What exactly are we paying for in a Louis Vuitton bag?



Luxury companies often command the power of a monopoly, and exaggerate their prices. They know that the demand for their brand is always high. Their customers are wealthy and are willing to pay sums that are considered exorbitant to the man on the street for status and quality. Thence has gone any incentive to keep price low.

Furthermore, they are unwilling to produce in greater numbers as that would erase its value in rarity. In the world of luxury goods, price is inversely controlled by supply. Low prices would inevitably result in lower sales, as the illusion of exclusivity is eroded by affordability. This is why companies often market their products as limited editions.

And the Middleman?

If only the aforementioned was factored in, the price would still be justified. However, we have yet to account for the middleman. It is no secret that the middleman amplifies the price. Exploiting the consumer's lack of budget control when it comes to such brands, the middleman increases the price again. This further increase cannot be justified by greater quality or design. What then are we paying for?

Are we paying for the boutique rent? In this case we pay twice for rent, firstly the rent for the factory, and then for the store space. Although the boutique might be situated in the heart of the city, we oftentimes pay much more than the accessibility is worth.

Are we paying for better service? Apparently not, judging by how snooty most of the service staff in luxury boutiques are. I would sooner shop online from retailers like The Wholesale Private Club and deny the middlemen wages they do not deserve. The Wholesale Private Club links you directly with manufacturers and wholesalers, removing surcharges and service taxes that come from purchasing from stores. It is surprising how much less wholesalers charge. An Ipod that costs $250 in stores can be bought here for $118. The Fendi Chef bag that retails for $412 is sold here for $200. This concept is definitely worth more exploration.

The idea of buying directly from wholesalers has the potential to be very popular. The Internet has simplified things by making distance irrelevant. Yet, the majority of people would still rather purchase directly from the retailer with his grossly marked-up prices. Perhaps the mindset of the manufacturer-wholesaler-retailer flowchart has been too readily entrenched in our psyche, so much so that shoppers aren't prepared to venture out of their comfort zone to deal directly with the wholesaler.

In this day and age, the middleman has become an unnecessary evil. They were previously useful because they connected manufacturers to consumers, but this is a role that can now be outsourced to the Internet. Almost 80% of the world is wired, or as it is, wireless. The time is ripe to rethink conventional ideas, taking into account the great flexibility of the Internet.