Does anyone remember when a drop-dead gorgeous, “you-had-me-at-hello” pair of designer shoes cost $250?
Seriously, you young ones, I am not exaggerating. In our lifetime, one used to be able to buy an incredibly stylish Italian-made pair of leather shoes at Bergdorf’s or Barney’s for less than $300.
Flash forward to today: my friends and I laugh about the fact (although it’s actually not all that funny) that we have become conditioned to casually dropping $1,000 on a pair of shoes (don’t even ask us what we spend on boots). I have been scoping out white sneakers, because that’s the thing right now, snow-white sneakers. Givenchy has a pair for $495. For a pair of simple white sneakers!
Men are not immune to this sky-rocketing inflation. Last week, my normally sensible Brooks Brothers-devotee husband brought home a pair of $3,000 Ferragamo crocodile loafers. Last year Nike released its men’s Air Jordan 1 “Pinnacle” sneaker with 24-carat gold trim. Originally priced at $400, you can score a pair on eBay today for bargain price of $1,199.99. I recently read an article in New York Magazine about a 16-year old male sneaker mogul who claims to have bought a pair of LeBron X MVPs for $400 and flipped them that same day for $4,000.
What is it about the shoe category that causes luxury consumer demand to be so incredibly inelastic? Keen eyes will have noticed that ready-to-wear prices are generally stable – some designers have even quietly brought them down. Handbags, too, although not cheap in absolute terms, are basically what they cost a few years ago. Beauty products, first-class plane tickets, luxury cars, even watches. The pricing is surprisingly stable, except when gas prices sky-rocket.
The footwear category is defying the basic laws of economics: even though there are now more places to buy shoes and sneakers than ever before in the history of humankind – from Zappos to an entire floor of Saks in New York with its own zip code; from Foot Locker to Sneaker Bar Detroit – as distribution grows, and prices increase, demand is still growing.
Even though there are plenty of available substitutes for expensive shoes – which usually keeps pricing in check – and even though there is no time sensitivity when buying a shoe (it’s not like buying the antidote for a snake bite), we keep paying up. Normally, if you’re able to postpone a purchase, you will end up paying a lower price – somehow, with designer shoes and sneakers, we think we need them TODAY and we won’t risk waiting (fear of missing out is a powerful motivator for the luxury consumer).
So what is going on here?
First, as the population ages, shoes have become a luxury product that women can still enjoy. No fears of growing out of them, when you get sick of the 4-inch heels you used to wear, there is an ocean of stylish flats (also crazy expensive, by the way). They’re easy to try on, and they never make you feel fat. Shoe shopping is like going out for French fries. It’s just always fun.
Second, shoe companies have earned their high margins by being endlessly inventive and generating new items with great frequency. I am awe-struck by how much innovation can occur with an object so small with such specific functionality upon which it has to deliver. No matter how edgy, beautiful or whimsical the shoe is, you’ve got to be able to walk (or even run) in it. Give them their due – delivering this level of novelty at this frequency takes both serious creativity and a strong supply chain.
Third, shoes – particularly sneakers – have become a meaningful part of our culture, and a signifier of who we want the world to think we are. Capitalizing on that by creating both novelty and scarcity, sneaker manufacturers and retailers have cleverly made their product into a luxury good. “Sneakerheads” spend thousands of dollars on their collections, and when a new Air Jordan is launched, there’s an absolute frenzy. The release dates are promoted online exactly the way a movie release date is. Foot Locker recently announced that its sales increased almost 5% in the last quarter, beating analysts’ expectations, due to unexpectedly high demand for Under Armour’s Steph Curry sneaker and Nike’s new Kevin Durant KD9s. In LA and New York you can now get high-end sneakers “detailed” – just like your Porsche – by Jason Markk. For $65, his SCTs (Sneaker Care Technicians) will make your Kobe 11s look like new.
Last, I think that for both men and women, shoes are the gateway drug to luxury. In the scheme of things, they are still relatively affordable in absolute terms. So you’re spending a reasonably small amount of your total income on them. Once you graduate from fragrance, a designer shoe or sneaker is the next step. And yes, the high is as good as they say it is. And yes, it’s totally addictive.
Like all good parties, this one will come to an end. The trees don’t grow to the sky, and at some point the price points will plateau. But man, what a great run! In $500 sneakers, no less.