While Supplies Last: Side Effects of Scarcity
Scarcity sells. That’s why the hallmark strategy of endless consumer brands is to intentionally restrict supply. Promoting flash sales, listing remaining stock, and spotlighting “Back in Stock” products are tried and true methods to trigger a near-panic urgency to hit the checkout button before someone else.
The luxury and art sectors boast products that are notoriously difficult to obtain, often defying the law of demand: increased prices lead to decreased demand. In these markets, higher prices can actually strengthen demand — all because expense makes things that much more inaccessible. This exclusivity, whether real or perceived, is not just a marketing strategy but a core quality of the industries. However, these brands walk a fine line, where a tiny misstep can spark public annoyance or suspected antitrust violations. The delicate balance between clever marketing and unlawful exploitation of market power raises important questions about the ethical limits of exclusive marketing strategies. Pinpointing when and how brands overstep reveals how variable consumer perceptions can be.
Grace Kelly and Iconic Hermès Kelly Bag, 1935. Photo Courtesy: Campaign Asia
Barring legal jargon, competition law (antitrust law in the U.S.) has two main objectives. First, it prevents businesses from colluding to stifle competition. Second, it stops any single business or group of businesses from using their power to dominate a market. The goal of these regulations is to ensure a level playing field in the marketplace, promote innovation, and prevent monopolies that could harm consumers by reducing choice and inflating prices.
Keep in mind that this article does not analyze the minutiae of legal codes; rather, it explores various branding strategies and corresponding consumer perceptions. It's important to recognize that these perceptions vary widely. For instance, when essential goods are in short supply, the public is resentful because everyone agrees that access to necessities is seen as a basic right rather than a luxury. In contrast, scarcity within the luxury sector is typically accepted and even expected as part of the buying experience. Until, that is, a brand noticeably oversteps.
According to two California residents, Hermès has taken exclusivity too far. On March 19, Tina Cavalleri and Mark Glinoga filed a class-action complaint against the company because they felt that Hermès’ well-known sales tactics – requiring the purchase of ancillary products and having selective distribution for their iconic Kelly and Birkin bags – violates antitrust law. The plaintiffs assert that this “tying” practice, better known on TikTok as the Hermès game, inflates the prices of already extremely expensive bags.
The ongoing Hermès lawsuit doesn’t only impact aspiring Birkin owners; it has the potential to set a precedent for other luxury and non-luxury brands. Partners at law firm Holland & Knight, who released a report on the case, note that the lawsuit "stands to impact other luxury brands' sales and marketing strategies," especially given rising concerns over antitrust issues. Other legal experts question the validity of the case, pointing out that proving Birkins have actual market power is difficult.
For many consumers, the Hermès game is just that – a playful challenge. One dedicated shopper posts a TikTok video captioned “When you’ve finally won the Hermès game.” The video, and others like it, receive as many spiteful comments as admiring ones: “I actually like the game,” “So happy for you!” and “Story time: tell us how you did it.” [1] Regardless of how you feel about the Hermès game, it arises some sort of emotional response — which is the entire point.
Obviously, not everyone shares this cheerful outlook. Life is too short to play such games, one commenter wants everyone to know. Even though Hermès hasn't made any changes to their policies, the lawsuit was fueled by personal frustrations of consumers who either 1) felt coerced into spending thousands at Hermès, or 2) were outraged at the fact a sales associate deemed them unworthy. This implication is when a brand shifts from mere exclusivity to potentially operating illegally is not fully determined by internal actions; rather, it heavily depends on the perceptions of its consumer base.
What makes this case interesting is that Hermès' tactics are quite similar to other luxury brands, just more well-known. Explicitly limiting supply and creating waiting lists are done by Ferrari, Rolex, and Patek Phillipe, to name a few. In fact, president of Patek Phillipe Thierry Stern leaves no room for misinterpretation by telling retailers, “You have to work with your local clientele, don’t sell a Nautilus to tourists. Sell them another item, but keep the hot items for your local clients. This is logical for me, this is a good strategy.” [2] Logical as it may be, this strategy doesn’t always work.
Just as waiting lists create scarcity for the luxury market, the process of art authentication can impact scarcity in the art market. Both processes are controlled by a select few and significantly shape consumer perceptions and behavior. Authenticity certifications, or their absence, dictate an artwork's market standing, echoing how scarcity impacts brand value in luxury markets.
An instance of art authentication veering into antitrust territory is the Simon-Whelan case against the Warhol Foundation. In 2007, documentary filmmaker Joe Simon-Whelan sued the Foundation, accusing them of using the authentication process as a vehicle for a "20-year scheme of fraud, collusion, and manipulation" aimed at monopolizing the Warhol market and raising the value of the Foundation’s own holdings. [3]
Andy Warhol, (Red) Self-Portrait, 1965. Photo Courtesy: The Art Newspaper.
The lawsuit emerged after the authentication board, established in 1995, rejected Simon-Whelan’s painting— a 1965 self-portrait by Andy Warhol set against a red background. This rejection came despite the painting's prior authentication by officials from the Warhol estate shortly after the artist's death in 1987. Moreover, the artwork had not only been handled by Christie's auction house but also had been examined by Fred Hughes, the late chairman of the Andy Warhol Foundation for the Visual Arts and executor of Warhol’s estate, who had authenticated it by signing on the back of the painting.
The Warhol authentication board does not officially disclose the reasons for denying a work's authenticity. To their defense, some boards decide not to disclose their reasoning to prevent forgers from creating better fakes. However, few such boards are linked to a foundation possessing extensive collections of the late artist's works available for sale, presenting a potential conflict of interest. [4] Although the lawsuit was eventually withdrawn in 2010, the case stirred suspicions about the potential misuse of authentication power to control market dynamics rather than safeguard the authenticity of Warhol's work. [5] These suspicions can sway art collectors to either seek out or avoid certain market segments based on their trust in the authentication process. Lack of transparency appears to be key to upsetting consumers. The Warhol case highlights a broader principle of both art and luxury goods sectors: when the actions of authoritative bodies—or brands—appear to manipulate the market, it can lead to significant shifts in consumer engagement and trust.
Warhol Authentication Stamps. Photo Courtesy: Revolver Warhol Gallery
Frustrated consumers are not fighting alone. The UK Competition and Markets Authority (CMA) is one example of organizational action against misleading consumers, specifically targeting strategies that create a false sense of urgency. Practices such as using countdown clocks or indicating falsely low stock levels—like stating "Only 5 Left!" when new stock is imminent and such scarcity has no real impact on the ability of consumers to make purchases—are being scrutinized for being misleading. [6]
These cases make more than catchy headlines; they are cautionary tales of the thin boundary between enhancing market appeal and anti-competitive behavior. Whether facilitating the Hermès game or manipulating the art market, the stakes are high as legal battle outcomes have lasting impacts on the future of luxury and art markets. As companies strive for the ideal level of exclusivity, even the most loyal clients’ trust hangs in the balance.
Footnotes:
[1] ‘The Hermès Game’: how the luxury house is defying the slowdown, Financial Times.
[2] Anders Modig Davis, Why are waiting lists for luxury watches getting even longer? South China Morning Post.
[3] Eileen Kinsella, The Trouble With Warhol, ArtNews.
[4] Michael Shnayerson, Judging Andy, Vanity Fair.
[5] Gareth S. Lacy, Standardizing Warhol: Antitrust Liability for Denying the Authenticity of Artwork, Washington Journal of Law, Technology, and Arts.
[6] Jennifer Dinmore, Urgency and price reduction claims: are your online tactics legal? Competition and Markets Authority.
Lily Holmes
Luxury Editor, MADE IN BED