The Economics Behind Fashion

Rhea Dewjee, Indiana University, Incoming freshman, Summer 2024

Although fashion may seem like just following trends, it is a complicated industry that is intertwined with economics. From shifts in consumer behavior to interesting supply chain dynamics, the fashion industry is way more intricate than it seems. Following a decrease in shopping in 2020, the industry had to adapt to come back from that and still continues to do so to keep up with the quickly changing market. 

After the COVID-19 pandemic, consumer behavior has altered significantly, reshaping the fashion industry. Many are now more aware of their spending habits due to the lockdown and worldwide economic shifts. There was a move in clothing trends away from luxury and fast fashion and towards sustainability and comfort. As the economy began to strengthen, consumers returned to their previous spending habits, leading to growth in the fashion industry. For example, after slumps in sales figures in 2020, the womenswear market grew 28.9% between May 2021 and 2022 (Statistica, 2023). This partially comes from companies pivoting to a new type of consumer and catering their marketing to a new generation. Many brands have used the pandemic as an “opportunity to step back and read and react to what was going on and adapt from there,” said Abercrormbie and Fitch intern, Aneeka Jain. By doing so, many clothing brands were able to bounce back from the pandemic, catering to a new consumer market. Additionally, the digitalization of retail that persisted helped the shopping industry go back to what it once was due to its accessibility.

The fashion industry is increasingly pivoting towards sustainability, due to growing awareness and demand for environmentally and socially responsible practices. Traditionally, globalization allowed brands to reduce costs through outsourcing to countries with lower labor costs, but this often came at the expense of environmental impact and labor conditions. After the COVID-19 pandemic, we have also been exposed to the fragility of the supply chain which left room for a pivot to more sustainable practices. A survey done by McKinsey shows that 67 percent of participants “consider the use of sustainable materials to be an important purchasing factor” (Granskog, 2020). According to NSR clothing line founder, Andy Azad, “Younger generations are more conscious of sustainability. They are more conscious of biodegradable fibers so it is better for the environment”. The slow shift to more sustainable practices show a broader industry commitment to a more eco-friendly future for fashion.

Sources:

• Granskog, Anna, et al. “Survey: Consumer Sentiment on Sustainability in Fashion.” McKinsey & Company, 17 July 2020, www.mckinsey.com/industries/retail/our-insights/survey-consumer-sentiment-on-sustainability-in-fashion.

• https://www.facebook.com/wunderlabel. “Fashion Statistics 2022/3.” Wunderlabel.com, 12 Dec. 2022, wunderlabel.com/lab/fashion-statistics/#:~:text=Annual%20consumption%20of%20garments%20is. 

• Aneeka Jain, Abercrombie and Fitch intern

• Andy Azad, NSR clothing line founder