Veblen Goods

In his book The Theory of the Leisure: An Economic Study of Institutions Thornstein Veblen defines conspicuous consumption as lavish spending on goods and services acquired mainly for the purpose of displaying income or wealth. Later, the term “Veblen goods” was coined to identify goods whose desirability increases with their price and scarcity. For example, there are a limited number of newest Porshe hybrid vehicles on the market at all times. Similarly, the waiting list for the iconic Hermes’ Birkin Bag can take years.

This phenomenon was clearly thriving prior to the recession of 2008, despite the popularity of online shopping that displayed luxury goods to mainstream Americans. Stephanie Clifford of the New York Times writes, “In the genteel world of luxury, companies long felt that the Web was no place for merchandising exclusive products. And there was a gentlemen’s agreement with department stores not to siphon sales by reaching out directly to wealthy customers.” Websites showed videos of parties and footages from fashion shows, but no where could you actually purchase the products.

During the recession, department stores began to discount these items and luxury lines worried their products would no longer have the prized label as a “Veblen good.” Regardless, the brands are making more money because they can control prices and not pay out a department store as the middle man. Furthermore, style and marketing is more consistent.

Although shopping on the internet cannot replicate the feelings produced by actually going to the boutique, websites are beginning to offer products that are not available in stores to compensate for this. Robert Duffy, the president and vice chairman of Marc Jacobs resonated this sentiment, “I want to give people a reason to go there — if I have the same stuff on our Web site that’s at Neiman’s and Saks,” the site would have little appeal.

However, the truth remains that these websites cannot exclude anyone. The mystery, allure, and intimidation of the boutiques on Rodeo Drive or Madison Avenue no longer deter mainstream Americans from pursuing their products. For better or worse, the number of products that can be called “Veblen goods” are decreasing. In their place, there will undoubtedly be more expensive and scarce products. We will just have to wait and see.