The Premium Pricing "Problem"

Wall Street Journal: Web-Bargain Luxury Comes to Japan (September 6, 2010)

This indeed sounds damning: The Coach Kristin Leather Hobo bag retails for $298 in the U.S. but $711 (¥59,850) in Japan. And this isn’t a rare example. Foreign premium and luxury apparel brands have always charged consumers in Japan a significantly higher price for the same goods. But now with the super-strong yen and the ability of shoppers to casually view global pricing on the Internet, the Japanese population is growing more weary of having to automatically part with their consumer surplus.

So as the WSJ notes, Japanese consumers are becoming accustomed to “discounts” — ironically making prices equivalent to the what everyone else places at standard retail — at outlet malls and online sales. Or in this era of relaxed fashion standards and falling wages, they are just kicking their Euro luxury habits cold turkey.

For years I too have raised many an eyebrow at foreign companies’ eagerness to charge nearly double for their products in Japan. Yet there is a valid logic at work in this behavior that goes beyond mere price gouging. Earlier this year, I was highly skeptical about Abercrombie & Fitch’s overall Japan entry strategy, but A&F CEO Mike Jeffries is correct when he says, “We are premium brands, and we get premium prices in these markets.” And it just happens that “premium prices” are very high in Japan due to the already high level of “standard prices.”

Before we even consider prices of luxury goods, think about the normal prices paid by Japanese consumers for everything else. Even with a relatively low consumption tax, the Japanese normally dish out 13.4% of their incomes just on food, compared to 9.9% in the U.S. (And in terms of calories, the Japanese are eating much less quantity than similarly rich countries.) A 5kg bag of rice — the staple grain of the Japanese diet — is often ¥2000 if not more. Meanwhile in the culture market, CDs are price-protected at ¥3000, which is a bargain compared to the ¥1800 vinyl albums once cost back in the 1970s (about 2.3% of the monthly salary in 1970 compared to ¥3000 being less than 1% now).

High prices in Japan are mostly a direct product of governmental policy. Protectionist tariffs not only increase the costs of imports but keep domestic producers insulated from having to compete on price. The government also protects a large number of uncompetitive, unproductive industries who keep average prices high. And there is often an informal cartel pricing where everyone in a certain industry agrees to generally keep prices at the same level. When it comes to the fashion and accessories market, mass apparel retailers like Beams, Ships, and United Arrows — despite having no central planning — keep their prices for “basics” around the same level, and in the process, set the “standard” price level in many consumers’ heads.

So when foreign brands come into the Japanese market, the most obvious brand positioning has been to go “above” the domestic makers and be “premium.” This almost necessarily means pricing at a higher level than the standard Japanese price, which as we know, was already very high. When Brooks Brothers came to Japan in 1979, for example, they logically needed to set prices above the Japanese copies of their items like oxford cloth button-down shirts and ties. More recently, the standard $25 T-shirt at Supreme in New York was set at around $60 in Japan. Companies generally want to set prices as high as the market allows anyway, and since the Japanese market has always had a structural need to set prices higher, brands were able to indulge. Conversely, when Japanese electronics or automobile brands went to the U.S., they would often charge much lower prices to match the American price level. (This was often criticized as “dumping.”) In both circumstances, Japanese consumers have always had to bear the cross of the global production system on their backs — using more of their (often lower) salaries in order to essentially subsidize lower prices in the rest of the world.

Now this all worked well when Japanese consumers’ incomes grew at a steady rate from the 1960s to the 1990s. Being gouged doesn’t hurt that much when your income keeps getting a big jump. But when incomes peaked in 1998 and started to fall steadily, the idea that Japanese have to pay more than other populations started to become less tenable. This, of course, opened the door for a clothing brand like Uniqlo, who set up a production system based in China that could deliver high-quality goods at the standard Western pricing level seen overseas at the Gap or H&M. Now in the recession, McDonald’s Japan and Sukiya have followed the same model in the food sector, and at least for McDonald’s, their low-price strategy has delivered record profits.

