468 Retail and Channel Management Blog

Friday, January 30, 2015

Price vs Quality: Is expensive clothing worth the price?

We have all meet people claiming high priced clothing is nothing but luxury brands exploiting their position to charge absurd markup, and the difference in quality between a $10 Walmart shirt and a $120 Hugo Boss shirt is barely noticeable. Now, at first glance it seems unlikely that a shirt costing 1200% more can deliver twelve times the performance, but in reality none of us regular shoppers can possibly know the truth lazily strolling through a mall on a sunday afternoon. 

"Good Morning America", a popular TV show aired on the ABC News network, did a study comparing shirts and footwear from opposite ends of the price spectrum, looking to find out whether they each perform to their price. With controlled testing, ABC News put the items through tests including washing, wearing, walking and running. The low priced shirts shrunk and became fuzzy, while the shoes tore and wore much quicker. Unsurprisingly, the higher priced items performed much better then their cheap equivalent, but according to the researchers, the $160 Nike shoe did not perform 10 times better then its $16 Target equivalent. The study concluded that based on the price alone, the cheaper clothing was better value, but we aren't all emotionless robots looking for the most mathematically correct decisions with our shopping; we want to feel and look good! Studies such as the one done on "Good Morning America" cannot account for the value of personal appeal and satisfaction, which are difficult to put a dollar value on. Some people simply prefer to spend the extra money in order to present themselves as the best version they can come up with, regardless of whether the decision is "logical".  



Looking at the other side of the coin, there is clearly a lot of thought put into the strategy of pricing clothing as high as allowed by the market. A study performed by Carl Obermiller at the University of Washington proved that consumers will use price as an indicator of quality, meaning when something is priced higher we subconsciously assume it is better. This is one of the main reasons luxury brands chose their pricing strategies as they do, they simply want to be seen as the superior brand. According to the daily mail UK, Burberry is one fashion house that admitted it would increase prices to attract new, wealthier customers after more 'exclusive' products. Price elasticity of demand, an economic concept measuring how sensitive a consumer is to change in price, is perhaps another reason allowing the high markups. The target market for high-quality companies is undeniably the richest segment of the population, which will often be very inelastic to price changes; if an item is a very insignificant portion of your income, you will not change your purchase decision based on a 20-30% price difference. This can be viewed as exploitation, but as everyone in the business world does, in the long run every company cares most about making money, and these are simply decisions yielding higher income.  


To conclude, while Mark Zuckerberg and Oprah don't have these concerns, most of us regular shoppers will often be faced with the decision of whether to buy a higher quality item, or save some money and be more efficient with our spending. When put to this test we must ask ourselves whether the loss in dollars is made up for by the non-monetary value added to our lives, or as we all do, just buy whatever looks better and live off water for a while.


References:


http://abcnews.go.com/GMA/Consumer/story?id=2535164&page=1

http://www.dailymail.co.uk/femail/article-2384963/The-REAL-reason-designer-clothes-expensive-How-luxury-brands-raise-prices-increase-appeal.html

http://www.acrwebsite.org/search/view-conference-proceedings.aspx?Id=6830

http://www.luxurystuff.org/wp-content/uploads/2014/08/luxury-brand.jpg

https://s-media-cache-ak0.pinimg.com/236x/49/85/fd/4985fdbe7a60ecbae7d87f11f494e3f3.jpg

0 Comments:

Post a Comment

Subscribe to Post Comments [Atom]



<< Home