Trying to understand, explain and predict the actions of agents in economies – the reason for researchers to create theories of business. Some are pretty complicated and hard to understand, but translated to the language that most women and some very smart men master, not so difficult after all. Next, I will present the principles of Shoeconomics 101.
The law of demand is usually described as follows: the lower the price, the bigger the quantity demanded. This is because the perceived marginal utility of goods is thought to reduce after each unit of the same product that the buyer purchases. Basically, it means that after the buyer has received their first pair of shoes, they are willing to pay less money for the next one. This is true for many brands of an average price range, say Zara, H&M or Bianco. You know that the heel piece will be worn out after a stroll around the town, but they still look kind of nice.. Here we have a demand curve, that presents the relation of price and quantity of purchases. (On the vertical axis we have the price of the product, and horizontally the quantity of purchases.)
Veblen goods are a group of commodities, that people are actually willing to purchase less if their price is reduced. In this case, greater price means greater status, hence greater value. Now, I’m talking Manolo Blahnik, Jimmy Choo and Christian Louboutin. Consumers prefer this type of goods because for them, price is quality – also known as the Snob Effect.
The Bandwagon Effect explains that the preference for a certain good increases as the quantity of demand rises. This would translate to that the more people buy shoes of a certain type, the bigger number of others would purchase them too, with no necessary change to the price. This is what happened to the ballerina shoes.
Now, some shoes have such a strong connection to certain genres of fashion, that there is only a limited amount of customers willing to purchase them at any given price.
However, footwear being such an important part of self-expression for many people, and human beings having the tendency to value individuality, most types of shoes only become popular for a short period of time. When a certain point at the quantity of purchases is reached, the demand curve starts to decline. Next, we are going to study the effect of time versus quantity.
With most trends, also regarding shoes, the curve follows a pattern called the Diffusion Of Innovations. First only a limited number of people, called Innovators, start to wear footwear that is somewhat different from anything else that we have seen before. Sometimes it’s just one person, take Lady Gaga with her McQueen lobster claws. Next, fans and fashionistas follow with either the exactly same product or similar ones. They are referred to as Early Adopters. After that, a huge number of shoe manufacturers recognize their potential market opportunity and start pushing out copies of the shoe. This is when the Early Majority starts shopping for these pairs, and the shoes become a must-have in any closet. In a few weeks time, also the not so active shoppers drag themselves to the stores and, not finding any other kinds of shoes, make the purchase. They are called the Late Majority. Now we have only a small amount of the population without claw shoes, so the shops put the rest on sale. Some of these Laggards may bring the pair home now that the price is not that high. At this point, the early users have probably stopped using these incredibly uncomfortable shoes and moved on to an other trend. (Here we have quantity on the vertical axis and time presented horizontally.)
In fashion, we often also recycle trends that first became popular a few decades back. For example, the wooden clogs from the 80′s made a comeback last summer. If you are wise enough to keep all your pairs of shoes forever, you might not have to purchase new ones. Otherwise, the same cycle is repeated again.
Now we have a basic understanding of the economics of shoes, and as only practice makes perfect, I suggest you all take a little field trip to the nearest shopping mall!