This idea of undercutting the previous Japanese price level has created an entire new rationale for entering the Japanese market. H&M and Forever21 have seen massive revenues thanks to offering product at a much, much lower price than what used to be considered “low.” Nothing has scared Japanese domestic apparel brands more than a challenge to their previous monopoly on controlling the psychological perception of what is the “normal” cost. Select shops Beams and United Arrows, who have weathered the recession relatively well, responded to the “fast fashion boom” by creating their own lines of lower-priced Chinese-made apparel at prices that Japanese consumers in 2010 can actually pay. Even designer brand Comme des Garçons created lines such as the PLAY casual collection and other Chinese-made basics to offer younger consumers (and Asian tourists) something to buy at a realistic price level.

So as the rest of the fashion industry becomes highly competitive on price, this leaves the Western brands in a difficult position. They cannot quickly drop prices because their pricing is an important part of communicating value and importance to customers. (They did, however, use the strengthening yen a few years ago as a stealth way to cut prices in the recession by 5-10%.) Meanwhile, Japanese consumers, who are growing less wealthy, are pessimistic about their economic future, and are accustomed to paying less for everything, no longer understand the 1990s-era logic of saving/going into debt just to buy a single handbag. And thanks to Yahoo Auction, grey market arbitragers, and a giant network of resale shops across Japan, there are much cheaper ways to buy new or near-perfect luxury items than the fancy flagship stores.

Of course, the broad middle-classes aren’t supposed to be buying luxury goods, and it was only a historical fluke that brought us to the strange situation we are in today, where there are multiple places within a half-dozen Tokyo neighborhoods where you can buy Louis Vuitton and Gucci. For those who are desperate to cling on to a consumer culture that made more sense during the heady days of the early 1990s, many have gone towards the alternatives offered by the industry itself: namely outlet malls and sale sites like Gilt and Yoox. The incoming Chinese travelers will help keep the industry a bit buoyant while middle-class Japanese consumers flee the market, but they may not be able to completely allow brands to keep charging artificially high prices in a deflating market.

The question for luxury brands going forward in Japan is whether they can surf on the deflationary swells to slowly readjust their “premium” pricing. In the thrifty yet wealthy U.S., spending $298 on a Coach handbag may seem like a splurge, and since Japanese incomes are falling to a mere fraction of American incomes, it makes sense that that very same price level may actually be perfect for a more impoverished Japan. Maybe the Japanese will not have to be such outliers — and scorned cash cows — any longer.

W. David MARX
September 17, 2010

W. David Marx (Marxy) — Tokyo-based writer and musician — is the founder and chief editor of Néojaponisme.

26 Responses

  1. Timothy Says:

    David, do you think the foreign brand companies will actually lower-their prices from premium to realistic or is the premium price so ingrained in the corporate and consumers minds that it may not change for a long time to come.

  2. W. David MARX Says:

    Short-term, no change to prices. Long-term, will probably become much closer to global level, but by that point, China will likely be the much more important cash cow.

  3. Matt TREYVAUD Says:

    Pedantic observation (do I make any other kind?)– the percentage of income spent on food might be higher, with lower calorie content, but might this not be because people are buying good, healthy food instead of subsidized corn syrup hot pockets by the carton? Not reflective of cost differences so much as food culture differences, in other words. (I note that France also spends about 13%.)

  4. W. David MARX Says:

    France spends more, but they are getting more calories out of it.

    I don’t know this for a fact, but my guess is that the high rice prices alone probably add a few percentage points to the Japanese total spending on food.

  5. Matt TREYVAUD Says:

    Right, but French cooking is about butter, cream and cheese. I don’t think “calories” is a worthwhile yardstick in 1st-world countries where virtually no-one starves to death.

    Even the high rice prices are also arguably a food culture thing since most folks, in my middle-class experience, will tell you they prefer Japanese rice even though it costs more. (Plus, there’s the distorting effect of all those rural parents supplying their city-living kids with rice for free. Only half joking.)

