FROM OUR FEBRUARY ISSUE: EDITOR’S LETTER-RISING PRICES, RISING CONCERNS
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A headline in The New York Times business section on December 26 seemed the first good news in ages: Holiday Spending Rises, Defying Fears of a Decline. According to the write-up, retail sales from Nov 1 to Dec 24 increased 3.1 percent over the same period last year, with spending in restaurants up 7.8 percent and apparel increasing 2.4 percent. However, spending on electronics and jewelry declined, as did home furnishings and toys. Online sales showed increases but less than last year, slowing from 10.6 percent gains in 2022 (vs 2021) to 6.3 percent in 2023.
What does it all mean? Apparently, Americans are being more mindful of how they spend. That said, menswear merchants reported mixed 4th quarter results, with some claiming their best December ever and others blaming the weather for disappointing sales. According to most of the clothing merchants we profile in this issue (page 22), price increases are a growing concern, even for those who have not yet felt the pain.
Says David Perlis, with three stores in Louisiana, “Our clothing customers have certainly noticed the price increases, especially at our top levels. We’ve seen MTM customers notice as well. I think the consumer is being more purposeful with purchases. It’s hard to say whether this is sticker shock or simply that we’re settling back into a more predictable cycle after pent-up demand inspired excessive purchasing in 2022. Whichever the case, our maintained markup percentage declines as ticket prices increase…”
On the other hand, Tim Sitzmann at Mr. B’s in Iowa is joyfully trading up. “My vision is simple: better, better, better. Our customers have indicated they want quality over price. Our suit prices are currently $1000-$3000. We try to show product they can’t find everywhere else.”
Even at Paul Stuart, where virtually all offerings are exclusive, Creative Director Ralph Auriemma is noticing some pushback. “There are always excuses for raising prices: the war, energy costs, fewer sheep… Today’s prices are crazy, and of course, it affects us. But I’m not trading down or compromising quality in any way. In the end, it would come back to haunt us. Our customers expect and deserve the best.”
In November, a group of Style Section editors at the Times gathered to discuss the impact of price increases on luxury goods. The panel concluded that “while luxury fashion brands can get away with steep price increases, 2023 prices were out of control.” According to data company EDITED, average luxury prices are up 25 percent since 2019, caused by inflation, the pandemic, and the impact of wars.
The panel also noted that sales are down at most big luxury businesses due to the aspirational middle class stepping away. Luca Solca, analyst for Bernstein, added that the top 5 percent of luxury clients now account for 40%+ of sales for most luxury brands. As wealth inequality increases globally, luxury brands are doubling down on a smaller slice of their clientele. And all this while credit card debt tops $1 trillion, according to the Federal Reserve.
Influencer Bryan Yambau suggested that “this might be a good time for brands to lower prices.”
Vanessa Friedman pointed out, “People think because something is more expensive, it has more value.” And Guy Trebay backs this up: “Subjects shown two identical cashmere sweaters, one far more expensive, inevitably choose the costlier. We don’t think; we act irrationally.”
Someone named Daniel Kahneman won a Nobel Prize for this theory. Here’s to luxury customers acting irrationally!
Image above, Courtesy of Gladson, photographed by Rose Callahan.
