The Lowest Cost at Any Price

155 Pages·2016·1.61 MB·English

by  Megan Lambert

Lake Forest College
Lake Forest College Publications
Senior Theses Student Publications
12-1-2014
The Lowest Cost at Any Price: The Impact of Fast
Fashion on the Global Fashion Industry
Megan Lambert
Lake Forest College, [email protected]
Follow this and additional works at:http://publications.lakeforest.edu/seniortheses
Part of theBusiness Law, Public Responsibility, and Ethics Commons, and theFashion Business
Commons
Recommended Citation
Lambert, Megan, "The Lowest Cost at Any Price: The Impact of Fast Fashion on the Global Fashion Industry" (2014).Senior Theses.
This Thesis is brought to you for free and open access by the Student Publications at Lake Forest College Publications. It has been accepted for
inclusion in Senior Theses by an authorized administrator of Lake Forest College Publications. For more information, please contact
[email protected].
The Lowest Cost at Any Price: The Impact of Fast Fashion on the Global
Fashion Industry
Abstract
The fast fashion industry is one facet of the multi-billion dollar global fashion industry. Fast fashion is the
latest business model trend in the fashion industry. These firms aim to provide low-cost, low-quality, trend
based clothing to consumers at unprecedented speeds. In order to do so, these firms use unethical and
exploitative cost cutting methods in order to lower production costs and maximize profits. This study
examines the fast fashion business model and its unethical practices in the broader context of the global
fashion industry. Economic models and theories are used to explain how fast fashion went from a competitive
fringe to a global profit leader, and how these firms can create empires based on unethical business practices.
Document Type
Thesis
Distinguished Thesis
Yes
Degree Name
Bachelor of Arts (BA)
Department or Program
Economics
First Advisor
Kent Grote
Second Advisor
Carolyn Tuttle
Third Advisor
Lou Lombardi
Fourth Advisor
Les Dlabay
Subject Categories
Business Law, Public Responsibility, and Ethics | Fashion Business
This thesis is available at Lake Forest College Publications:http://publications.lakeforest.edu/seniortheses/39
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Printed Name: Megan Lambert
Thesis Title: The Lowest Cost at Any Price: The Impact of Fast Fashion on the Global Fashion Industry
This thesis is available at Lake Forest College Publications:http://publications.lakeforest.edu/seniortheses/39
LAKE FOREST COLLEGE

Senior Thesis

The Lowest Cost at Any Price: The Impact of Fast Fashion on the Global Fashion Industry

by

Megan Lambert

December 1, 2014

The report of the investigation undertaken as a
Senior Thesis, to carry two courses of credit in
the Department of Economics, Business, and Finance

____________________________ __________________________
Michael T. Orr Kent Grote, Chairperson
Krebs Provost and Dean of the Faculty
__________________________
Carolyn Tuttle

__________________________
Lou Lombardi

__________________________
Les Dlabay
Abstract

The fast fashion industry is one facet of the multi-billion dollar global fashion
industry. Fast fashion is the latest business model trend in the fashion industry. These
firms aim to provide low-cost, low-quality, trend based clothing to consumers at
unprecedented speeds. In order to do so, these firms use unethical and exploitative cost
cutting methods in order to lower production costs and maximize profits. This study
examines the fast fashion business model and its unethical practices in the broader
context of the global fashion industry. Economic models and theories are used to explain
how fast fashion went from a competitive fringe to a global profit leader, and how these
firms can create empires based on unethical business practices.
i
Dedication

To all the friends, family, professors, and strangers who listened to me speak of nothing
but labor exploitation and design piracy for five months.

ii
Acknowledgments

Thank you to my wonderful committee for providing guidance and support
through this process. This would not have been possible without the industry
professionals who assisted with interviews and debates. Also, thank you to Kathleen
Lambert for editing the final draft—and all of my other college papers.

iii
Table of Contents

Abstract……………………………………………………………………………………………….i
Dedication………………………………………………………………………………………......ii
Acknowledgments……………………………………………………………………………........iii
Table of Contents…………………………………………………………………………………..iv
Table of Figures…………………………………………………………………………………….v

