Sustainability in the Fast Fashion Industry
40 Pages Posted: 26 Nov 2019
Date Written: November 13, 2019
A fast fashion system allows firms to react quickly to changing consumer demand by replenishing inventory (via quick response) and introducing more fashion styles. In this paper, we study the environmental impact of the fast fashion business model by analyzing its implications for product quality, variety, and inventory decisions. Our results show that the fast fashion model is conducive to low quality products. In particular, we find that a key driver of low product quality in the fast fashion industry is the firm’s incentive to offer variety to hedge against uncertain fashion trends. When variety is endogenous, quality decreases as consumers become more sensitive to fashion or as the cost of introducing new styles decreases. We also identify conditions under which expected leftover inventory increases as the firm’s fast fashion capabilities increase. To counter the environmental impact of the fast fashion business model due to low quality and overproduction, we assess the effectiveness of three environmental initiatives (waste disposal regulations, consumer education, and post-consumer recycling programs). We show that waste disposal policies are effective in reducing the firm’s leftover inventory — but may have the unintended consequence of lowering product quality. We also compare firm-owned versus third-party recycling programs and propose a revenue-sharing scheme which could induce higher levels of recycling rate and product quality — while increasing the system’s total profit.
Keywords: fast fashion; quick response; sustainability; quality; product variety
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