  6. Mulboyne Says:

    Rice is obviously expensive but another factor keeping US food budgets down is bulk-buying. Not just at Costco or equivalents but through larger-sized packaging everywhere. Storage space in Japan is an obvious limitation but a healthy number of consumers prefer fresh ingredients and tend to buy as they eat more than their US counterparts.

    Thanks for those observations on the luxury goods market. Premium pricing has been part of the brand image but it’s also worth noting that very few foreign companies in other fields tried very hard to compete on price.

    When companies like Citibank, GE Capital and HSBC entered the unsecured consumer loan market in Japan, all were happy to charge the highest interest rates possible rather than try to expand market share through lower-cost offerings. The luxury brands’ need to maintain a premium image wasn’t applicable to them.

    Even a known discounter like Toys ‘r’ Us didn’t really undercut the market in the way many anticipated when opening for business in Japan. There certainly are examples of foreign businesses who found Japanese customers would equate price competition with inferior goods and services but a lot never tried to find out.

    On clothing, I don’t think the US is necessarily the best comparison. For a UK consumer, Brooks Brothers prices were similar or even cheaper in Japan in the nineties once the yen weakened to £1=Y200. They stayed that way for 10 years or so until sterling began to fall. I suspect other European consumers, especially in the north, had a similar experience. The same was true at the likes of Gap and Eddie Bauer.

  7. M-Bone Says:

    So many things in Japan buck the trend – smokes, books/manga, B-kyu gourmet restaurant meals (considering tip and tax you pay less for entry level tasty/healthy cuisine in Japan than you do for the Denny’s ‘slimy bucket of eggs and meat) to name a few – that it seems hard to talk about prices in these sweeping terms. The USA isn’t always the best comparison – even Canadians pay significantly more for lots of things, not to mention Australia and NZ and Europe. Aggressively developed distribution networks, oil, etc. are all important to consider as well.

    Definitely share the doubts expressed above about food comparisons – you end up comparing a salad, fish, rice, and three types of pickle to Hamburger Helper. The incredible thing about Japan is that you can (not always, obviously) go to a household that is clearly hard up by Japanese standards and they are eating good, fresh food. Just look at the Kodaira family and Revis family photos from Hungry Planet -

    Also have to wonder about the exchange rate – at 120 yen to the dollar, Japan seems flat out cheap.

    *Of course, the broad middle-classes aren’t supposed to be buying luxury goods, and it was only a historical fluke that brought us to the strange situation we are in today*

    I didn’t have a chance to post on your earlier Harajuku / magazine piece, but when I read it, I was thinking something along the lines of the above quote.

    What percentage of the Japanese population build a wardrobe with a developed (albeit magazine legitimated) sense of fashion? What percentage of American? My impression is that there are far more consumers deliberately working withing fashion trends in Japan than in the United States.

    When this sort of thing becomes massified, it makes sense that many involved just aren’t going to be creative people so when you look at the bulk of the Japanese market, you get that pattern that you mentioned – Japanese consumers falling close to the given trend line. If that is a larger base, however, couldn’t there be a similar absolute number of innovators or critical, rather than repetitive, consumers in both environments? Could Japan have a greater number of fashion sheep simply because the base has been middle-classified and is much bigger?

  8. W. David MARX Says:

    My impression is that there are far more consumers deliberately working withing fashion trends in Japan than in the United States.

    This is correct, and likely also true for any country of similar per capita GDP. Japan is #1!

    Your last paragraph is spot on. You especially are prone to have uncreative people when they are dressing well out of a sense of social obligation rather than personal expression. This is a relatively universal principle.


    The government profits when its citizens smoke, which is why prices are low.

    There are definitely lower prices in Japan for certain things, but I still think it’s fair to say that Japan can be very expensive for a country without high VAT. The inefficiencies are built into the system to keep prices high and protect jobs. That works especially well when the economy is growing, but takes real sacrifice on the part of citizens when their incomes are shrinking and they are still expected to pay inflated prices.

  9. M-Bone Says:

    ‘The government profits when its citizens smoke, which is why prices are low.’

