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Mall stores, including Talbots, Ann Taylor, and Abercrombie & Fitch, are adding higher priced handbags to their product mix to excise the clearance racks that have appeared on their floors from customers’ memory banks. The high-end bags also may exert a halo effect, such that the aspirational, expensive product makes other products in the store look less expensive.

The $200–$450 handbags hit a price level that far exceeds their normal selection of merchandise. For example, Ann Taylor’s average sales price per item last year was $38. Certainly the retailers do not expect every customer to buy one of these bags, but they hope the additions effectively improve brand perceptions. Ann Taylor and Talbots themselves have aspirations: to be recalled as entry-level luxury retailers, comparable to the high-end department stores.

But the comparison might get these mall stores in trouble. For the same price they would pay for bags offered by the mall stores, consumers could purchase, in department stores, Marc by Marc Jacobs, Tory Burch, Rebecca Minkoff, and Coach brands. It is risky to compete with such well-known handbag manufacturers with their established designer labels.

These retailers also want customers to shop with them exclusively, so if they offer handbags, customers may be less likely to go elsewhere to search for a purse. In this economic climate, customers demand high-quality products; but will they pay as much for a Talbots bag as they would for a designer label?

Discussion Questions

1. Why are mall stores adding expensive handbags to their product mix?

2. Would you prefer to buy a Talbots or Ann Taylor handbag, or a Marc by Marc Jacobs, or Tory Burch handbag?

Elizabeth Holmes, “OMG, These Bags Cost a Lot!,” The Wall Street Journal, May 27, 2010.