The Behavioural aspect of Fast Fashion
“Fast fashion can be defined as cheap, trendy clothing that samples ideas from the catwalk or celebrity culture and turns them into garments in high street stores at breakneck speed.” (Good On You, 2021)
Latest advances in behavioural economics highlight the significance of conducting studies on deviations from the “homo economicus” as described in mainstream the standard model of theoretical construct that assumes “calculating self-interest is the driving force behind all human exchanges” and neoclassical theory in order to provide a simplified method of study.
Fast fashion provides the leverage for people to afford fresh, inexpensive, and trendy apparel impulsively. Over the last two decades, this industry framework has grown at a tremendous pace. Fast fashion possesses significant financial impact and is accountable for the clothing industry’s current and foreseeable expansion. The fashion business is extremely important to the global economy. The main contribution to this sector’s development is fast fashion and the pattern of purchasing clothes has significantly been altered. We now have tremendously surged the purchase of apparels from fast fashion manufacturers like Zara, Forever 21 and several more. The clothes are frequently used barely for a couple of weeks before being discarded and updated with the newest styles. It is no longer a once-in-a-while activity but more of a periodic trend.
Fast fashion developed an impulsive buying culture and customer demand for low-cost clothing. The demand for trendy items and stylish goods that are relatively affordable is increasing (Urbina & Villaverde, 2019). Although most people strive to make the optimal choice while acquiring products or services, human thinking is far from flawless and is frequently led by sentiment, resulting in outcomes which do not maximise utility. Because impulse buying is such a wide notion in behavioural economics and customer conduct, there are many unanswered issues on the subject. (Soukup et al., 2014)
Re-examining the Aspect of Economic Rationality
Despite rationality of agents being a significant topic of research in economics, we will examine and critique this ostensibly rational behaviour through the fast fashion sector. After all, it’s critical to understand the rationality of rational customer behaviour.
“According to Fashion Industry Statistics India, the fashion industry sector share is 13.5%, and the market value is $42.24 bn. The Indian textile business is valued at roughly $108 bn and is predicted to reach $223 bn by 2021. The textile sector also contributes significantly to India’s exports, accounting for around 13.5% of overall exports.” (FISI, 2016)
Considering the industry’s expansion, we investigate different economic characteristics of human behaviour to evaluate rationality. Two elements of this behaviour are relevant to “Rationality and the Bandwagon Effect”, respectively.
This surge in discretionary expenditure, which is often non-essential, directly contradicts the assumption of rational consumer behaviour. Consumer rationality is a delusion, according to behavioural economics. It addresses why individuals make illogical judgments and why and how their behaviour differs from what economic models predict. Fashion brands have been extremely effective in persuading people to acquire clothing items despite being not necessary at the moment. Fashion, unlike in the past, was no more a commodity of rarity and richness.
Consider the following scenario: One of the most popular fast fashion manufacturers copies a Loui Vuitton winter collection outfit and sells it at a cheaper rate. In such situations, it is inevitable for a person to think irrationally by acquiring the product not because it was necessary at the time, rather since it was a premium clothing company imitation accessible at a lower price with a fictitious brand image.
Looking at the bandwagon effect in the fashion sector, we can see how much money has been lost. This effect may be characterized as a psychological phenomena in which individuals are more likely to do anything just simply because it is being done by others, irrespective of one‘s personal opinions, which we normally ignore. This occurrence of the bandwagon effect, as well as the idea of social upkeep, prompts to challenge the rationality of the economic assumption of Fast Fashion.
The Case of Projection Bias
The phenomenon of fast fashion can be explained by fashion-oriented impulse buying. This behaviour of consumers buying something instinctively without analysing it “rationally”, as standard economic models would suggest, points towards the existence of projection bias accompanying fashion-oriented impulse buying (Hausma, 2000). One striking result of this behaviour on the part of these consumers is the emotional responses like “regret” and ‘dissatisfaction” that are “connected to retrospective judgements about the utility of a purchase” (Wood, 1998). This happens because consumers have the incorrect belief of expecting future utility derived from the present impulse buying to be very close to the present utility derived from the same (Wilkinson & Klaeus, 2012).
As given by Wilkinson and Klaeus (2012), utility (u) is a function of consumption © and the state (s) such that
u = f(c, s).
If the present state and the unknown future state are given by s and sf respectively, the prediction of future utility uf (c, sf) by a consumer is given by
uf (c, sf) = (1-α) u (c, sf) + α u(c, s).