    I know about the BS shenanigans behind the cigarette prices, however, I can’t help but think there is a more ‘rational’ profit point for both the government and the tobacco monopoly. If the price of cigarettes went up by 200 yen, the number of smokers / cigs smoked might decline some, but an overall increase in profitability seems likely.

    The whole discussion of prices has a chicken and egg dimension – people pay more because of the failure to ruthlessly rationalize the system, but that failure is also a reason why many of them have jobs that pay a living wage at all.

    Japan’s big debate at present seems to be about finding the right point between neo-liberalism and social capitalism.

    ‘takes real sacrifice on the part of citizens when their incomes are shrinking and they are still expected to pay inflated prices’

    This may be a good way to phrase it for the handbag discussion, but the two lost decades have seen housing prices decline by at least 1/3 per square foot, 100en shops have proliferated, and electronics have declined dramatically in value (did I really pay $2000 for a 32 in LCD TV in 2006!?). Many of these developments were contingent on changes elsewhere (cheap Chinese labor mobilized), but the prices of lots of things have declined far more than wages in the recessionary era. The problem comes down to the ‘feelings’ that you discussed above – in the 80s, people felt rich because they could buy progressively more despite the fact that what they could buy was essentially squat compared to what one can have now.

    The only ‘out’ that I can see for this problem of identity is if China slips to low growth (looking pretty likely in the medium term) . People only feel bad about not getting rich when faced with stories of other people getting rich. India might take up the high growth champion torch after China, but India just doesn’t rate in the Japanese pop imagination in the same way, and doesn’t come with (legit) security fears, so it just might be possible for Japan to adjust to a sustainable / low growth mindset. If this happens and high fashion items become angst free ‘take it or leave it’ commodities, I can imagine the price would come down to earth.

  10. Leonardo Boiko Says:

    Perhaps it’s simply not possible to eat better-quality food than the typical US consumer without spending more money than them? Even if it’s cheaper, I don’t want to live on the kind of corn-subsidies diet that has become common in America (no offense intended)…

  11. Chuckles Says:

    You would expect a growth in black and gray markets for luxury goods in Japan -which is not happening significantly enough. So this is also atypical for the Japanese generally – aside from the typical market responses of lowering production costs by outsourcing to China and insourcing of raw materials.

    I am not denying that these markets for brands like Coach, Burberry and LV, etc do not exist – but they are just not as prominent as one would find in countries that had the kind of protectionism in question plus the kind of appetite in question. What we find instead is a proliferation of directly operated stores – even in recession.

    Recession proof, black/gray market proof, high appetite driven, protectionism aided consumption of luxury brands – doesnt sound like neoliberalism versus social capitalism to me – but something far more intrinsic: whether certain kinds of economic assumptions – H. Oeconomicus, for instance – are valid wrt certain markets versus behaviorist explanations.

  12. M-Bone Says:

    “doesnt sound like neoliberalism versus social capitalism to me”

    That was more of a meta point concerning the general economic environment of Japan, only tangentially connected to the brands issue. I think, however, the brands issue only becomes really important when we connect it to the big issues like the one that I favor – postwar economic nationalism and its consequences – and also the general issue of Japan’s “system” and its competitiveness.

    Incidentally, this is worth checking out –

    Interesting to see how it relates to some of our long running discussions. I have no idea how they generate these ratings but the impact of organized crime (presumably as a drain on competitiveness) in the US gets a worse rating (81) than Japan (77). I was wondering if higher or lower was “better” but the 130 rating for Italy answered that question.

    Japan also does a lot better than the US in areas like “undue influence” on politicians, bribery, etc.

    Have to wonder about all of this, but some things like public health and Japan’s global #1 rating for “buyer sophistication” certainly ring true.

  13. Mulboyne Says:

    Japan tends to come out well in macro surveys which give weight to factors such as infrastructure, health, institutions, education etc but does worse when comparisons are made at the industry level. I suppose you could draw a simplistic conclusion that all the pieces are there but they don’t fit together as well as they might.

