How does high fashion turn a profit?

The most expensive dresses can sell from anywhere from $15,000 to $100,000. They are popular for weddings in the United States and the Middle East, but otherwise do not garner large numbers of orders. Note also that the sector is highly regulated and in typical French fashion:

The Chambre Syndicale de la Haute Couture, the governing body that oversees the couture business in France, enforces archaic and unyielding regulations–defending tradition and, in the process, driving most practitioners out of business. To receive official designation as haute couture from the Chambre Syndicale, a fashion house must employ 20 or more full-time skilled technicians in France and produce a minimum of 50 new designs for day and evening wear in each of the two fashion seasons, although the conditions are somewhat looser for new houses that wish to start producing couture.

How then do the designers make money?

…couture…serves two other purposes for the houses that produce it. One is that couture represents what the designer John Galliano called the “laboratory of ideas,” where the act of creation is given free rein. Many who watch the coverage of the couture shows marvel that anyone could be possibly expected to wear the extravagant and seemingly uncomfortable designs on display, but couture is not really designed to be worn; rather, it affords an opportunity to try out cuts and styles that can then be incorporated, in more modest form, into wearable prêt-à-porter.

Couture also serves to create a brand identity that rubs off on the perfume, cosmetics, and leather goods–few of them high-design products in themselves–where the profit margins are fat and the real money is to be made. Ironically, many people will buy a $150 bottle of perfume to participate in the lifestyle suggested by the $15,000 couture dress they cannot afford, while in reality the dress was produced in large part to seduce them into paying too much for the perfume.

Here is a list of papers on the economics of fashion, but the topic remains underexplored. So much of economic activity is about buying dreams, and we don’t yet have to analytical tools to analyze this kind of problem.