The projection bias is measured by the parameter α. In this case, α = 0 indicates no projection bias and α = 1 indicates full projection bias. Thus, projection bias in the case of fashion-oriented impulse buying (Pf) in our model is given by
0< Pf < 1.
This inequality states that Pf lies between 0 and 1. In other words, according to our model, consumers neither show no projection bias nor full projection bias while indulging in fashion-oriented impulse buying.
Data Evidence
With an intention of testing the proposed model, a questionnaire was developed (see Appendix). Qualitative data on purchase of clothes based on the Likert Scale is collected from 44 second year undergraduate students of Christ University, Bangalore. 24 respondents were male and 20 respondents were female.
The five-point Likert Scale is assigned values such that:
· Strongly disagree = 1.
· Disagree = 2.
· Neutral = 3.
· Agree = 4.
· Strongly agree = 5.
Based on these values, the data is represented in the table below;
The data in Table 1 reflects:
1. Whether recent/new fashion trends in time period t0 encourage buying behaviour (represented by the Second Column).
2. The degree to which new fashion trends emerging in time period t1 lead to offsetting the buying behaviour of t0 by discarding the clothes or not wearing them(represented by the Third Column).
Estimating Projection Bias
To estimate the projection bias, we estimate probability values such that Likert Scale values of 1 and 2 reflect negative buying behaviour and Likert Scale values of 4 and 5 reflect positive buying behaviour. Further, in order to account for all the responses, the responses with Likert scale value of 3 are split into two equal halves with each half reflecting negative and positive buying behaviours respectively. Accordingly, from Table 1,
P (buying clothes based on recent fashion trends in t0)= (0.5*14 + 21 + 4)/44
= 32/44
= 0.727, and
P (not wearing “outdated” clothes in t1) = (0.5*16 + 17 + 6)/44
= 31/44
= 0.705.
This predicts that 72.7% of the total respondents will indulge in fashion-oriented impulse buying in time period t0 and 70.5% of the respondents will not wear “outdated” clothes when a new fashion trend emerges in time period t1. Thus, the number of respondents who bought clothes in t0 and do not wear them in t1 can be expressed in terms of probability as:
P (respondents who bought clothes in t0 and do not wear them in t1) = 0.727 * 0.705
= 0.513.
This is the estimated projection bias of the respondents. The rationale behind this is that the value of 0.513 estimates the likelihood of the respondents, who impulsively bought clothes in t0, not wearing the clothes in t1 due to utility derived from the clothes in t1 being less than utility derived in t0. Thus, the prediction of future utility can be written as:
uf (c, sf) = (1–0.513 u (c, sf) + 0.513u(c, s)
or, uf (c, sf) = 0.487u (c, sf) + 0.513u(c, s).
Moreover, the prediction of our model given by 0< Pf < 1 is also justified as Pf = α = 0.513.
Figure 1: Respondents who exhibit Projection Bias.
In the modern era, because fashions trends change very quickly, the time period between two successive fashions trends (t1 — t0) can be taken to be very short (Liu C., 2021). When the 32 respondents out of 42 buy clothes in time period t0, they do so, albeit impulsively, with the expectation that future utility in t1 will be almost as same as present utility in t0. However, in time period t1, new fashion trends emerge and the fashion trends popular in t0 become “outdated”. As such, 16 respondents out of 32 now prefer not to wear the clothes they bought in t0 as the utility derived in t1 is significantly less than the utility derived in t0. Subsequently, they indulge in another round of fashion-oriented impulse buying and this cycle continues. Thus, projection bias (=0.513) is exhibited by these 16 respondents when they erroneously believe that their utility derived from fashion-oriented impulse buying in t0 would remain stable over future time period t1 and beyond.
Fast fashion has gone through a tremendous transformation in the last two decades. Many prominent fashion brands’ designs have been quickly duplicated, piquing the interests of the middle classes. In terms of behavioural aspects, the rise of rapid impulse buying behaviour is something of an enigma when explained from the perspective of mainstream economic theories. As such, the irrationality of economic agents owing to the bandwagon effect as well as the existence of projection bias points towards a need for incorporating principles of behavioural economics to mainstream economics in order to make economics, as a subject, reflect the unpredictable, yet predictable, nature of reality.
Tennyson Pangambam (3ECOHB)
Odinungsang A Jamir (3ECOHA)
References
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https://goodonyou.eco/what-is-fast-fashion/
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https://repositorio-aberto.up.pt/bitstream/10216/123182/2/361588.pdf
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