    One reason Japan’s domestic market is often difficult for foreign firms to crack is because it is very competitive on service. When the product itself is a service, overseas forms have stumbled more often.

    Certain goods and services often cost so much in Japan because they are priced for people who don’t know exactly what they want. Luxury brand pricing is interesting because I have the impression, perhaps wrongly, that buyers know a good deal about the products so you might have expected them to seek out lower prices much earlier.

  14. W. David MARX Says:

    You would expect a growth in black and gray markets for luxury goods in Japan

    For luxury goods, a lot of the reason for buying the goods in the first place is essentially a form of social obligation/pressure. And being social goods, propriety is a key concern. That makes a “fake” handbag a dangerous consideration in that someone may be able to tell it’s a fake. I find this a very real concern in a culture so obsessed with details and judging others on details. This impulse has probably helped brands be able to avoid their customers going for fakes or even products bought at non-sanctioned retail locations.

    I also wouldn’t say that luxury goods are “recession proof.” The overall expenditure of luxury brands has fallen almost exactly with the falling curve in wages. The thing is that the mega-brands — LV, Gucci, Prada, etc. — saw rising sales from around 1996 to 2007 in that if people were going to spend money on luxury goods they wanted something that would be in style as long as possible. This meant mostly bags and wallets from these mega-brands. Now with the post-Lehman Shock economy, even THOSE brands have seen mega-losses in the market. They were likely down 20-30% in 2008 — which is a drastic loss — and down another 3-10% this year, even with the Chinese tourists showing up.

    “buyer sophistication”

    This is a pretty abstract term. The mass Japanese consumers are mostly “sophisticated” in their obsession over “quality,” which mostly means “products that won’t fall apart so you get more money out of them.” The average level of fashion sophistication is higher than anywhere else in the world, for sure, but remember the natto diet, etc.? If TV says something is a miracle cure with the most flimsy evidence, you can’t find it on
    shelves. That’s not a vote for a different kind of sophistication about which information to trust.

  15. Mulboyne Says:

    Do you think there is anything to the theory that price stickiness for some goods is related to the custom of exchanging gifts?

    I’ve heard it said before that the amount of money spend on a gift is important to both the giver and the recipient since they mentally keep a running account of the totals.

    This has also sounded to me like a retrospective justification for a poorly functioning market but I’ve certainly come across cases where recipients know exactly how much someone has spent on a gift and that determines what they might give in return.

  16. W. David MARX Says:

    The gift theory seems plausible to me, especially as most women I know have LV bags that they received as gifts rather than bought themselves.

  17. M-Bone Says:

    *If TV says something is a miracle cure*

    Well, there was a while there when Americans were convinced that skipping whole grains and eating plates of bacon was the weight-loss grail. I also take it that you’re aware of this “Obama is a Muslim” business. If Japanese are “even” here and leading in brand awareness, perhaps they deserve the general crown.

    One of Canada’s big national newspapers ran a rather large Louis Vuitton ad yesterday. Not an ad for a new product or anything, simply a “hello, we’re here!” ad. Being used to Japan, I thought this was pretty astounding – even the quality paper art section snobs need a reminder that there are places to buy handbags other than Sears.

  18. W. David MARX Says:

    Well, there was a while there when Americans were convinced that skipping whole grains and eating plates of bacon was the weight-loss grail. I also take it that you’re aware of this “Obama is a Muslim” business.

    Neither of those US claims are pushed by the mainstream media in prime time TV like the natto diet was.

    In general, how the Japanese consumer works is that his/her level of sophistication is usually dependent upon (1) the level of adherence to mass media and (2) how sophisticated the message given from the mass media is.

    In recent days, both things have disappeared. More and more consumers, especially on the fringes, are moving away from believing the mass media’s very unified narrative is supposed to guide their lives. (Take the gyaru, for instance.) And the mass media is shedding sophistication quickly in order to catch up. And again, I think a lot of the sophistication we saw at least with luxury goods was a product of consumers believing there was some sort of social duty to consume these goods in order to be “normal.” As Yonehara Yasumasa said, the girls buying LV in the ’90s would tell him, you have to buy a LV bag just to get up to the start line, not go above it.

