Luxury Goods

Saks and Barneys and the rest of those luxury retailers have discovered that nothing destroys a luxury brand like a sale:

All around Saks Fifth Avenue, merchandise is sold out. The $2,520 Marni shearling vest? Gone. The $5,295 Brioni leather bomber jacket? Only one left. The $1,995 over-the-knee Christian Louboutin boots?

The $1,995 over-the-knee Christian Louboutin boots at Saks have sold out, unless you can wear the only pair left -- a size 11. "All gone, except for this," said Nick Passerelli, a Saks employee, dangling a size 11 boot from his fingers.

After a brutal year in which the nation's luxury retailers were forced to offer their wares at stunning discounts, they are trying to get their magic back. And they may have found a way: deliberately running low on merchandise.

Saks, the chic Manhattan department store, is a prime example. Its inventory is down by double digits compared with last year. That is partly a response to lower demand, of course, but it is also a business strategy aimed at weaning consumers from deep discounts. By carrying fewer goods and selling them at full price, Saks is essentially telling customers: buy it now or live without it.

"Upscale stores want to train the customer that luxury equals exclusivity and that they cannot assume they can wait and they're able to buy it on sale," said William S. Taubman, chief operating officer of Taubman Centers, a mall developer and owner.

This is bad news for people like me, who subsist on online sales. But I think it's clearly good retail policy, if only because the allure of luxury items - the irrational desire that makes us want to spend two thousand dollars on a boot - is entirely rooted in their rarity. When you put something on sale, you suggest the opposite: the object is too abundant, which is why it requires a discount.

The reason luxury items are damaged by abundance is because they are "positional goods," since part of their appeal is that they signal your social position. A Christian Louboutin boot doesn't protect your feet better than a L.L. Bean winter boot - in fact, it's probably far less functional - but it does convey a sense of identity. The fancy shoe instantly informs strangers that you're the type of person who can afford (and appreciate) such splurges, and also knows how to find something so rare. (This is an under-appreciated perk of capitalism: it allows us express ourselves with things, defining our personality with clothes, computers and brands. I'm not defending this practice - I'm simply noting that it works, and that people the world over rely on mass-produced objects to remind themselves who they are.) Last year, I talked to Jonah Berger about the quirks of luxury retail brands, and how even seemingly subtle brands - such as Prada t-shirts without the Prada logo - are still all about exclusivity:

LEHRER: You've pointed out that expensive brands come with a subtle paradox: consumers spend lots of money on these brands (such as Prada or Armani) but these high-end products are actually less likely to contain clear brand markers. Although that $20 Tommy Hilfiger polo shirt will almost certainly contain a Hilfiger logo, that $100 Prada t-shirt won't advertise its provenance. Why, then, do consumers spend so much money on expensive brands?

BERGER: Communication. Consumers want other people to think certain things about them, and so they wear clothes that communicate particular identities. Conspicuous consumption, or spending lots of money on visible goods, is a good way to try and communicate wealth, but this signal breaks down when any wannabe can buy a certain car or handbag. What were once status symbols become just aspirational markers rather than the real thing. Consequently, insiders may engage in more inconspicuous consumption to signal only to others in the know. Such subtle signals may be almost invisible to the mainstream, and this helps maintain their cache.

LEHRER: In a 2007 paper, you note that "Manhattanites stopped wearing mesh trucker hats when the bridge-and-tunnel crowd adopted them." In other words, the urbane crowd abandoned a fad once too many of the "wrong" people adopted it. You argue that this kind of switch is because consumers choose products that communicate a "desired identity." Is this true of all product domains? Or are certain consumer items more intertwined with our identity than others? If so, why? Why are hats more reflective of our identity than, say, backpacks?

BERGER: Certain domains are definitely more symbolic of identity and this fact has a lot to do with utility and function. People buy detergent based on what cleans the best, and consequently that choice doesn't say much about who they are. Shirt choice, however, is based much less on function. Two different colored shirts do an equally good job of being shirts, so observers are more likely to attribute someone's choice to something about their identity. Similarly, things that violate functionality are more likely to be seen as identity-relevant. Wearing sunglasses indoors makes it harder to see. Wearing a scarf in the summer is unnecessary. Consequently, these behaviors are more likely to be seen as signals of identity because they have little functional value.