Sent by Jonathan Stark on November 3rd, 2017
Reader Ian Chapman wrote in to share one of the best pricing stories I have ever heard.
Jonathan, I was out on Worth Avenue in West Palm Beach with a wealthy local who was a regular shopper in the area. If you are unfamiliar with Worth Avenue, it is the shopping district in West Palm Beach. Further down the road are costal properties that range up to $100M+ in price. But walking around the shopping district that day, I noticed at least 3 jewellery stores who specialized in cubic zirconium jewelry (Ie: fake diamonds). But these places didn’t have knockoff prices. Many items were 6-figures in price. What I couldn’t understand though was why these fake products were priced so high, and yet most customers were those that could afford the real thing. That is a perfect example of thinking with my own wallet. I couldn’t conceive of why some of the world’s wealthiest billionaires would spend so much money on knockoff items. Had I been alone on the trip I would have left puzzled. However, my local guide explained to me that some of the jewelry worn by the residents is so rare and valuable that they are simply irreplaceable. Some of them contain gems that are mined only once in a hundred years. So even though they can insure them, the mere thought of losing them means they often hide them inside a vault (in their house or in the bank), so as to ensure they don’t have it stolen. However, they also want to wear the jewellery out in public while at an event or when travelling. So to keep their investment safe, while still getting use out of it, they commission $100,000+ knockoff versions of their jewellery. These are identical copies that are finely crafted by the best jewellers. So while the materials are “fake”, their craftsmanship is still impeccable. To them, if the knockoff version is stolen, lost, or damaged, they are not overly concerned with the $100,000 loss - they know that their $5,000,000 piece is safe and sound back home. So to these buyers of $100,000+ pieces of knockoff jewelry, they are purchasing the “reduced risk” of having their actual items stolen, and thus there is a market for super-expensive, knockoff jewelry that only the truly wealthy can afford. Anyways, I thought I’d pass that along as that revelation always intrigued me and was inline with your last couple of emails. Thanks, Ian
Thanks for sharing, Ian!
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