May 29, 2008
Flexing Your Buying Power
Dress for Less and Less
SINCE 1998, the price of a “Speedy” handbag — the entry-level style at Louis Vuitton — has more than doubled, to $685, indicative of a precipitous price increase throughout the luxury goods market. The price of Joe Boxer’s “licky face” underwear, meanwhile, has dropped by nearly half, to $8.99, representing just as seismic a shift at the other end of the fashion continuum, where the majority of American consumers do their shopping.
As luxury fashion has become more expensive, mainstream apparel has become markedly less so. Today, shoppers pay the same price for a basic Brooks Brothers men’s suit, $598, as they did in 1998. The suggested retail price of a pair of Levi’s 501 jeans, $46, is about $4 less than it was a decade ago. A three-pack of Calvin Klein men’s briefs costs $21.50, only $3.50 more than in 1998. Which is the better buy?
Factoring for inflation, each of these examples is actually less expensive today. In current dollars, the 1998 suit would cost $788, the jeans would be $66 and the underwear would be nearly $24. As consumers adjust to soaring prices for gasoline, food, education and medical care, just about the only thing that seems a bargain today is clothes — mainstream clothes, anyway.
Clothing is one of the few categories in the federal Consumer Price Index in which overall prices have declined — about 10 percent — since 1998 (the cost of communication is another). That news may be of solace to anyone whose budget has been stretched just to drive to work or to stop at the supermarket; in fashion, at least, there are still deals to be had.
An anecdotal price comparison by Thursday Styles for 31 name-brand clothing items — such as Calvin Klein underwear, a Chanel tweed cardigan, a pair of L’eggs pantyhose, Ray-Ban Wayfarer sunglasses and a wool crepe jacket from Anne Klein — would seem to demonstrate that while luxury prices have outpaced inflation, lower-priced clothes have generally experienced deflation. Even some items that may seem more expensive today, like a $75 Ralph Lauren polo shirt (which cost $62.50 in 1998), are really not, because their prices have risen more slowly than inflation.
Anyone who has spent time walking along 34th Street in Manhattan recently, from Kmart to Macy’s to Forever 21 and H&M, would think that the economic outlook is rosy. Shoppers there are still laden with bags from Payless and Victoria’s Secret, and several said they perceived fashion to be a better buy, with more variety and style at lower prices, than a decade ago.
“You can buy a lot more with your money today than before,” said Joanna Eliza, a recent graduate from the Fashion Institute of Technology, shopping on 34th Street on Tuesday. “Stores like H&M and Forever 21 make it more affordable for people who want to be fashionable, and that makes me feel really good.”
Over all, apparel prices have gone down primarily because of two factors: the overwhelming movement of manufacturing to countries with cheaper labor, where the clothes are made, and increased competition between traditional retailers and discounters, where the clothes are sold.
In some cases, the low prices today seem almost ridiculous. Steve & Barry’s sells celebrity-branded shoes and dresses for $8.98 or less. Target offers a silk faille ball gown from Isaac Mizrahi on sale for $129.99. Wal-Mart, the nation’s largest retailer, promotes an Op T-shirt for 97 cents.
But how low can prices go? While fashion deflation may be good news for consumers, it is not necessarily so for stores. Such prices at the low end and, conversely, such high prices at the luxury end, where $1,300 handbags are piled up like tomatoes at Saks Fifth Avenue, are beginning to cause concern among retailers and analysts, because they are having a profound impact on the way people shop.
“Everything we pick up today has to pass a test,” said Candace Corlett, the president of WSL Strategic Retail, a consulting group. During a survey of shoppers in November, 60 percent of the respondents said they had recently begun to stop and reconsider clothing purchases before buying. “To me, that is the scariest thing for retail going forward, because that is a new habit,” Ms. Corlett said. “It’s not like in 2000, when we were just buying so much stuff. We are learning now what we call the cautious pause.”
The fashion and retail industry fear that the appeal of price, for consumers of both mass and luxury goods, is becoming a more important factor in decisions about what to buy than desire, which has been the driving mechanism behind the growth of fashion and luxury for decades.
“We as a business cannot afford to have a customer take a second look and ask, ‘Do I need this?’ ” said Bud Konheim, the chief executive of Nicole Miller. “That is the kiss of death. We’re finished, because nobody really needs anything we make as a total industry.”
The divergence of price extremes has become so striking that some fashion executives, including Mr. Konheim, are openly asking whether prices have reached both their nadir and apex at the same moment. “As far as bottom costs go, we’re there,” Mr. Konheim said. “I think we’ve exploited all the countries on earth for people who really want to work for nothing.”
But at fashion’s high end, it may be consumers who think they are being exploited. Of the name-brand items that Thursday Styles ran a 10-year comparative price check for, the highest gain, 104 percent, was for the Speedy bag, followed by a $1,900 Lady Dior bag (73 percent higher) and a $325 Diane Von Furstenberg wrap dress (71 percent higher). These prices were not adjusted for inflation, which has run 32 percent cumulatively since 1998.
Of nine items that declined in price, those that dropped the most were basics like underwear and T-shirts, by as much as 60 percent for Joe Boxer’s three-pack of basic briefs, 32 percent for capri pants from Liz & Company, and 21 percent for a Lacoste polo shirt. Prices for the remaining five items stayed the same or changed within 1 percent of their 1998 prices, including styles sold by L.L. Bean and Lands’ End, which are frequently touted in catalogs for maintaining their original prices.
Price differences for products that have remained consistent in image and design can also be affected by sales and competition among stores. The suggested retail price of a pair of Levi’s 501 jeans, for example, has declined $4 since 1998, to $46, but stores like J. C. Penney and Kmart have often sold them for much less.
The cost of materials — all the denim is produced in the United States — has remained constant. But the cost of production has fluctuated as production has moved overseas, a factor that could now lead to price increases.
“As we see gas prices going up, and the shipping going up with that, that will certainly affect what the end price will be,” said Erica Archambault, a Levi’s spokeswoman.
A Diane Von Furstenberg dress cost $190 in 1998, it cost $325 in 2008.
It is becoming harder to compete with price alone, said Stephen Donnelly, the general merchandise manager for women’s apparel at Kmart, where shoppers, he said, are increasingly value minded. They are often more informed and more interested in fashion that is affordable, rather than basics that are cheap, and increasingly, less profitable.
“Just like everyone else,” Mr. Donnelly said, “we’ve definitely had some cost increases and a lot of that has to do with transportation, for getting the goods from the manufacturers to our warehouses and off to the stores, as well as increases in the price of raw materials. But we are trying to minimize increasing the costs to our customers.”
HOW the potential for higher prices will sit with consumers may depend on the how many companies find themselves in the same boat, unable to withstand further cuts without sinking.
“Clothing has been incredibly cheap,” said Sarah Maxwell, a professor of marketing at Fordham University and the author of “The Price is Wrong” (Wiley, 2008), which looks at how price affects consumer behavior. In the book, she describes buying the same pair of sneakers for 15 years, during which time the price ranged from $19.95 to $29.95. When she recently went to buy a new pair, they cost $34.95, so she rejected them.
“There is room to move up,” she said. “If the entire market moves up at the same time, there isn’t any problem. It’s when one person moves up that the market notices.”
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