Is a bra more expensive than a house in square-meter terms?
- By Ni Tao
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E-mail Shanghai Daily, May 24, 2013
Outrageous markups
We've only heard of people who can't afford a house, but none who can't afford a bra. So whatever spark of evil genius lit up his muddled mind, it fell flat on its face.
Ren's rant did get one thing right - we are indeed living in a time when everything, from perishables to durables, from consumer products to luxury goods, from real estate to banking services, is being priced at outrageous markups. It's true for a branded bra as well as for a house.
Although exorbitant profits of some products, like brand liquor, can be ascribed to reckless government spending, the general increases in consumer prices are driven mostly by pure greed.
The amount of branding, marketing, speculating and price-gouging going into a product result in excessive markups.
Take vegetables, an unlikely target of speculation. News reports of seasonal hikes of vegetable prices reveal that they have less to do with rising production or labor costs than with speculation. Nor do profits trickle down to farmers.
A colleague said the other day that a bottle of imported wine at Waigaoqiao, a local port, is worth only 30 yuan, but it could quadruple in price in a supermarket.
As inflation bites deeper, giving acquisitive businesses a pretext to overcharge their customers, the emergence and flourishing of Taobao is only natural.
I myself am a fan of Taobao, China's leading e-commerce website and a treasure trove, for the prices offered by shopless vendors are sometimes a fraction of their cost in brick-and-mortar stores. Online sales of Taobao topped 1 trillion yuan in 2012, overshadowing the revenues of small nations.
And I have so come to trust Taobao that I not only by consumables but also some big-ticket items.
As an amateur saxophone player, I am constantly on the lookout for modestly priced quality instruments. My recent purchase is a Japan-made Yanagisawa saxophone from an online vendor, priced at 15,000 yuan. By contrast, at a local dealer, the same horn is available at more than 20,000 yuan.
Although real stores need to pay rent, staff wages and utility fees, the extravagant markups at which they sell their goods are beyond acceptable levels. To avoid being fleeced, many have taken to checking Taobao prices before they buy.
Of course, in a country of 1.3 billion, contrasts are commonplace. While price-sensitivity is on the rise, there always are people who buy when prices are high enough to gratify their vanity.
And buying expensive isn't the privilege of the rich, but essentially a national pastime.
Chinese tourists snapping up luxury items abroad care less about the true provenance of their LV or Prada handbags than the conspicuous labels. However ridiculous their prices, people don't feel like victims of rip-offs.
The term Veblen effect aptly describes this phenomenon of conspicuous consumption, and the direct causal relationship between higher price and higher demand.
I was told by the friend who visited from Japan that when a Japanese casual wear maker first set up operations in Shanghai, it failed utterly because locals perceived it to be a cheap brand.
Its second foray in the China market was a resounding success. Guess how? It simply raised the prices of its garments.
So it may be hard to give a verdict on whether the so-called "China prices" are predatory, since many of us voluntarily fall for them. That said, a house isn't a typical "Veblen good" that most Chinese relish squandering their life savings on.
Unlike bras, of which there are myriad choices, deluxe and inexpensive, we don't have much of a choice about houses. There are only expensive and more expensive houses, no cheap ones.
That "Big Cannon Ren" found a half-baked red herring suggests how desperate he was to deflect attention from the deplorably staggering profits of his own industry.
If he is so enamored by the tantalizing profits of lingerie, he ought to quit real estate and embrace the more lucrative bra business.
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