  19. Chuckles Says:

    True, but Japan’s response is still atypical, because black/gray markets are posing a greater challenge to luxury brands in other economies; where I also assume, social obligation also plays a role in the marketing of these products.

    1.) Sale of items through non affiliated channels / stores in Japan is insignificant compared to other economies that have significant consumption of luxury brands. I am not hung up on the word significant here: it is comparative.

    2.)Actual copying and duplication of products – counterfeiting is again, negligible. Not denying that it occurs though.

    3.) As to recession, Mark Ritson suggests differently:

    even though I agree that qualifying the goods as recession proof isn’t completely accurate (I saw several market reports saying the same thing) – still, I would like to see if the drop is sales can be segregated by demographics in Japan – age, gender, etc – so we know exactly where the losses are coming from. There *have* to be some luxury brands that are *currently* pinch proof

    To crystallize this: returning to the beginning and to borrow from Ritson: there is a facet to Japanese consumption – whereby what he calls Japanese discernment or discretion overrides psychological variables at play in other economies and mitigates the rise of these non standard markets in Japan. Interestingly, he also believes that “race” – a proxy for sociocultural factors I assume in context – also plays a major factor in luxury consumption. In your original post, you seemed to suggest that the peculiar pattern of Japanese consumption was almost entirely dependent on economic structure and politics.

    Japanese consumption is something that has fascinated me forever – the LV, Prada, Hermes obsession; and Ritson seems to conceptualize my sense of it fairly accurately.

  20. W. David MARX Says:

    1) Japan is the only luxury market in the world that developed as a middle-class mass market. And part of that was that buying luxury goods was a sign of being again, “normal” or “middle-class” rather than a sign of being richer/above everyone else. In China and Korea, luxury goods are used as signifiers for wealth above and beyond the standard. Conspicuous consumption is most apparent in communities where there is big difference between rich and poor. Japan, until very recently, had a small Gini and even now income differences are kept to a visible minimum. (Partly because New Money does not exist much and Old Money’s m.o. is to hide in the shadows.) Also, everyone could kind of save up the money to buy a luxury bag or buy it on credit if they had to. And if it’s about social obligation, counterfeiting/gray markets have a high risk. Meanwhile in China I have heard that young people think the idea of paying so much for a real bag is ridiculous when you can have a cheaper one for much less.

    2) I will listen to that Mark Ritson thing later but anything recorded in 2008 is way out of date. The luxury brands basically disintegrated rapidly FROM 2008 onwards. (I wrote about it here:

    At the recent Business of Luxury Summit of 2010 that FT holds, there was basically no talk of Japan. Compare that to 2008 when Japan was still upheld as the center of 40% of luxury consumption. Now China’s luxury market is growing strongly and Japan’s is flat or shrinking. If I was a betting man, I would put money on Japan’s luxury sector continuing to contract in the next decade, with some of the bigger brands holding steady. There is no more room for growth, however, unless Chinese tourists start coming more and spending more money in Japan. (The goods are still cheaper in HK though.)

    Race is an issue as much as that Japan had a very clear inferiority complex with the West up until the Bubble Period. I think this is way less prominent than it was before. (Again, see the gyaru and the general disinterest about “abroad” in recent days.) I think “race” is a rather crude way of putting this though. There was association of the white race with economic progress, and goods themselves became the peg on which people measured their own progress. High fashion is associated with its production locus in the same way as chocolate is called “Ghana.”

  21. Chuckles Says:

    Point 1 is understood – but this at present is also true of China and “new” Russia. Luxury consumption is being fueled mostly by middle class growth – depending on what you mean by mass market – I don’t see how that aspect of the development of the market is unique. Again, luxury consumption in Japan did not develop exclusively as a middle class thing. In fact, I’d say the middle class thing was much later feature that ended up becoming the major structural force in the market. Will your emphasis on social obligation and being normal thus prove to be important wrt China and Russia as well – i.e. to mitigate black/gray markets?

