Sustainability in the Fast Fashion Industry

46 Pages Posted: 26 Nov 2019 Last revised: 22 Feb 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

Problem Definition: 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.
Relevance: Our work establishes a much-needed understanding of the link between the fast fashion business model and its environmental consequences.
Methodology: 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 analyze the effect of fast fashion capabilities (quick response and design flexibility) on the firm's quality decision, leftover inventory and total environmental impact.
Results: 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 identify the conditions under which increasing fast fashion capabilities leads to higher environmental impact.
Managerial Implications: We assess the effectiveness of three environmental initiatives (waste disposal regulations, consumer education, and production tax schemes) in countering the environmental impact of fast fashion. 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 and hence worsening 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.

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

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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