The Luxury Conundrum: How high can prices really go?

What you paid Rs 25,000 for just five years ago now costs Rs 38,000. Hand-tooled Italian shoes that cost Rs 12,000 at full price 10 years ago, now start at Rs 45,000.

Written by Namrata Zakaria 2 | New Delhi | Updated: July 30, 2014 10:32:50 am


This is an idea I have been toying with for a couple of years now but have refrained from discussing openly. In bits and bobs of previous columns, the idea slips in, and I quickly watch myself. How does one bite the very hand that feeds you? But then, one’s first and possibly only loyalty should be to the reader, no?

So here it is: Do shop the sales. If possible, only shop the sales.

The prices of luxury fashion goods have seen a very high increase in the last decade. Seventy per cent in five years, says the industry bible Twice the rate of inflation, says a British magazine. What you paid Rs 25,000 for just five years ago now costs Rs 38,000. Hand-tooled Italian shoes that cost Rs 12,000 at full price 10 years ago, now start at Rs 45,000.

I’ve been buying high-end fashion items since I was in my early twenties. On my first work trip to Rome, another fashion writer and I would skip a meal every day so we could return with a new belt or a pair of shoes. I spent a whole month’s salary (as a young reporter for this newspaper) on Prada’s famous nylon wallet, I had no money left to put in it.

Buying luxury was akin to falling in love. It had no logical reasoning and was purely driven by passion. It was just the idea of owning something that had a sense of history and a promise of fine quality. Not to mention the snob value of it. You could willingly starve for it!
What do the escalating prices tell us today? The explanation offered by various CEOs who run the industry is that prices of everything are up: right from cattle (for leather accessories) to cotton (it’s not throwaway cheap anymore) to labour costs (the human rights lobby is killing us).
But the truth is that the business of luxury is taking away the joy of it. Shareholders are demanding a 65 per cent gross margin. This means you, a consumer, are paying not just for the raw material and the making of a product, but also for over-the-top branding. The costs of several retail outlets in China and the excessive magazine adverts are coughed up by you.

Fashion is also now run by companies and their CEOs, not the people whose signatures the marquee bears. (The multi-talented Helmut Lang doesn’t own his name, the Japanese company that owns the label sells watered-down versions of his cult designs at high-street prices. The real Mr Lang is now a painter and lives in Long Island.)

Of course there is the newly moneyed customer for whom the status of owning a luxury item overrides the value of it. But the more knowledgeable shoppers are bargain hunting. Moreover, the high street retailers have upped the game: they offer high fashion at industrial quality.

Conspicuous consumption is on the wane everywhere, and the sale is becoming the only time to shop. But this is not good news to industry icons like Louis Vuitton and Hermes, who never offer discounts. A sale is bad for their image. Vuitton proudly says it escalates its prices by almost 20 per cent each year, without ever going on sale, and shores up remarkable profits.

But for the first time, this quarter shows a seven per cent loss for the LVMH group. Kering (that owns Gucci) is down by three per cent also.
A small but steady reverse snobbery has begun, ‘luxury’ now means a refusal to buy.

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