How the fashion industry is tackling the cost-of-living crisis
As their real disposable income keeps shrinking, millions of British consumers are treating new clothes as an unaffordable luxury. How can the industry respond?
The UK is suffering a cost-of-living crisis the like of which we haven’t seen for more than 30 years. The cost of essentials such as groceries, energy and fuel is spiralling, with the latest figures from the Office for National Statistics indicating that the Consumer Prices Index rose by 7% in the year to March. In a bid to curb inflation, the Bank of England lifted its base lending rate in May to 1% – its highest level in more than a decade – but this measure is likely to dampen economic growth. The unwelcome return of stagflation – a phenomenon that’s rarely been seen in the West since the 1970s – is becoming a real possibility.
At a time when millions of households are being forced to choose between heating or eating, what role is the fashion industry playing in people’s lives? For the many average consumers who’ve unexpectedly found themselves far worse off than they were a year ago – and who may now be making tough financial choices daily – what capacity is there left for buying just a single new item of clothing?
“It’s difficult,” says Rachel Kan, an independent coach and consultant to the fashion industry who specialises in sustainability issues. “I’m always coming up against economics in everything I’m doing.”
She points out that it’s not only consumers who are having to watch the pennies. Businesses in the industry are becoming acutely aware of where they could achieve greater cost-efficiency. Garment manufacturers and retailers are trying to curb the overproduction of items, for instance, and are focusing more on the quality and longevity of their products.
“For me, it’s about the lifecycle of the garment and the interaction points with consumers,” Kan says.
Fast fashion has dominated the sector for the past 10 years, transforming the average consumer’s relationship with the clothes they wear, observes Dr Alana James, senior lecturer at Northumbria University’s school of design.
“We’re also witnessing a shift towards what’s been labelled ultra-fast fashion. This adopts all the characteristics we’ve previously seen, but it’s faster, cheaper and consumed in even larger quantities,” she adds. “It has been a hugely turbulent time for fashion retail over the past decade. The cost-of-living crisis is the latest storm it’s going to have to weather.”
To do so, the industry must adapt quickly to its new circumstances. On the face of it, spending on fashion is one of the first things to go when most households are slashing their budgets. But it’s more complicated than that, James argues.
“On a very basic level, we look to clothing for modesty, warmth and protection – basic functional reasons,” she says. “When we think about fashion as almost a material culture, it goes beyond the frivolous, luxury purchase.”
Frivolous, luxury purchases do tend to be the first for the chop when times get hard, which is particularly bad news for the exponents of ultra-fast fashion. Boohoo, for instance, reported a 94% year-on-year fall in its pre-tax profits in the year to March 2022, resulting from both rising costs and falling demand.
Is the fact that Boohoo is far from the only retailer in its segment to be feeling the pinch a sign that consumers could take a more sustainable approach to clothes shopping?
Kan believes that there is an opportunity for us to change ingrained habits. Doing so may be difficult, not least because we’ve been conditioned in recent years to expect an endless array of cheap clothes to choose from. Telling shoppers that there’ll be fewer options on the racks, which may cost a little more but last far longer won’t be the easiest sell, therefore.
She acknowledges that “the market is going to be pushed”, but it may be possible for consumers to go “back to an age where we’re coveting our items, rather than buying 100 things that each last for 10 days. This is a chance to look at the economics of fashion in its entirety. The constant growth can’t go on – these busts show that the system doesn’t really work. We need to think about other systems that share the money in different ways.”
She suggests that companies could engage with the emerging circular economy of repair and upcycling.
James believes that high-street fashion retailers also need to rethink their approach.
“They need to get better attuned to the buying behaviour of their customers and better at anticipating short-term needs as well,” she argues, adding that extremely low prices are no longer sustainable. “Supply cost increases are being passed on to the consumer in many industries. I don’t think fashion will be much different in a lot of ways.”
Rather than forking out for items of clothing that will be owned permanently but worn rarely, many consumers are starting to tackle the cost-of-living crisis without scrimping on their standards by hiring, rather than buying, Kan reports.
“When I speak to students, I find that they aren’t into needing to own things,” she says.
That’s good news for the raft of rental economy startups, which are offering cash-strapped consumers an alternative to foregoing fashion entirely.
“A model such as rental delivers sustainability and affordability,” says Isabella West, founder of fashion rental firm Hirestreet.
She recalls the so-called lipstick effect that occurred during the global financial crisis of 2007-08 and the resultant recession. This was where consumers still had the urge to spend on luxuries because they needed something to make them feel good in trying times.
What’s changed between then and now is the emergence of a rental market that offers shoppers the chance to continue being fashionable while not paying big money to own pieces they can’t afford.
“Given the very challenging consumer environment, I think we’re more likely to see a shift towards circularity in the coming years, not a massive forcing down of prices,” West predicts.
Hirestreet is releasing rental offerings in collaboration with retailers every two or three weeks as they try to adapt to the new circumstances. It’s an indication of how the industry is adopting new models to meet consumer demand – and a suggestion as to how some players could get through the cost-of-living crisis.