The key details

• Brands use price discrimination not just to differentiate their products, but to align their pricing with the perceived value they offer to different consumer segments.
• In this way, the humble white T-shirt becomes a powerful tool for understanding the interplay between brand strategy, market positioning, and consumer psychology.

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At its core, price discrimination allows brands to optimise their pricing strategy by charging different prices for essentially the same product to different consumer segments. This practice is particularly evident in the fashion industry, where the same item can be sold at a wide range of prices, depending on brand positioning, target audience, and perceived value.

The white T-shirt, with its seemingly simple construction, provides an ideal case study. From Zara’s £7.99 version to The Row’s £390 offering, the price differences are staggering, yet each product is essentially fulfilling the same basic function. So why the vast price disparity? The answer lies in how these brands understand and segment their markets.

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To understand how price discrimination operates, it’s crucial to examine the positioning of brands like Zara and The Row. Zara, known for its fast-fashion model, targets price-sensitive consumers who value trendy designs at affordable prices. By offering the white T-shirt at £7.99, Zara captures a broad audience that is looking for the latest styles without the commitment of a high price tag. The brand’s business model thrives on volume sales, low production costs, and rapid turnover, allowing it to maintain lower prices.

In contrast, The Row is a luxury brand that targets a niche, affluent market. The Row’s white T-shirt is marketed as a premium product, justified by high-quality materials, superior craftsmanship, and the allure of exclusivity. The £390 price tag is not merely a reflection of the cost to produce the T-shirt but also a deliberate positioning strategy that appeals to consumers who equate higher prices with higher value and status.

This differentiation in pricing also plays into the psychological principle known as the "Veblen effect," where higher prices make products more desirable, especially in the realm of luxury goods. Consumers who purchase The Row’s T-shirt are not just buying a garment; they are investing in the brand’s narrative, the prestige associated with it, and the exclusivity it offers.

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The Implications for Brands and Consumers

The implications of price discrimination extend beyond the initial purchase, influencing brand loyalty, consumer perception, and overall market dynamics. Brands like Zara and Weekday, which also offers a white T-shirt at £12, operate within a high-volume, low-margin framework. They focus on accessibility and trend responsiveness, which attracts a diverse, price-conscious consumer base.

On the other end of the spectrum, brands like Skims and COS, offering white tees at £52 and £25 respectively, strike a balance between affordability and quality. They cater to consumers who are willing to pay a bit more for perceived added value, such as superior fabric or brand ethos, but are not ready to leap into the luxury market.

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For luxury brands like The Row, price discrimination is a critical part of maintaining their brand equity. By setting high prices, they not only cover the costs of high-quality production but also sustain an aura of exclusivity. This exclusivity is essential in a market where brand image is paramount, and where price itself becomes a signal of status.

Price discrimination allows these brands to capture different segments of the market effectively, maximising revenue while reinforcing their brand positioning. For consumers, this means that the price they pay is closely tied to their perceived value of the brand and their personal price sensitivity.