In this day of high fashion, it seems almost quaint to speak of an inexpensive pair of faded Levi’s jeans. Indeed, for proof that jeans have moved far beyond their role as the outfit of the working man, check out this Wall Street Journal article on “The Rise of Power Jeans.”
As designer denim became every girl’s go-to, prices went up; “luxury” jeans by companies like True Religion and Seven for all Mankind were fetching hundreds of dollars, the same price as a new computer.
Cotton dungarees for the price of an iPod was a stretch so extreme that retailers had to come up with a whole new term to suggest that the new jeans were different from the $100 jeans they used to sell in the 1990s.
But as this New York Times article points out, such a price point is only sustainable if consumers are willing to pay. When that willingness disappears – in this case, due to a recession – the speculative jean “bubble” starts to deflate.
But the denim bubble has burst, and only a handful of such extravagantly priced jeans remain…Meanwhile, the sweet spot for designer jeans has relocated to a neighborhood just below $200, even though the styles do not look substantially different from the $300 jeans that were on the sales floors of Barneys New York and Bloomingdale’s only two years ago.
“The bubble has burst,” or some variant of this phrase, was used so frequently during the housing crisis that it’s almost cliché. Where does this imagery come from?
Economists disagree on the exact causes of a speculative bubble; however, when the term is used, it generally means that consumers are willing to pay increasingly large amounts of money for a product based on its perceived value.
Whether it’s the housing bubble, internet bubble, or denim bubble – the common denominator is that they all “pop” eventually. If the price of goods can rise rapidly due to consumer demand, they can also fall very quickly when the demand disappears.
Such is the case in the market for luxury jeans. As inventories built up in stores, retailers realized that a willingness to pay $400 for a pair of jeans no longer existed. So, retailers dropped the price below $200 – a market correction, as it’s called – and found the points at which consumers were again willing to spend money on designer denim.
Whether it’s $200 or $400, though, spending too much of your money on any luxury good may hamper your savings. If you’re shelling out serious cash for clothes, make sure the item is really an investment and not this season’s must-have trend. Check out our tips on fiscal responsibility here.
