In 1966, before it became Los Angeles’s most famous grocery store, Erewhon was a basement stall at 303 Newbury Street, right here in Boston, selling natural foods. Sixty years later, hundreds of people lined up at 6 a.m. this February for the opening of its West Hollywood store, where smoothies sell for $22. How did a health-food shop become a luxury brand? The answer lies in a few surprising ideas from economics.

For most goods, higher prices mean lower demand. But for some luxury products, price itself creates appeal. Economists call these Veblen goods, after Thorstein Veblen, who argued that people consume conspicuously to signal status. Erewhon’s smoothies illustrate this logic. Nobody needs a $22 drink for its nutrients alone. Customers pay for the branded cup, Instagram photo, and lifestyle it represents. A cheaper smoothie might taste identical, but it wouldn’t carry the same social value. At Erewhon, price isn’t just a cost, it’s part of the product.

Erewhon reinforces this signal. Its optional membership, up to $200 a year, works like a paid loyalty program, with perks such as 10% back on purchases and a free monthly drink. Economists call this an optional two-part tariff, where members pay a fee up front in exchange for lower effective prices on everything they buy. Celebrity smoothies act as complements to the stars’ own brands, as demand rises together. Hailey Bieber debuted her smoothie alongside her skincare line Rhode, so buzz around one drove sales of the other. People pay extra not for the product, but for what owning it says about their status.

The smarter part of the business is less visible. Ingredient brands reportedly pay Erewhon to be featured in its smoothies. That means Erewhon earns money from two groups at once: shoppers pay for the smoothie, and brands pay to reach those shoppers. Economists call this a two-sided market.

But Erewhon’s greatest economic challenge is growth. Expansion creates economies of scale, allowing businesses to spread fixed costs and negotiate better supplier contracts. Yet Erewhon faces a trade-off. The more accessible it becomes, the less exclusive it risks being. By expanding its stores and selling $100 smoothie kits nationwide, Erewhon generates additional revenue while potentially weakening the scarcity behind its appeal.

Luxury brands like Hermès and Rolex manage this tension by carefully controlling supply to preserve exclusivity and pricing power. But scarcity works differently for a smoothie. A watch can be resold and hold its value, while a smoothie is gone in minutes. So instead of making its products rare, Erewhon makes access rare through a limited number of stores, limited edition drinks and member perks. This is far harder to protect, since its products are easy to replicate.

Ultimately, Erewhon isn’t just selling groceries or smoothies. It’s selling status, identity, and belonging. And if Erewhon ever returns to Boston, the real question won’t be whether we’ll pay $22 for a smoothie. It’s whether we’ll still want one when everyone else can.







Citations

Mazariegos, Roberto, and ConteNido. “Origins: Erewhon.” Substack.Com, ConteNIDO, 24 July 2026, https://elcontenido.substack.com/p/origins-erewhon. Accessed 17 Oct. 2026.

Zalben, Bianca. “Hundreds Line up at 6 a.M. In West Hollywood for Erewhon Grand Opening—and a $22 Smoothie.” California Post, 25 Feb. 2026, https://nypost.com/2026/02/25/lifestyle/new-erewhon-location-in-west-hollywood-opens-with-hundreds-of-shoppers-lined-up-outside/. Accessed 17 Oct. 2026.

Erewhon. “Erewhon.” Erewhon - Organic Grocer & Cafe, https://erewhon.com/about. Accessed 17 Oct. 2026.

“Erewhon.” Erewhon - Organic Grocer & Cafe, 2026, https://erewhon.com/membership. Accessed 17 Oct. 2026.

Hicks, Katie. “The Business Behind Erewhon Smoothie Collabs.” Marketing Brew, Morning Brew, Dec. 2025, https://www.marketingbrew.com/stories/2025/12/01/business-behind-erewhon-smoothie-collabs. Accessed 17 Oct. 2026.


Ravichandran, Joshua. “Veblen Goods: Why Sports Cars and Diamonds Don’t Obey the Law of Demand – Michigan Journal of Economics.” Michigan Journal of Economics, 10 Jan. 2022, https://sites.lsa.umich.edu/mje/2022/01/10/veblen-goods-why-sports-cars-and-diamonds-dont-obey-the-law-of-demand/. Accessed 20 Oct. 2026.