What Methods are Used by Brands to Increase Scarcity and How Does it Affect the Price?

SOURCE: Hypebeast

The economic principle I’m exploring is “Because of scarcity people choose. All choices have an opportunity cost.” 

My research question to help me study the economic principle is “How Does Scarcity in the Fashion Industry Affect People’s Choices?”

The article published in BBC titled “The hype machine: Streetwear and the business of scarcity” demonstrates this economic principle by showing that companies use tactics like limiting the quantity of products, collaborating with other brands can greatly increase the products’ price.

To begin with, brands use the “drop tactic.” Brands will announce a limited release of a product at a certain date and time which increases the price through exclusivity. They will then use social media to spread the news about their products and amplify the demand. Once the release date comes, the products sells out in minutes due to a higher supply than demand.

Second, brands will collaborate with other well known brands. This adds another factor to the limited exclusivity because a collaboration between two well known brands result in styles that will never come back on top of the limited quantity. According to the article a jacket made by North face and Supreme was retailed for $498 but the market price is around $1250 due to rare collaboration and limited supply.

Finally, the scarcity of products lead to a high resale value price. According to Kyle Maiorano, a first year university student, “The Adidas Yeezy Boost is my bread and butter. I have made $200,000 last year reselling sneakers.” An example of a product with a high resale value is the Semi Frozen Yeezy Boost which sold out in seconds for $220 but can be seen being resold for as high as $1100.

In my next blog post I will research the question: What Makes Certain Brands "Higher Quality" Than Other Brands?