Why are luxury items so expensive?no_redirect=1

Quite a spirited discussion erupted on a recent Instagram picture of Nicki Minaj, who posed with a few ATL stars in a Stella McCartney shirt that originally retailed for $880.


The striped tee, now on sale for $528, got Instagrammers up in arms, with many saying, “No sane person pays that much for a plain T-shirt. I bet you bill gates wife got the same shirt for $3.00 at the goodwill/salvation army,”800 bucks for a Cotton tee?” and “I just got mines from Wal-Mart and it was only $5 and it looks exactly the same.”

They have a point! Though the top is bold and bright (and Nicki looked absolutely gorgeous!), I too wondered what made her simple short sleeved shirt ring in at close to $900. So I tapped a few experts to get the scoop.
Read on for why luxury goods typically cost an arm and a leg…

1. Brand Positioning

Sometimes, with designers, it’s a matter of simply staying on par with the current luxury market. Brand Consultant Soma Lisa Choudhury says, “Prices are set to differentiate markets. It has nothing to do with how much things cost to make, unfortunately, but moreso to stay within a certain bracket of designers.” She continues, “Say you’re starting a collection tomorrow and you have a certain aesthetic. If your prices range from $200-$500, you’ll stay in the contemporary market along the lines of Theory and Joie. If your prices range from $495-$1,000, you’re classified as lower luxury to higher end luxury. That’s how retailers categorize you. That’s how they know where to put you on the floor, which designers to sit you next to. That’s just how it is.”

Teri Agins, former Wall Street Journal reporter and author of Hijacking the Runway, further explained, “If you’re a designer, certain things have to be priced at a certain level. [Stella McCartney] can’t make the t-shirt for $100, because it won’t fit with the other stuff in the department. [Designers] have to price it so that it fits with everyone else.”

Agins offered an anecdote, “I have been buying Salvatore Ferragamo’s Vara flats for years. That shoe, for years, was $195. I went back and bought a pair and they were $500. The last time I bought those, I think they went up to $300, and suddenly they’re $500! And I thought how could this be? They didn’t redesign the shoe, this shoe has been in their line since 1978.”

“… Ferragamo wanted to be in the same league of Manolo, Jimmy Choo, Christian Louboutin and those other guys. They probably thought, ‘We can’t have a $195 shoe when Tory Burch and all those other people have shoes at that price.’ So they raised the price. That’s part of the whole Brand Positioning.”


So, it seems, with many luxury brands, it’s about following the crowd. And ultimately, designers have to stay consistent within the market they are selling to.

2. Exclusivity

Aaron P, who manages a Louis Vuitton boutique in New York says, “Fast and trendy is available to everyone. There is less of an experience, and less exclusivity. In order to keep and build interest, most brands have had to diversify their labels in order to generate income by amping up Men’s Ready to Wear, creating diffusion lines, and launching baby, home, and fragrance. With all of that, and how seasons change so quickly (also interest, trends & what celebs wear), brands have to release, and within months – go on sale. Louis Vuitton doesn’t do that. With the exception of broadening our mens universe, we have maintained an elevated sense of exclusivity & brand awareness, history with modernity, and an insanely expansive collection that fashion folk, and casual shoppers revere as the Go To House of Luxury. Simply put: it’s expensive, stays expensive & gets MORE expensive (every year or so…) to maintain the exclusivity & luxe lifestyle attachment that Consumers Expect.”

Aside from the brand experience, many designers don’t actually produce as much as fast fashion retailers, giving their wares a ‘limited edition’ feel. Choudhury says, ” A lot of luxury designers can’t [make a lot of items] because it’s too expensive.” Most factories charge the same amount whether you make hundreds of shirts vs. just a few shirts. Choudhury says, “ If you’re making 500 t-shirts, your costs will be significantly less than doing 10 t-shirts only.” The brand builds that price into what you ultimately pay.

3. Marketing and Fashion Shows

Alluring advertisements and fantastical fashion shows aren’t cheap! But all those expenditures are apart of the brand’s story and help to market items in an aspirational way.

You’ll find luxury brands renting out fabulous venues and sometimes paying celebs to sit front row and wear their items. Celebrity marketing, shows, and advertising all play a part in what you’re paying for your clothes.

Agins says, “If the brand has that cool factor like a Tom Ford or a Stella McCartney, the market will bear that. People will pay a little extra to wear it.”

4. Labor Costs

Agins says, “Stuff from Italy, France, and the United States demands higher wages, and that’s going to be reflected in the price. [It’s cheaper to get clothes made in] Bangladesh, India, and China.” So yes, you can get a similar striped red and blue shirt from the GAP. But please note Stella McCartney is made in Italy, while the latter is made in China, hence the price difference.

5. Quality (Sometimes)

June Haynes, who owns luxury consulting firm June Haynes Luxury Retailing, says, “Most luxury brands are European and therefore there are costs such as duty and freight that are factored into cost, as well as craftsmanship, such as finishing by hand, hand beading, etc. Sometimes anything that is heavily embellished, hand stitched, etc takes time to finish and takes a skilled seamstress or tailor to put together.”

Choudhury adds, “With shoes and handbags, the quality is worth the price. A lot goes into it. Everything is about the process from design to pattern making. Shoes are very very expensive to make. When you’re paying for Italian shoes, you’re paying because their factories are really expensive to produce. Samples are $600 each to produce, just for samples. In accessories, it is expensive. Handbags are really expensive to make. The leather, the hardware, the patterns. You can make cheap shoes in China, but it doesn’t have the same form. When you’re paying for shoes, you’re really paying for quality and artisanship. The process is incredible.”

She adds, “With men’s and women’s suiting, the quality is usually worth every single penny. You can pay a premium for originality and something that is not mass produced.”

But ultimately, shoes and bags are the items that help brands stay afloat in the market place.
Clothing is a rarefied world targeted towards the very rich. But Choudhury offers, “Zara is a really good fit for all of it. If you don’t want something to be too cheap (in terms of quality) and you can’t break the bank, go to Zara.”
And there you have it!
What do you think? Has this changed the way you view luxury goods and fashion?