Business of Fashion says the margin for producing items for high-end labels like Burberry are usually at about 65 percent, which includes the cost of raw materials, design, manufacturing, and fulfillment. The cost of labor in China, where many goods are made, is also on the rise. Not only that, but the price of a luxury item also needs to factor in the cost of real estate and staff. Then there is the cost of marketing, which can be very steep. There is also the perception that the more pricey something is, the more "exclusive" and "desirable" it is too. To that end, Business of Fashion quoted Burberry as saying some years ago that it was willing to raise prices to increase its desirability and appeal to the more elite of its customers, and to attract new, wealthier ones.
Ironically, one reason why luxury labels like Burberry are expensive is because there is a fear that they might need to go on sale at some point. "Designer brands repeatedly going on sale may eventually be forced to artificially inflate prices to counter the margin pressure," fashion industry executive Matthew Walker told Business of Fashion.
But in the end, the reason why Burberry is expensive is because there are folks who are willing to pay those prices to acquire those goods. In short, the pool of wealthy people is growing, particularly in Asia (via Business of Fashion), which Burberry considers an important market (via BBC News).
