Monday, December 5, 2011

Consult an economist before buying a wedding dress


When Stephanie (her name has been changed to avoid embarrassment) went shopping for a wedding and bridesmaid dresses, she found valuable advice from an unusual source, Chapter 23 of her favorite economics text.  And it was not about sleeve options, figure flattery, or bustles.

She was puzzled that over half of the stores that sell wedding dresses do not permit photos, and do not have tags in the dresses that would identify the manufacturer and style type.  

These retail stores want to prevent customers from "free riding" on their fitting and display services:
I just spoke with someone who had all her bridesmaids sized in the store only to go online and buy them from a discount site. I would assume many of the brides are doing this as well.

Note that this is not just a problem for the store, but also a problem for the dress manufacturer: if stores cannot prevent free-riding, they will invest less in point-of-sales fitting services, and dress sales will suffer.  See our earlier post about golf club manufacturer PING, who faced a similar problem,
The discount retailers were advising consumers to visit a full-service retailer to request a custom-fitting session, and then bring the specifications for custom-made clubs back to the discounter. PING could control this kind of opportunistic behavior only by dropping dealers, a very costly option.

PING wanted to set a minimum retail price (called "retail price maintenance") to address the problem.  The minimum price meant that discount retailers could not undercut full service retailers.  The antitrust laws prevented this until the Supreme Court changed the case law.

For the wedding dresses, the no-photos policy created a problem for Stephanie because she wanted to photograph her bridesmaids in each of the dresses to make sure that they choose the best dresses for the wedding. So she chose to purchase from a large retail chain, like J. Crew, BCBG, Ann Taylor, or Nordstrom’s because they had solved the free riding problem, using exclusives, where only one chain carries the style.

For an economic analysis of resale price maintenance, see the amicii brief of 24 antitrust economists (I am one of the 24.)

UPDATE:  Amazon just made free riding a lot easier.

21 comments:

  1. This is great! I'll visit this store soon. Hope I can get a good items here.

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  2. This sounds great! I will definitely consult an economist before buying a gown for myself.

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  3. Look ahead reason back
    does the value of a wedding dress increase or decline over time?
    ~~ think about it~~~

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  4. It'd be nice if there were a way to unbundle the cost of fitting from the cost of the dresses. Charge a fitting or try-on fee, and sell the dresses for appropriately less. A good econ textbook would tell the dress store managers that charging marginal cost for services and for goods is arbitrage-proof.

    The metaphor in my mind is to optometrists, who used to be the only way to get glasses and contacts, so they could give you a free or near-free exam and then charge you a ton for the glasses. Now, the exams cost more because they know you're buying your glasses online.

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  5. Now I get what the title meant.. It is true, some were bad enough to avail free services and head to other stores to purchase. Sad!

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