The Irrational Economics of High Fashion

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If there’s one thing students certainly don’t have, it’s an abundance of disposable income.

Twenty-pound weekly food shops at Aldi and the seizing of any and all deals available would prove this. But one trend amongst students seems to buck this pattern; the obsession with expensive clothes and high-end fashion. 

With companies such as Lacoste turning over a net profit of $100 million (2018), and even larger companies such as Louis Vuitton with a staggering net profit of $7 billion (2018), what is it that makes consumers flock to these fashion products despite the monumental and ever-rising prices?

A standard Ralph Lauren shirt will cost you between sixty and eighty-five pounds, whilst a plain Gucci t-shirt will cost you somewhere in the region of two to three hundred pounds.

Gucci

To understand these shockingly high prices, we must first look at the production side of the industry. 

Firstly, costs of production are far higher than they would be for other low-end fashion brands, as in most cases all modes of production take place domestically. Brands like Gucci take pride in the fact that all of their produce is manufactured on Italian soil. 

This means that costs of labour, materials (which are also of very rich quality) and advertisements are all covered in Europe, which come at a higher price than if this production was based in Asian countries such as China and Bangladesh, where labour is exploited at a far lower cost. 

As well as this, many high-end products have a prestigious designer’s name attached to them, who is usually well acclaimed within the world of fashion or celebrity. Such a name’s attachment to a product also boosts up the price, in the same way a famous chef would charge highly for a meal they’d personally cooked.

This is only half the story however, as the huge profit margins of these companies shows us that they manage to charge even higher prices still. It is in the way consumers demand these products in such an irrational manner all in the name of exclusivity, which leaves the price tags so truly high. 

With any piece of expensive clothing, comes a degree of exclusivity attached to the product, as most often supply of any given product is limited, sometimes to only a few thousand, or even a few hundred. 

People are willing to pay extraordinary amounts more-so for the brand itself attached to the product, rather than the attractiveness of the clothing, evident in the high price tags of plain tops and other such otherwise ordinary items. 

It is so that with the ownership of one of these products comes the membership of a club; the club of wealth and riches, as one is able to display their net worth on their torso. 

This falls in line with a classical understanding of income elasticity, as with a higher income there is there is a far more inelastic demand for luxury goods.

This kind of irrational behaviour makes sense in regard to the world of the rich, yet it still seems to come into play among those who aren’t in an abundance of income. 

It is clear that many students still flaunt towards expensive labels, despite the struggle of low-earning student life, but why? 

One reason that they are willing to spend such a high proportion of their little income on these items is to give the impression of wealth, much in the same way that some people re-mortgage their house in order to buy a new and expensive car. 

The impression this wealth gives is desired by so many as it creates status, seemingly placing one in the same prestigious club of riches as those who truly spend in excess. 

In a world where great wealth is so heavily sought after, to see yourself in the trendiest and most exclusive products may just be enough to satisfy some of those desires.

Image: [GQ]