Question

Why buying cheaper clothing is better than expensive clothing? Why do expensive brands envy cheaper brands?

Answer 1

There are basically two components which greatly defines the price of a product - Production Cost & Service Cost. Production Cost is mainly the cost of raw materials used for making the cloth and service cost is the cost incurred in services provided to make the cloth available for sale. On critically analyzing the cost structure of Cheaper brands and Expensive or Luxury brands, we shall see that Production cost hold a greater percentage of share in the price for cheaper cloth but for Luxury cloth, Service cost hold a greater percentage of share in price. Therefore, we can say that in cheaper cloth you are actually paying for what you get and hence, buying them is preferential. On other hand, we all know that fashion industry is very dynamic and changes continuously. Hence, making greater investment in purchasing clothes knowing that it would stay in trend for a short duration of time is not a judiciuos decision.

Expensive brands envy cheaper brands because the cheaper brands provide the low cost alternatives against the products of expensive brands. As we generally see a high price sensitivity in customers of such sectors, the price difference appears to be a good proposition for the customers. Moreover, to negate the price sensitivity, the luxury brands are required to put in extra efforts and investments so as to get into the customer's preference list. This extra investment increases the risk for the brands and is unfavorable. Last but not the least, the cheaper brand always enjoys a higher market share and greater popularity. Hence, the luxury brands' envy towards cheaper brands is justified.

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