A gentleman came in the store on Saturday looking for a specific nightstand, one with a shallow depth, yet wide and tall. The industry doesn't really make those because they are tipping hazards i told him, but I would go through the 300 or so nightstands we have available to us to see what I could find. As I was headed over to the computer, I asked him what his budget was for this piece and he said "No more than $ 250". Well, that stopped the search instantly and I told him that with today's freight costs, just landing one to my store is $ 125 before we even begin to pay for one. I suggested at that price point he look on Craigslist or Facebook Marketplace for something pre-owned.

Expectations

Yesterday I was at Bloomingdale's with my wife to get some new pillow shams for our guest bedroom. We walked by the Louis Vuitton boutique and she saw this handbag she liked. I thought it pretty nice as well. It had a price tag of $ 7,700.

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Being a leather guy, I was now really curious at the build of this bag. The leather is decent, but not exceptional. I would estimate $ 250 to $ 300 in materials in the bag. The pattern is obviously a CNC cut, since they make thousands of these so that's fast - and the sewing is excellent on it. Let's say another $ 500 in labor tops, then add in $ 100 in packing design and shipping. I'm guessing $ 900 to make it for the manufacturer and that's being generous. Overhead for Marketing / Salaries / Advertising costs of running the biz and maybe we are at $ 1,400. Retailers at least double the price so I can maybe see $ 2,800 for the unit based on it being Louis Vuitton. So where does that extra $ 5,500 come from? Perceived value is where. The nuts and bolts of this handbag are nowhere near the ask price, but it has that value if the consumer thinks it does. My wife would not pay $ 7,700 for any handbag, its not in her makeup so we just kept on going. (Yes, I am aware of $ 80,000 Chanel Birkins!).

Going back to Saturday, another person in the store looking at a Hancock & Moore sofa didn't think it was worth $ 5,000. Yes it has 50x more leather - a better leather - than in the Louis Vutton handbag, a far more complex build with high end foams and wood/springs, and costs considerably more to ship than a purse. Yet people will stand in line at the Chanel Store and Louis Vuitton with their name in an iPad to get and buy that piece of overpriced leather. Why? Perceived value again. I find that very interesting and actually quite fascinating.