At Any Price

Even with the snob value, would you splurge on a US$ 900 white blouse? With prices of luxury fashions increasing every season, affluent consumers are willing to pay whatever is needed for their designer duds.
By Ruth La Ferla

Readers leafing through the September issue of Vogue encountered a Prada mohair twin set tagged at $2,925; a chunky Giles sweater at $3,675; and a supersize Marc Jacobs bracelet at $2,180. And as fall looks begin trickling into stores, shoppers will find basic designer sheath dresses selling for $1,200, coats for just under $4,000 and designer sunglasses for $500 or more.

Yet merchants and manufacturers have seen surprisingly little resistance in recent seasons to the cost of luxury goods. So strong is the demand for cashmere car coats and crinkled patent leather bags at Barneys New York that two firms – one from Dubai and the other from Japan – engaged in a bidding war to acquire the store. The luxury conglomerate LVMH, the owner of Louis Vuitton, had net profits for the first half of 2007 of $1.11 billion, up 2 percent from a year ago. Profits at the parent of Gucci and at Prada are also up.

Those brands owe part of their success to shoppers with caviar taste who have come to view extravagant prices as an enduring, if unwelcome, fact of life. At the same time, another consumer group is driving the trend, shoppers for whom a high price can in itself be an inducement to buy. Just as makers of premium ice cream have persuaded consumers to pay $4 for a cone instead of 90 cents, and California vintners convince them that a $100 cabernet is better than a $0 bottle, the makers of designer clothing know that high prices can cast a spell.

An exorbitant price can confer exclusively. "People are willing to pay a significant amount of money to make sure they don't see their purchase on other people," retail consultant Robert Burke said. Or to ensure that their friends will recognize its provenance.

"Price is part of the status o certain luxury items," said Marvin Traub, a retail consultant in New York. Traub, who visited Moscow in Mach, noticed that people there were fascinated not by how little but now much was paid.

Among merchants and manufacturers, consumer psychology can be as significant as economics in setting prices.

"Luxury makers are not necessarily forced to raise prices above the exchange rate factor, but sometimes they do," said Milton Pedraza of the Luxury Institute, a research group in New York. "Why? They know that consumers are resilient. For manufacturers, it's really about asking for a price increase because you can."

The appetite for high-end wares has been a boon to retailers, who need to sell fewer of a given item to turn a good profit. The higher the price, the higher the margin, Burke pointed out: "It's much easier to sell five of something really expensive than 20 of something less expensive."

A recent stroll through several high-end stores in Manhattan turned up prices that might be the equivalent of a down payment on a minivan. A raglan-sleeve black jersey Lanvin dress was $2,455, a Shown Collins thermal knit sweater $995; a Balenciaga leather bag with fancy grommets, $1,725; Lanvin leather ballet flats, $530; and Marc Jacobs cuffed leather ankle boots, $995.

That is not to say that consumers are indifferent to price. Many are making emotional adjustment, finding ways to balance a love of fashion with the reality of its increasingly exorbitant cost.

Eunice Ward, a lawyer in Cicago with a taste for quirky labels like Dolce & Gabbana and Stella McCartney, pays full price only for items that resonate with her sense of style. During a recent shopping trip, she spied a Yohji Yamamoto sweater.

"I knew it would fit with my wardrobe and update everything," she said, "that it was going to be my workhorse for fall."
"I didn't even check the price at first.. I knew I would love it, and I didn't care."

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