Why the ‘IT’ crowd are out pricing the market

Author Kristy Loveday

ID: 216205341

Why the ‘IT’ crowd are out pricing the market

When H&M first hit local shores in April 2014, Australians were suddenly able to look forward to fast fashion from the high street retailer. What wasn’t expected were the large price tags that would ensue. H&M have become internationally known for stocking the latest trends at the best prices; so why are Australian consumers now seeing such exorbitant pricing from the popular retailer? One word, demand. The pairing of high street fashion with designer basics has created a cult following with the “IT” crowd, allowing retailers to easily increase prices due to surges in demand (Wells, 2016).


So who are the “IT” crowd, and why is pricing in Australia affected? Global fashionistas such as Alexa Cheung, international models and designers, fashion editors and influential bloggers; the “IT” crowd are usually seen wearing high-priced designer clothing and accessories, only the best for high fashion influencers. Designer clothing, has been inadvertently publicised as desirable but not attainable due to the high price tag associated with such goods. The recent collaborations between labels such as H&M and high end designers brings couture styles to the streets for a fraction of the ‘thousand dollar’ price tags. Customers may be fooled in assuming these collaborative garments are of higher quality due to the higher price point, although this is questionable as explained by Iaocbucci, “However, studies demonstrate that there is no correlation between price and quality for most product categories”.




Customers interpret premium prices as prestige and high quality, helping them to justify the purchase. The prestige now associated with labels like H&M is allowing them to increase the average price of clothing in store. Why? Because an increasing number of people are willing to pay hundreds of dollars, for something, usually retailed for thousands from designer boutiques. People want to feel a part of the “IT” crowd and dressing so, enables them to be one step, in designer shoes, closer to their idols.


Supply and Demand

Consumers seeking high street couture pieces at affordable prices has created such a demand, customers are willing to line up for hours to obtain them. H&M’s recent collaboration with French designer Balmain caused this exact scenario “Some shoppers queued for up to 20 hours outside H&M in Melbourne’s Bourke Street Mall to secure limited edition clothes, shoes and accessories designed by the French fashion label when the store opened on Thursday morning”(Hatch, 2015).



As explained by retail analyst Steve Ogeden Barnes from Deakin University, ‘’It comes down to a basic principal of supply meets demand. While some retailers such as Target, Kmart, Cotton On and Supre have adopted a strict low-cost-price strategy, most fast fashion retailers on the Australian high street, both local and international, will set market prices based on how much they believe the consumer is willing to pay”.




Pricing Elasticity

The greater demand for these goods allows retailers to justify their premium price points of three to four hundred dollars per item, in a store where an average price is normally fifty to sixty dollars. Although considering the purchase price in the designer outlets is in the thousands, customers potentially perceive the prestige pricing at the low-end market a compromise effect. It also highlights the elasticity of the apparel market in its current state. Clothing has an elastic demand meaning that the quantity demanded responds strongly to price. Most other human necessities like food and water are inelastic in price, however clothing options are so broad, customers share of wallet for this necessity varies (Amadeo, 2016).


We cannot expect to see prices drop or lower until high street fashion is no longer perceived as prestige and the demand for these items slows and/or sensitivity (Robertson, Bendall, 2016) to pricing increases. As long as the “IT” crowd continue to wear high street fashion and customers are willing to pay premium pricing to achieve their look, it is expected prices will remain high. Are we willing to boycott being fashionable to encourage lower prices?




Wells, 2016, News.com.au, http://www.news.com.au/lifestyle/fashion/fashion-trends/why-prices-at-your-favourite-cheap-fashion-shop-arent-so-low-any-more/news-story/cfb22a22a3e54b851ff79b4372309276

Iacobucci, 2014, Marketing Management

Hatch, 2015, Sydney Morning Herald, Fashion forward brave the rain to get their hands on H&M’s latest line, http://www.smh.com.au/lifestyle/fashion/fashion-forward-brave-the-rain-to-get-their-hands-on-hms-latest-line-20151104-gkr4tg.html#ixzz47J0sa1kF

Amadeo, 2016, About News: Elastic Demand: Definition, Formula, Curve, Examples, http://useconomy.about.com/od/glossary/g/Elastic-Demand.htm

Robertson, Bednall 2016, MPK732 Marketing Management, lecture 1, week 7: Pricing Considerations and approaches, lecture PowerPoint slides, viewed 26 April 2016, https://d2l.deakin.edu.au/d2l/le/content/414166/viewContent/2918961/View



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