their hunger until the much-awaited object of desire is achieved.”
> Third, although market-clearing prices might raise profitability in the short term, in the long run they would drive French women away, leaving nouveaux riches from the developing world as the bags’ main buyers. If elegant Parisiennes lose interest, so, eventually, will women who aspire to be like them.
'economics' would make more sense if offered as a humanities course
"... both Veblen and Giffen goods have an upward-sloping demand curve. This means that demand for them increases when their price increases. Their main difference is in the type of good.
Veblen goods are luxury items that connote status in society, such as cars, yachts, fine wines, celebrity-endorsed perfumes, and designer jewelry. Giffen goods are essential goods, such as rice, potatoes and wheat. Demand stays high when prices increase because there is no ready substitute for them."
The key point of Giffen goods is that, as they become more expensive, you have less to spend on alternatives and thus have to buy more of the Giffen good. For example, you normally spend 10% of your income on pasta but then the price doubles. With less disposable income, you can afford less meat, so buy more pasta instead. That said, there’s very scant evidence such an effect exists in the real world.
The way Giffen goods were explained to me is that not only is there no substitute for a Giffen good, it is the substitute. Imagine you eat meat and potatoes and the price of potatoes increases. If you can no longer afford your regular diet and need to cut costs, well, meat is probably still more expensive than potatoes, so you buy less meat and even more potatoes.
edit: look like some people think so:
https://seekingalpha.com/article/4103336-healthcare-ultimate...
https://www.econlib.org/archives/2006/01/giffens_paradox_1.h...