Originally Posted by aschick
I'v been bothered for a long time about the following. As I recall Malden Mills basically invented the polyester fleece weaving technique to manufacture Polartec around 1982. By 1992 a number of companies had figured out how to do essentially the same thing, and have been improving since. My question is, you can now by a fleece zip up or pullover for $15 from Old Navy, $50 from Columbia (MTR) and $80 and up from high end manufacturers. Is there really such a huge difference? Granted, some might last a bit longer and some can stretch a little more, and some can also block wind and rain (not exactly necessary under a good shell) and some can provide the same insulation in a thinner material, but is there a difference that warrants an eigthfold increase in cost? When you look at the tags they are all made in Thailand or Vietnam or some other near slave labor country. Are the high end brands just ripping people off for essentially the same product?
It's what companies do to get you to pay more for essentially the same thing--just not quite the same thing. Differentiation.
And the pricing -- for everything, not just fleece -- is based on supply and demand. It has nothing to do with their costs; it has everything to do with what people are willing to pay. If pricing was based on cost of production and distribution, a Coke would cost less than a nickle. Same for Starbucks coffee (well, maybe a dime).
Want a horrendous example? Diamonds. DeBeers is the world's largest cartel (except, maybe, OPEC). They manipulate the market to keep supply short relative to demand. And demand is created by those DeBeers commercials that say absurd things like, "How much should you spend for an engagement ring? About five months' salary." Such complete B.S.
Every company is, from a profit maximizing perspective, trying to behave like a monopoly. If you are completely devoted to a brand, they represent a monopoly (to you) for that product. No other product matters to you. Thus, you will pay a premium.
Ok. Finished with my business school / economics rant