Paying for Quality versus for a Label

Paying for Quality versus for a Label

Try to imagine a still frame picture of yourself living the “perfect life.” Maybe you’re on a sunny beach enjoying champagne with your partner or driving through the Italian countryside in a beautiful classic car with the top down. Can you see it? Now ask yourself, what are you wearing?

Are well known luxury brands part of the fantasy? If so, then it’s worth asking why. Luxury brands and labels spend far more in trying to cement themselves in that picture than they do in the actual production of their clothing. While they would argue their expert “craftsmanship” and heritage justify their price tags, they are obviously selling a high-end image more than anything else.

We like to imagine ourselves as rational beings, so why would we be pay extra for something of zero tangible value? The answer of course is that we are not as rational in our decision making as we’d like to believe.

The Circus of Consumer Behavior

Marketing is all about studying incentives. It is finding those pressure points in the human psyche and applying leverage to tip your buying decisions in favor of a brand.

If you walk into a grocery store for coffee and pass up the tried and true local brand for the premium import only because the label looks better, then there is a marketer somewhere getting a pat on the back. They have somehow convinced you that quality depends not on the product but on the package the product is wrapped inside.

Consumer behavior is studying not only how we make our decisions based on needs like food and shelter, but also on emotions of what we desire. Every time we make a purchase, we are building our identity. Are we someone who only shops organic? Do we prefer foreign or local goods? We create this persona reinforced by the products we surround ourselves with.

Fashion is no exception.

Pricing as Marketing Tool

If consumers associate brands with their identity, then why not focus on brands that emphasize quality and function at fair prices? Regardless of how much money someone has, most people try to avoid overpaying for something relative to its known cost or tangible benefit. Yet, when it comes to fashion, often the price of an article of clothing is what drives the desire for it. The underlying value is irrelevant.

The New York Times for example, estimated that a Hermes handbag which retails for $4,800 costs approximately $180 to produce… that’s a mark-up of 3,000%! Can you think of any other product where the mark-up is so dramatic? The price/value perspective is obviously thrown out the window in these instances and that’s unsurprisingly not by chance...

A common retail strategy is called anchor pricing. It is basically a tactic of showing you one price that “anchors” your perspective and then another - usually lower price - that now seems like a much greater bargain than if looked at in vacuum. The most common example of this psychology at play is when you see an item on sale with the original price crossed out and the new “sale” price below it. Your perception of “value” is inevitably going to be based on that price difference.

Exclusive fashion labels use this strategy in a more subtle way that is arguably even more powerful when you consider the prices they are steering you towards. Think about walking by a window display for Louis Vuitton with a handbag priced at $10,000. Upon going inside, we see the same bag on a wall of other options, each with lower pricing. Suddenly we discover a $2,000 bag – not all that dissimilar to the $10,000 one in the window – and perceive that a great value. Without the $10,000 bag to anchor our expectations, most people would never consider $2,000 to be reasonable.

This is psychological manipulation and a common practice in marketing. It is a form of cognitive bias we see all the time. Just visit the wine section of your local store and you will see expensive bottles at eye level and affordable bottles on the bottom shelf. Even if the wine is the exact same quality, the higher price and better placement anchors that idea we compare all bottles against.

Many of us believe that you generally “get what you pay for” and as consumers we naturally often associate a higher price with better quality. When it comes to exclusive fashion labels, however, clearly the “what you get” is much less tangible…

Paying for Imaginary Status

It seems like the first thing any newly famous musician must do when they have made it big is buy a flashy car or ostentatious jewelry. This is usually some sort of tacky necklace with enough diamonds to make Tiffany’s blush. It is a status symbol. The irony is that instead of the fact that their song is being played worldwide internalized as social proof of their success, they need an elaborate piece of jewelry to show they have achieved a certain status.

This is what the exclusive high-end fashion houses are ultimately selling. Going back to the Hermes example, in 2021they reported an operating margins of 39% - a strong number but one that is surprisingly in line with a more mainstream clothing retailer like the Gap. The mark-up on the handbag would on its own represent a 96% profit margin, so where is the added expense coming from? In large part naturally from marketing and creating the image in consumers’ minds that make their product an aspirational desire. It’s why their ads and even store presentation display a degree of arrogance and undeniable sense of superiority. They are not trying to sell you an article of clothing… you are buying the feeling you get by associating yourself with their label.

This on its own would not even be such a bad thing – we all want and deserve to feel good about ourselves! The issue is when this feeling is based on the external validation we seek from others. It used to be enough to have a small, embroidered rider on a horse, but now the ultra-high-end brands have all turned their logo into a pattern itself ensuring that no one can miss what you are wearing. The brand name used to be confined to the tag inside the garment and now is frequently spelled out in as large as possible across even the lip of a shoe. Most companies would have to pay you to function as a walking billboard of their brand, but in the case of the so-called high-end fashion labels, the deal is reversed – you pay top dollar so that you can be associated with the image their expert marketing people have created. Is it a stretch to consider them the true “craftsmen” behind these labels?

Buying with Intent

We obviously have deeply held opinions on the values that matter to us when buying clothing, but also don’t expect those to be held by everyone. We do believe that as consumers we should be purposeful in our buying choices and understand the designed manipulation that goes into getting us to consider a company’s product. If you are self-aware enough to understand this and still find joy in purchasing a $4,000 hoodie, then more power to you. We may not be the type of label you want to be associated with and that’s fine too (of course, we’d love for you to give us a shot!).

From our perspective, if “clothing makes the man,” then why not seek out quality and versatility? We all want more of two driving forces in our lives: time and money. Chasing after the latest fashion trend being driven by the “it labels” of the moment rob you of both.

Our brand is all about simplicity, quality, and purposeful decision-making. Our premium men’s Pima cotton t-shirts are not cheap, because quality is not cheap. We also do not mark them up more than necessary to fund some massive marketing campaign with teams of influencers and paid celebrities equating our label to your ticket into the club of elites. We don’t run sales and instead offer permanent discounts on our men’s T-Shirt bundles because we base our pricing on our actual cost structure and not as a marketing tool. We try to speak to the real ambitious human beings out there who want the best when it comes to looking good and feeling good, so they can ultimately focus on more important things. After all, success is not what you wear but what you do while you wear it.
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