Andrew Tran
Staff Writer

Why Clothing Store Sales Have Declined Credit: www.qz.com

This topic materialized when I saw that retail sales in September had been down this year, which was the first decrease in retail sales in the last 7 months. The closing of several stores, such as Carson Pine Scott and Charming Charlie’s, also prompted me to question the seemingly growing number of stores going bankrupt within the apparel industry. As of now, the apparel market has been struggling and people have blamed Millennials and Generation Z as the culprits behind this decline. As a whole, the economy has improved, especially for general retail sales in the U.S.; however, the apparel market has not. It has actually stagnated.

There have been several key factors for the stagnation of the clothing market. According to Morgan Stanely, the clothing market has reached a “ceiling”. This means that this market cannot expand any more, and it has hit the maximum point of expansion. The market has reached this circumstance due to the “Law of Marginal Utility”. This law states that as consumption increases, the marginal utility (happiness) derived from each unit declines. In other words, if a person purchases a hamburger and finishes it, then the same person goes to purchase another burger, the second burger will not have the same satisfaction as the first one. As consumers buy more of the same good, the happiness derived from the first purchase begins to decrease after each subsequent purchase. It works the same way with clothes; shoppers have bought and own so much apparel, that buying additional clothes does not stir the same happiness as before. For example, a buyer purchases a pair of jeans and has the most happiness when purchasing the first pair of jeans because they need it. If that person bought another pair, they would not feel as eager because they do not need an extra pair of jeans.

Another factor in the stagnation of the apparel market is the supply of clothing and the number of competitors in the market. Clothing stores have been in a rush to produce more clothing to replace the ones they sold. To account for this need in supply, clothing stores have outsourced their clothing production to outside countries and employ child labor to reduce their costs. This allows businesses to produce lower-cost apparel while maintaining the retail price. This goes into the discussion of market price and supplier price. The clothing stores set their prices as low as they can to make a profit, or hold sales to get rid of old merchandise. These tactics attract customers while staying competitive in the market because competitors will charge a lower price to attract patrons. This creates a situation where these clothing stores will engage in price wars to attract the most patrons into their store. This will keep the business running in the short run; however, it prevents these businesses from charging clothing at the proper market price. For example, if Target obtains the newest lines of hoodies and they charge $40 for the hoodie at market value, a different competitor, say Walmart, would then price that same hoodie at $30 and cause more people to shop at Walmart because it’s cheaper.

Some people have argued that the declining clothing sector has been caused by Millennials and Gen Z. In the Millennial’s defense, the cost of education has increased substantially. Millennials carry a heavier student debt than the previous generations, such as Gen X. Due to this debt, millennials do not have a lot of spending money available for utilities, healthcare, and groceries which means even less money for clothes, leisure, dining out, and travel.

For Gen Z, they are doing the opposite. They are helping clothing retailers stay in business, especially malls. Malls have allowed for a new type of “retail therapy” with 58% of Gen Z people interviewed saying that browsing shelves and clothing racks enabled them to disconnect from social media and the digital world. Also, clothing stores have adapted to their consumer’s needs by offering extraordinary shopping experiences and customer service. Hollister, for example, offers an extra 15% discount on an item of the buyer if they pose in a Hollister outfit and posts to social media using the company’s hashtag.

It’s no surprise then that the apparel industry has been struggling. The basis of this practice factors in the consumer’s willingness to buy clothes and to purchase more in the future. This all depends on how the consumer feels and if they derive any happiness if they purchase an article of clothing which then relates back to the economic law of diminishing marginal utility. It is not millennials or generation z who ruined clothing stores and malls. Rather, it was the structure of the apparel market that caused its downfalls such as competition and cheap supply costs.