Sustainability in the Fast Fashion Industry

47 Pages Posted: 26 Nov 2019 Last revised: 8 Oct 2021

See all articles by Xiaoyang Long

Xiaoyang Long

University of Wisconsin - Madison - School of Business

Javad Nasiry

McGill University

Date Written: November 13, 2019

Abstract

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. Specifically, we consider a two-period model in which a firm sells to fashion-sensitive consumers whose preferences are influenced by a random fashion trend. We then analyze the effect of fast fashion capabilities (quick response and design flexibility) on the firm's quality decision, leftover inventory and total environmental impact. Our results show 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 further identify the conditions under which increasing fast fashion capabilities leads to higher environmental impact. To counter the environmental impact of fast fashion, we assess the effectiveness of three environmental initiatives (waste disposal regulations, consumer education, and production tax schemes). We show that waste disposal policies and production taxes are effective in reducing the firm's leftover inventory---but may have the unintended consequence of lowering product quality which may worsen the firm's environmental impact. We also find that education campaigns that increase consumers' sensitivity to quality strictly benefit the environment in the long run. Overall, our work establishes a much-needed understanding of the link between the fast fashion business model and its environmental consequences.

Keywords: fast fashion; quick response; sustainability; quality; product variety; environmental footprint

Suggested Citation

Long, Xiaoyang and Nasiry, Javad, Sustainability in the Fast Fashion Industry (November 13, 2019). Available at SSRN: https://ssrn.com/abstract=3486502 or http://dx.doi.org/10.2139/ssrn.3486502

Xiaoyang Long (Contact Author)

University of Wisconsin - Madison - School of Business ( email )

Madison, WI
United States

Javad Nasiry

McGill University ( email )

1001 Sherbrooke St. West
Montreal
Canada

HOME PAGE: http://https://www.mcgill.ca/desautels/javad-nasiry

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