Introduction………………………………………………………………………………1

Chapter One: Industrial Organization…………………………………………………6
Market Segmentation……………………………………………………………………...7
Haute Couture……………………………………………………………………..9
Luxury Ready-to-Wear…………………………………………………………..11
Small Fashion Start-Ups…………………………………………………………13
Commercial Ready-to-Wear……………………………………………………..14
Fast Fashion……………………………………………………………………...15
Counterfeits………………………………………………………………………17
Crossing Markets………………………………………………………………...18
Oligopoly Structure………………………………………………………………………19
Jean Paul Gaultier Model………………………………………………………...24
Zara Model……………………………………………………………………….29
Success of the Competitive Fringe: Fast Fashion Model………………………………...32

Chapter Two: Intellectual Property…………………………………………………...44
Intellectual Property Overview: Settlements v. Trials…..……………………………….44
Intellectual Property in the Fashion Industry...…………………………………………..49
Trademarks………………………………………………………………………49
Copyright………………………………………………………………………...55
Patents……………………………………………………………………………67
Trade Secrets……………………………………………………………………..69
Global Market Place……………………………………………………………………..70
Design in the Fast Fashion Industry……………………………………………………...75

Chapter Three: Manufacturing………………………………………………………..88
Manufacturing Process…………………………………………………………………...89
Supply Chain……………………………………………………………………..91
Exploitative & Unethical Cost Cutting…………………………………………………..98
Low Safety Investments………………………………………………………….98
Low Wages……………………………………………………………………..109

Conclusions and Recommendations……………………………………………….....125
Works Cited……………………………………………………………………………136

iv
List of Figures and Tables

Figure 1.1: Industry Pyramid…………………………………………………………..…8
Figure 1.2: Gaultier Pay-Off Maximization ………………………………………….…26
Figure 1.3: Zara “Enhanced Design” Strategy ……………………………………….…30
Figure 1.4: Strategic Decisions (Daily Feedback) ……………………………………....31
Figure 1.5: Fast Fashion Supply and Demand……………………………………….…..34
Figure 1.6: Generational Characteristics………………………………………………...38

Figure 2.1: Legal Dispute………………………………………………………………..47
Figure 2.2: Supply of Counterfeit Purchase Offenses……………………………….…..73
Figure 2.3: Copying Decision—No Protection………………………………………..…82
Figure 2.4: Trend Adoption Nash Equilibrium………………………………………..…84

Figure 3.1: Basic Supply Chain………………………………………………………….92
Figure 3.2: Compensating Differential Model………………………………………….105
Figure 3.3: Compensating Differential Model (Minimum Wage)……………………...105
Figure 3.4: Monopsony Labor Market………………………………………………….118
Figure 3.5: Monopsony with Min. Wage……………………………………………….119
Figure 3.6: Optimal Efficiency Wage Model…………………………………………..121

Table 3.1: Country Comparison as of 10/2014 (in USD)…………………………...….112

v
Introduction:
In Dhaka, a nine-year-old girl named Meem sits on a concrete floor of a nameless
factory, snipping threads on collars and cuffs for blouses that will travel across the globe.
When her mother became pregnant and could no longer work, Meem left school to help
provide for her family. She works twelve hour shifts, with an hour break for lunch; her
paycheck amounts to twenty-eight USD per month if she works seven days a week. With
the exception of a half day on Fridays, no time off is allowed. The room is small,
crowded, and hot even on days when the three industrial fans work. There are no fire
extinguishers and the space is filthy.
Meem’s glittery hair clips are her most prized possessions; she has eleven, her
parents allow her to buy one per month with her earnings. One day, a new child begins
work at the factory; she is scared and bursts into tears during her work. Meem, without
thinking twice, takes the clips from her hair and presents them to the crying girl. The
sense of community in the workroom is strong. Workers protect each other from the
wrath of the owner. Meem double-checks the new employee’s work, just as the fifteen-
year-old machine operator quietly snips any threads Meem misses. Despite child labor
laws and compulsory education laws, there are many children working full-time in
garment factories around the world. This is the only life Meem will ever know; her dream
is to one day work in a larger factory as a sewing machine operator because they pay
higher wages. This selfless child will only ever know back-pain and hardships. While
“fast fashion” manufacturing has provided economic opportunities for workers in
countries like Bangladesh, the work requires so many hours that the workers cannot enjoy
any money they may have left over (Aulakh).
1