Manipulating Supply & Demand of Designer Brand Handbags
January 11, 2008 by Susan Gunelius
Filed under Marketing
In December, I wrote a post about the Nintendo Wii shortage asking if Brandcurve readers thought it was real or manufactured. Whether or not it was real, demand certainly skyrocketed as customers scrambled to get their hands on a Wii before the holidays. Now, it seems the manipulation of supply and demand is happening in the designer handbag category.
Saks Fifth Avenue, Neiman Marcus and Bergdorf Goodman have each created a limit on the number of pricy designer handbags a customer can buy to 3 within 30 days. At first, it may seem like a strange restriction based on the pricetags these brands have on them. For example, brands like Prada and Botega Venetta sell purses that cost nearly $1500.00. However, the limitation is meant to deter foreign buyers from stocking up on the pricey bags while the U.S. dollar is so weak. It seems foreigners buy the purses then resell them in Europe and Asia for a nice profit.
Interestingly, one designer handbag company, LVMH who owns famous designer brands such as Dior and Givenchy, sells it Louis Vitton bags strictly through its own website, eLuxury.com. The LVMH policy limits buyers to just 2 handbag purchases per calendar year.
What do you think about these restrictions? Will they work to increase demand of the brands with purchase limitations? Will they help in reducing the resale market?
Since I am a personal lover of all things designer handbags, I think the limit on how many you can buy is actually a good idea. Designer handbags are meant to be one-of-a-kind so as to increase its desirability and yes, lust, for its products. Resalers who undersell the manufacturer’s products are essentially “devaluing” the product and making it un-desireable.
That seems unusual, to limit the number of expensive designer handbags a customer can buy. One would think that, if these handbags are fetching such an exorbitant price, that limiting the number would not make a lot of sense. Why restrict the profit to be made from the more profitable handbag selection? Isn’t that counter-productive for the business in question?