Opinion / Handbags cost much more than men’s work bags – are luxury brands like Hermès, Gucci and Dior just ripping women off?
It can take years to get your hands on a Hermès Birkin for around US$9,000, while most luxury brands make men’s bags and briefcases for US$2,000 or less – what’s up with that?
It might sound incredible, but the most expensive brands in the world may be priced too cheaply.
Pricing is one of the most challenging tasks for brands. Few get it right. Indeed, our research shows that many luxury brands are priced far too low – leaving a significant profit potential on the table.
Sound wrong? Take an example that may seem absurd at first glance: the most expensive omelette in the world, the Zillion Dollar Lobster Frittata, served at Norma’s restaurant at what was then called the Le Parker Meridien New York. A decade ago, I ran an analysis with a luxury pricing tool developed for my doctoral thesis and ran it on the omelette category simply for fun. I was astounded: although the omelette sold for US$1,000 at the time, the pricing algorithm indicated, by comparing the omelette with many other categories, that the price could easily be doubled. I remember calling the restaurant management to give them a free tip: double your price, and you will probably sell more.
That suggestion was ignored for almost 10 years. Then, when the price of caviar increased, the price of the omelette was adjusted – to the level I had indicated years earlier. The effect: the omelette, already famous, became a “celebrity”. It received an endless array of press coverage, and the journalists could not believe that anyone would buy an omelette at that price. They were wrong. Sales went up, proof that intuition is almost always wrong when it comes to setting the right price for a luxury item. It also shows that if brands don’t apply sophisticated luxury pricing tools, they risk leaving enormous profits on the table by pricing themselves too low. If the most expensive omelette was too cheap, then many other luxury items may also be too cheap – in many cases, far too cheap.
Why do women pay more for bags than men?
I am frequently asked why handbags for women seem to be more expensive than work bags or briefcases for men, especially when it comes down to comparing the amount of material used. Take the Hermès Birkin bag, starting at around US$9,000 and ending somewhere around half a million dollars for rare limited editions.