Fashonomics
- vanshikamalpaniblo
- Aug 10, 2022
- 9 min read
Updated: Sep 1, 2023
Whenever we think about a fashionista, we think of a person with the most exclusive sense of style breezing ahead of us on a walkway looking like a page out of Vogue. The fluorescent lights of the thrift shop garishly illuminate dozens of racks of clothing and people milling between each, Victoria’s Secret fashion shows, Paris couture, Instagram models and all other fabulous, glittery images come up hearing this fanciful word. But have you ever thought of economics while thinking about fashion? I am sure it feels like the relation between these concepts is like Tom and Jerry but if you delve deeper, you will get to know how it is actually a Joey-Chandler relationship. According to us, fashion is a form of self-expression and self-identity not following any patterns, rules, concepts, or principles like the study of economics. All of us know the economics of production, distribution and consumption of clothing but have you ever wondered why you continue to wear that same old piece of uncomfortable clothing not much to your liking anyway? Or why you go crazy when you hear there is a sale of your favourite brand? Or why do people have a thing for DIY Fashion? Or why you prefer wearing the latest and the most expensive attire you purchased to the party? Or why people have a sudden urge to copy the style of Alia or Varun just after watching their movie? Or why most of us first visit fast fashion brands like Zara, Forever 21 or H&M while visiting a shopping mall? Or why do people place more importance to the “out of stock” clothing? Or why do people pay unreasonably high prices for luxury brands? Or why is there always a new trend in the next issue of Cosmopolitan? You will be surprised to know that the answers to these questions can be derived from economics and much delighted to know that you have been applying economic principles while behaving in this manner.
Haven’t we all had days when we continue to wear the same old piece of itchy clothing even though they are not much to our liking? These clothes range from loose sweatpants to baggy sweatshirts, but have you ever wondered why do we behave in this manner? Why do we stick to the same uncomfortable piece of clothing even when we have the option not to? The answer to this question is given by Richard Thaler in his book – Richard Thaler’s “Misbehaving: The Making of Behavioural Economics”; where he explains the sunk cost fallacy. Sunk cost fallacy is the phenomenon where a person is reluctant to abandon a strategy or course of action because they have invested heavily in it, even when it is clear that abandonment would be more beneficial. We can clearly apply this concept as to how we keep on wearing that discomfited piece of attire instead of throwing it away or donating it to someone because of the fact that we have already invested in it and hence have to make use of it.
Now, for the timing let us consider the story of one of my fashionista friends. She is greeted by the youthful, ultra-feminine fragrance of the Chanel perfume which she cannot resist making her enter the store. Although she had no intentions of purchasing any product, seeing the Chanel Bag at 50 percent off makes her heart skip a beat and the bag earns all the way into her closet while she wheels out of the store satisfied, somehow thinking she has gamed the fashion industry. Haven’t we all had a similar experience where we got so tempted by the word “SALE” that we actually ended up purchasing stuff we didn’t really need and now that we look into that, all of us have such a pile of clothing stacked in the rusty ends of the cupboard. Surprising, the answer to this peculiar question is again provided by Richard Thaler in his book – Richard Thaler’s “Misbehaving: The Making of Behavioural Economics”. It is because of a phenomenon called Transaction Utility. He explains transaction utility as the satisfaction gained from the difference between the selling price and the reference price of a product (distinct from consumer surplus, which is the difference between the price of a product and what one is willing to pay). When presented with the opportunity, she bought it because she was happy that the new selling price was low, even though she might not have loved the bag at the first glance.
All of us have a soft corner for handmade products and DIY (Do It Yourself) Fashion, don’t we? While flipping through clothes, we try to assess each piece for what it can become. A men’s XXL sweater can become a dress for a woman, after she cuts the sleeves, hems the edges, and adds a belt. A long floral skirt can become a halter dress with a discrete clothespin at the neck. A pair of jeans can become shorts with a lace trim, taken from an old skirt. Suppose, to enhance your boring white sneakers, you did a creative DIY shoe makeover where you got all crafty with your sneakers by adding paint, delicately putting patches all over it and finally adding some texture and pattern. Now, which shoe would you wear more often and would remain much closer to your heart? Of course, the one you crafted on your own. But have you ever wondered why? All of us do experience this but could hardly believe that the answer lies in one of the phenomenons of behavioural economics, the classic IKEA Effect (named after the Swedish manufacturer and retailer IKEA). The IKEA effect is a cognitive bias in which consumers place a disproportionately high value on products they partially created. These instances of creative liberty factor into our pride in the finished product, no matter how haphazard. It can cause us to ignore the defects of their creation and hence you may see your piece of art as rivals to Louis Vuitton or Giorgio Armani.
Now, suppose you have to go to a family function and have to put forward the best look possible. You have two suits- the one you purchased just a month ago and wore it once and the one that was purchased a year ago and has been worn by you multiple times. In general circumstances, you will go for the new suit. But have you ever thought why do you behave in such a manner? Why do you place more importance to the newly purchased suit than the old one? The economist will be able to give you this answer. It is because of the Law of Diminishing Marginal Utility by Adam Smith which tells “The additional benefit a person derives from a given increase in his stock of a thing diminishes with every increase in the stock that he already has”, essentially meaning that we derive higher utility from goods we have consumed lesser as compared to the goods consumed in larger quantities.
