Despite the slow return of the American economy, the luxury goods industry has managed to double its profits over the past two years. In part this growth has come from an uptick in high-end consumers. It has also come from a steady rise in the prices of luxury goods.
Everything from cellphones to luxury cars have risen in price, but that’s not stopping the allure of luxury goods. But why? What is it that makes designer clothes more appealing than retail clothing – so much so that people will continue to purchase these overpriced items during a global recession? And is there a reason for items such as anti-aging products and wines to be so expensive? Or, perhaps luxury goods priced at such high levels only to reel in high-end clients. Here, we reveal how the following nine items are unjustly marked up for the luxury market.
9. iPhone’s Inflated Prices
Yes, iPhones have slowly crept their way into the world of luxury goods. They are the most expensive smartphones and the clear winner in popularity with most smartphone users. So why are these phones so pricey? Because they can be. Essentially, Apple has the smartphone market cornered. Recently Apple raised the price on their iPhone 6, making the most expensive version of the phone over $800. What tricks do Apple use to convince us we need to spend a month’s rent on a phone?
By raising their prices on their most recent phone update, they created a desire within smartphone users to obtain the mysteriously expensive item. They also made sure that consumers knew the supply of the iPhone 6 was limited, thus furthering the phone’s luxury status. Sure, the phone runs well and looks awesome, but for the majority of us who use our phones for calling, texting, and taking the occasional picture, is an $849 phone really necessary? Probably not.
8. Men’s Watches: Paying for Advertising
Ever stood next to a businessman wearing a diamond encrusted Rolex? If you have, then you have stood next to a man that has spent the same amount on a watch that most of us do on a house. Just what could possibly make men’s designer watches so expensive? Several things: For starters, those diamonds and the gold that add the flash and bling to high-end watches rise and fall in value.
When the price of gold, diamonds, silver, and dozens of other gemstones go up, so does the price of luxury watches. The same is true for the artistry of the watch. Watches that are high in detail require the precise work of artists and watchmakers. All the intricate work adds up to a big pay check for the artist, which in turn leads to a higher price tag for the consumer.
And of course, there’s the price tag from the massive amount of money that luxury watch brands spend marketing their products in high-end magazines, nightclubs, and luxury hotels.
7. Expensive Wine Really Doesn’t Taste Better
If you’re dining at a five-star restaurant, you may find yourself skimming the wine list. If you’re like the majority of Americans, the most you probably know about wine is that it comes from grapes. And judging by the prices of wine, very expensive grapes. But does that $200 glass of wine really taste better than the $10 glass?
According to a blind taste test done by psychologist Richard Wiseman, probably not. In his study, Wiseman discovered that only 53% of people could identify an expensive white wine versus its cheaper counterpart and only 47% could tell the difference between an expensive and cheaper red wine. So if the tastes are so similar why do we pay for expensive wines? Basically, because of the assumption that the more expensive the wine the more luxurious it must be. So the next time you scan the wine list remember that just because there is $200 glass of wine on the menu, doesn’t mean it tastes any better than the $20 of wine.
6. Expensive Vehicles Are Actually Worth The Price
Luxury cars come with an extremely high price tag. Some vehicles, such as the 2014 Mercedes Benz S-Class cost nearly $100,000. Besides the shiny emblem on the hood of a car, why would a person pay such a high-price for a vehicle? For three basic reasons: interior comfort, safety, and power. BMW, Mercedes-Benz, Audi, and Porsche are all known for their elegant interiors and comfortable cabin. From leather seats to shiny wood trimming, the interior of luxury vehicles make taking a long trip much more comfortable. Luxury vehicles also offer some of the latest safety designs.
They are usually five-star crash test rated. Finally, the most obvious reason why people are more than happy to shell out so much cash for luxury vehicles: power. Anyone who has ever taken a ride in a BMW knows the quick pick up and handling power of a luxury vehicle makes driving a blast.
5. Designer Clothes: Get Quality For Less
If you have any kind of fashion knowledge, then you know there’s a high cost of keeping up with clothing trends. The unveiling of spring and fall collections brings a rush of fashion forward shoppers to the doors of fashion houses in cities like Paris, Milan, and New York City. Each shopper is searching for a piece with impeccable tailoring, perfect color, and of course a fresh new designer look. And they’ll pay a price to get all those things; but for good reason. Designer clothes are made with far more durable and expensive material than retail clothing.
They are also more delicately crafted and often involve some form of hand stitched detail. Despite the craftsmanship of designer clothes, each piece in a designer’s collection keeps its ‘new’ status for only one season. Then, when the season comes to an end, the piece becomes part of past collections and immediately loses its luster. Designers known this, so they keep their prices high during the season and then when the piece is considered ‘old’ it is marked down to somewhere around 70% off.
3. One Company Monopolises The Eyeglasses Market
If you are one of the half a billion people around the world who wears brand name eyeglasses then you owe the high-cost you paid for your lenses to one company: Luxottica. According to Forbes magazine, Luxottica, a company founded by Leonardo Del Vecchio, controls 80% of major brands in the eyeglass industry. The company, which did $9.71 billion in sales in 2013, makes sunglasses and frames for brands such as, Dolce & Gabbana, Burberry, Tiffany, Vogue, Rayban, LensCrafters, Sears Optical, Target Optical, and about half a dozen more. Essentially, Luxottica controls eye wear and the ridiculously high prices.
2. Hotel Room Service: The Cost of Convenience
From its start at the Waldorf Astoria in the 1930’s to its inception at over three-quarters of hotels across the United States, room service is a common part of the hotel experience. But the truly luxurious hotel room service can only be found in five star hotels that cater to the high-end clients of the world. At these hotels, where each room is more like a small apartment, the room service prices are about what the average person would pay for a week of groceries.
What makes the meals so expensive? For starters there is often a hidden 15% service fee and an “in-room dining” fee added to the final room service bill, which most hotel guests fail to remember upon ordering their late night snack. Also, hotels have the ability to charge higher prices on food simply because… they can. If someone arrives at midnight from a long flight and is completely starved for food, chances are they will pay the extra price for the convenience and speed. And of course, most luxury hotels run under the assumption that if you can shell out $3,000 a night for a room, you can probably afford a large room service bill.
1. Anti-Aging Products
Many women across the world are in search of the one product that will firm their skin, clear their pores, and keep the signs of aging from ever touching their faces. Is there such a miracle cream? If there is, a lot of women will pay an arm and a leg to get their hands on it. From retinol creams, to laser treatments, and chemical peels, anti-aging products come in a variety of options and a wide range of prices.
The most expensive products, which can be as expensive as $1,000 for a 6 ounce bottle, “guarantee” a youthful face. But according to Vesna Petronic-Rosic, a dermatologist at the University of Chicago Medical Center, the products often point to a specific ingredient that has anti-aging components. The studies of the products do not demonstrate that the product itself is beneficial for anti-aging. They also do not inform the consumers of just how much of the anti-aging ingredient is in the product. All in all there is a good chance that the $1,000 anti-aging cream you are using may not be doing quite as much as you hope.