    The Ritson thing might be out of date with respect to the recession (I pretty much agree with your MEKAS article – again, I did mention that I had seen other reports noting the effect of the recession on luxury goods) – though I notice that as of mid 2009 his views seemed to be unchanged. However, his claims wrt variables involved in driving consumption deserve notice. Race is a very crude way of putting it, I agree. But by Race, I think Ritson means “internal culture” – “internal aesthetics” of a culture – so he is saying that it is mostly hiphop aesthetics that is driving African American consumption of luxury goods – to the extent that AfAm are consumers of luxury goods in the USA and he is comparing this with how a certain aspect of being Japanese – i.e. discretion affects consumption in Japan – its hard to talk of being “normal” without conjuring sociocultural narratives.

    Found his site:

  22. M-Bone Says:

    ‘Neither of those US claims are pushed by the mainstream media in prime time TV like the natto diet was.’

    I’d beg to differ on the varieties of the Atkins Diet. To the credit of the US media, there was later debunking, but not before it was presented as the silver bullet, and more widely than the Natto diet and potentially to more disastrous results in a country not exactly know for diet balance.

    In addition, Roger Ebert has recently done a few good pieces on how many of the (by some accounts more than 50 percent) of Republicans who believe that Obama is a Muslim report that this view was gotten from media sources. Ebert argues that while Beck, Palin, and Limbaugh may not be SAYING that Obama is a Muslim, that there is so much innuendo that the desire of people to believe is being played like a fiddle.

    I’d like to think that Fox News is some extreme fringe, but at this point, I think that we have to talk about it as one part of the ‘mainstream’ media. The numbers don’t lie.

    One interesting LV parallel that I don’t think anyone has mentioned yet – one of the taste cultures in which LV has taken off in North America is the hip hop sphere. Like in the yankee culture, it has become an aspiration item for (some) people from lower socio-economic strata (an attainable one in Japan). In US, however, this happened without middle class LV awareness (perhaps because of this?). This happened with cognac as well – and there is even a Japan parallel with the spread of Hennessy to the new middle class in China. Has there been anything written on the gangstaization of European luxury brands in NAmerica that also takes the Japan angle into account?

  23. Mulboyne Says:

    “…Like in the yankee culture, it has become an aspiration item for (some) people from lower socio-economic strata”

    Burberry encountered prole drift in Britain.

  24. M-Bone Says:

    Just googled “prole drift” and found out it was coined by one of my favorite academic literary critics – Paul Fussell. He got me into Robert Graves through “Goodbye to All That”.

    Also, speaking of Palin, I was gobsmacked this afternoon to see her described as “Fist of the North Star” in a recent Vanity Fair article (Alaska being the North Star state). Apparently, a popular pro Palin blog took the manga title and the Vanity Fair bit even goes so far as to mention how she is like Yuria in the plot. WTF!?

  25. RMilner Says:

    A lot of the premium pricing is a hangover from the bubble economy and will gradually change as Japanese society is forced, very reluctantly, to change by grim reality.

  26. Mulboyne Says:

    We have to be careful what we mean by premium pricing in Japan. It can’t simply refer to price premiums over comparable US goods and services. I’m not accusing RMilner of doing that but, as I mentioned above, for many Europeans, prevailing exchange rates for the best part of a decade meant Japan was not only reasonably-priced, it was often cheap. This is no longer the case but any robust concept of premium pricing should be able to survive exchange rate movements even as those movements act as a signal to the market.

    One question which often comes up in relation to Japan is: if prices are set at a premium, where are the premium profits? They are to be found in some cases but not nearly as often as you’d expect to see with examples of premium price-setting in the West.

    You can take your pick of theories about this but they usually end up in a discussion of whether premium prices are a result of a high fixed cost structures or whether they demand it.

    Overseas luxury goods makers clearly did enjoy high returns in Japan but I suspect if they instituted “normal” pricing in Japan, whatever we might agree that means, it would produce losses for them rather than “normal” profits.