How many of us Bollywood buffs are guilty of saying “Kareena wala lehenga dikhana” or “Hrithik wale sunglasses dikhana”? I am sure many of us are. Which Friends fan has not recreated Rachel Green’s outfit and which How I Met Your Mother fan has not recreated Barney Stinson’s style of dressing? Indeed, very few. As soon as our friend purchases an expensive dress or a suit, don’t we have a sudden desire too to buy that particular attire? But have you ever wondered why it happens? Economists can give this answer to all the fashionistas. It is because of a phenomenon called demonstration effect which refers to the tendency of a person to emulate the consumption style of others.
Have you ever wondered why Zara and H&M have become household names? It is because of the demonstration effect only. Fast fashion brands replicate the styles and clothing offered by hind end brands within an affordable budget (because of their low production costs) and hence are able to attract customers. Indeed, fast fashion brands are growing at a high speed. The global Fast Fashion market size is projected to reach USD 244850 million by 2026, from USD 203300 million in 2020, at a CAGR of 3.1% during 2021-2026.(1)We tend to emulate the high-end luxury brand styles and fashion trends in general and that is exactly what is offered in these stores much to our affinity.
Now, suppose you are shopping on Amazon. Have you ever wondered why you always go repeatedly to the online shopping website to check the availability of the “out of stock” piece of attire instead of putting much value and surfing through the items always available? Economists approach this behaviour towards fashion in terms of the model of supply and demand. Items in limited supply have high value, whereas our desire decreases for readily available products which is exactly the case here.
For the timing, let us consider this hypothetical situation. Two high school students Raj and Simran are out on a date. Simran wears a very expensive silk dress that costs almost the entire salary she earns from working in a restaurant (that is her part-time job), with her hair in a spiral curl and her acrylic nails painted with French tips. Raj wore an oversized designer sports coat which also cost him a fortune. But have you ever wondered whether being fashionable needs to be so expensive and bothersome? Why did Raj and Simran spent so much? According to Thorstein Veblen, an economist who wrote “The Theory of the Leisure Class” over a century ago, the answer is yes. Veblen argues that the main point of being fashionable is to gain status by appearing rich and powerful. One way to display wealth and power is through "conspicuous consumption"—extravagant purchases of clothes and other status symbols. Economists in general also analysed money and the time spent behind fashion. When lumped together with luxury, fashion becomes a form of conspicuous consumption, described very accurately by Veblen. In his accurate words, “The quasi-peaceable gentleman of leisure, then, not only consumes of the staff of life beyond the minimum required for subsistence and physical efficiency, but his consumption also undergoes a specialisation as regards the quality of the goods consumed. He consumes freely and of the best, in food, drink, narcotics, shelter, services, ornaments, apparel, weapons and accoutrements, amusements, amulets, and idols or divinities.”(2)
On the basis of this effect, an entire industry of luxury fashion has been sustained. It is such a large and growing industry that the global luxury goods market is expected to increase from US$285.1 billion in 2020 to US$388 billion in 2025.(3)From 500-pound Balenciaga logo t shirts to 800-pound Christian Dior sneakers, a question that often comes up in our mind is why do these brands have such absurdly high prices and why do people still endorse and spend money on it. It is because of the Veblen effect only; these brands have become a “status symbol”, a source of display of wealth and richness. Upper class and the affluent like buying from luxury brands simply because it is highly priced. For an instance, back in 2013, Burberry even announced that they would raise the prices to increase its appeal to the upper end of its consumer base in addition to attracting new wealthier customers. That is also why high-end brands are reluctant of offering discounts in the fear of diluting the exclusivity and power of the brand. Some brands go as far as burning stocks to prevent excess goods being sold at knockdown prices. In 2018, Burberry hit deadlines for destroying unsold clothes, accessories, and perfume worth 28.6 million pounds to protect its brand.(4)
Change is the only constant in the fashion industry. Cities of developed nations are littered with abandoned factories, empty retail stores, defunct design houses, and wreckage of supporting industries. Once-famous department stores are now history; harem pants, three quarter pants and other gone away fashion trends is something we only see while watching 90’s Bollywood. Buy why is it so? Why do Fast fashion brands put out new collections every week or month to make it seem like your wardrobe is all off trend? It can again be traced to one of the most established laws of economics- the law of Diminishing Returns which states that too much of a good leads to a negative return eventually. The fast fashion brands through fashion shows and promotions through high end celebrities put a particular style so much in trend that in the beginning people go haywire and crazy about it, it is seen everywhere, but constantly pushing it after a certain point of time leads to people dismissing the trend.
Also, there are instances in fashion which can be similar to the instances in economics. Whenever we go to a party, don’t we always have the desire to find the perfect outfit, an attire that shows we have neither put too much effort nor too little? The impulse to find a balance between simplicity and complexity is known as Goldilocks principle and we have a similar theory in economics called Goldilocks economy, which describes the ideal state for an economy whereby the economy is neither expanding or contracting too much.
As Coco Chanel rightly said, “Fashion is not something that exists in dresses only”. If we extend our horizon of thinking, we will understand how an economist has been an immensely helpful teacher to a fashionista all along. You believed that you were taking decisions and behaving in a certain manner because of your rational thinking and conventions but subconsciously you were always applying the concepts and principles of economics while taking these decisions. So weren’t you an economist all along?
REFERENCES AND FURTHER READING
Engaging!