Sunday, October 30, 2011

Volume 3 Issue 44: Two-Cent Economics

Price of Women's Underwear

Simply amazed the kind of data you can get on the Internet. I don't know what this chart tells us exactly, but it is certainly interesting to note:

As you can see, the price of women's underwear has shot through the roof. It has far exceeded the price of outerwear and even the headline CPI, which includes the prices of fuel etc. It begs the question, why the heck are women's underwear so expensive? Well, breaking it down to supply and demand, I think it is safe to say that it is not due to the lack of supply. So, it must be due to higher demand.

So, what caused this higher demand? Well, we most certainly cannot attribute it to women's knack for shopping because the price of women's outerwear has pretty much stayed where it was. Here are my guesses based on principles learnt in Economics 101 (although I never actually took that class).

1. Price of related goods
I don't really know what are complements to women's underwear. Not sure what the substitutes are either. But the Business Insider guesses that it is possibly due to the increase in the prices of other luxury goods. For example, a cheap luxury handbag is still cheaper than an expensive bra. This is possible, but I don't think it is that likely. But women, if you are reading this, please let me know if I am wrong.

2. Personal disposable income
I also don't think personal disposable income has increased in the last four years, especially during a recession.

3. Consumer expectations about future prices and income
This suggests that women buy more underwear if they expect the prices of underwear to go higher in the future. It would seem a bit absurd. This would mean that they would be treating underwear like a stock. But then again, who am I to judge the female mind?

4. Tastes and preferences
This is the most likely scenario. Though, I think its a modification of that. I wouldn't say I have done extensive research into the variety of women's underwear, but I would venture that there is an increasing variety of exotic women's underwear. These days, you can find all kinds of visually enhancing, physically enhancing and emotionally enhancing underwear. If you think "emotionally enhancing" sounds a bit far-fetched, let me remind you of the advertisements that tell women that they can now "feel confident" by wearing a certain kind of bra. Not only that, now, there is now an increasing number of purposes for women's underwear, i.e. sports (remember Anna Kournikova's "only the ball should bounce" commercial?), bedroom sports, Halloween (!?) etc. With increased variety comes increased product differentiation. This allows certain companies to carve out a niche market (i.e. Victoria Secret).

5. New market?
This is not really one of the reasons given in Economics 101. What do I mean by new market? While e-commerce has been around for a really long time, I think previously, shopping online for clothing was usually a women's thing. I am being stereotypical, but men in general do not like shopping. In fact, I seriously doubt men would even shop for women's underwear. But e-commerce has facilitated that. Many men feel embarrassed about walking into a lingerie shop and picking out lingerie for their partners, mistresses and whatnot. But now, they can not only browse online, but make purchases discreetly. I don't know much about men who wear women's underwear, but I think it is increasingly popular that men buy underwear for their female partners. I guess the reason is that they buy what they would like to see their partners in. Kinda like women picking out shirts and pants for men. So, there is an entirely new market out there, but I really don't know if this is enough to boost the price up that high.

Another thing about shopping is that men do not know the actual price of these things. In fact, I would venture to say that men would even pay a premium for something that they like. Getting the best bargains is not really men's forte. Also, there really is a lack of alternative. As mentioned above, men generally shy away from walking into a lingerie store and grabbing something for their partners.

All in all, I think it is a combination of a few of the factors mentioned above. This is just an exercise and an application of economic knowledge in the real world. Please enlighten me if you find something that I missed out.

Perhaps, it could be as simple as the fact that women's underwear have been undervalued for a really long time and is only starting to realize its value.

HT: Business Insider