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The Value of Fast Fashion: Quick Response, Enhanced Design, and Strategic Consumer Behavior

Author

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  • Gérard P. Cachon

    () (The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104)

  • Robert Swinney

    () (Graduate School of Business, Stanford University, Stanford, California 94305)

Abstract

A fast fashion system combines quick response production capabilities with enhanced product design capabilities to both design "hot" products that capture the latest consumer trends and exploit minimal production lead times to match supply with uncertain demand. We develop a model of such a system and compare its performance to three alternative systems: quick-response-only systems, enhanced-design-only systems, and traditional systems (which lack both enhanced design and quick response capabilities). In particular, we focus on the impact of each of the four systems on "strategic" or forward-looking consumer purchasing behavior, i.e., the intentional delay in purchasing an item at the full price to obtain it during an end-of-season clearance. We find that enhanced design helps to mitigate strategic behavior by offering consumers a product they value more, making them less willing to risk waiting for a clearance sale and possibly experiencing a stockout. Quick response mitigates strategic behavior through a different mechanism: by better matching supply to demand, it reduces the chance of a clearance sale. Most importantly, we find that although it is possible for quick response and enhanced design to be either complements or substitutes, the complementarity effect tends to dominate. Hence, when both quick response and enhanced design are combined in a fast fashion system, the firm typically enjoys a greater incremental increase in profit than the sum of the increases resulting from employing either system in isolation. Furthermore, complementarity is strongest when customers are very strategic. We conclude that fast fashion systems can be of significant value, particularly when consumers exhibit strategic behavior. This paper was accepted by Yossi Aviv, operations management.

Suggested Citation

  • Gérard P. Cachon & Robert Swinney, 2011. "The Value of Fast Fashion: Quick Response, Enhanced Design, and Strategic Consumer Behavior," Management Science, INFORMS, vol. 57(4), pages 778-795, April.
  • Handle: RePEc:inm:ormnsc:v:57:y:2011:i:4:p:778-795
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    File URL: http://dx.doi.org/10.1287/mnsc.1100.1303
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    References listed on IDEAS

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    1. Gérard P. Cachon & Robert Swinney, 2009. "Purchasing, Pricing, and Quick Response in the Presence of Strategic Consumers," Management Science, INFORMS, vol. 55(3), pages 497-511, March.
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    Cited by:

    1. repec:eee:jeborg:v:143:y:2017:i:c:p:133-146 is not listed on IDEAS
    2. Valeria SMEETS & Sharon TRAIBERMAN & Frederic WARZYNSKI, 2014. "Offshoring and the Shortening of the Quality Ladder: Evidence from Danish Apparel," Working Papers DP-2014-12, Economic Research Institute for ASEAN and East Asia (ERIA).
    3. Aydinliyim, Tolga & Pangburn, Michael S. & Rabinovich, Elliot, 2017. "Inventory disclosure in online retailing," European Journal of Operational Research, Elsevier, vol. 261(1), pages 195-204.
    4. repec:eee:proeco:v:193:y:2017:i:c:p:31-39 is not listed on IDEAS
    5. repec:spr:annopr:v:257:y:2017:i:1:d:10.1007_s10479-016-2204-6 is not listed on IDEAS
    6. Aviv, Yossi & Bazhanov, Andrei & Levin, Yuri & Nediak, Mikhail, 2016. "Quantity Competition under Resale Price Maintenance when Most Favored Customers are Strategic," MPRA Paper 72011, University Library of Munich, Germany.
    7. Ye, Taofeng & Sun, Hao, 2016. "Price-setting newsvendor with strategic consumers," Omega, Elsevier, vol. 63(C), pages 103-110.
    8. repec:wsi:ijitdm:v:16:y:2017:i:06:n:s021962201750002x is not listed on IDEAS
    9. Robert Swinney, 2011. "Selling to Strategic Consumers When Product Value Is Uncertain: The Value of Matching Supply and Demand," Management Science, INFORMS, vol. 57(10), pages 1737-1751, October.
    10. Lect. Alexandra-Codru?a Popescu (Bîzoi) Ph. D, 2015. "Fast Fashion And Sustainable Supply Chain Management," Revista Tinerilor Economisti (The Young Economists Journal), University of Craiova, Faculty of Economics and Business Administration, vol. 1(24), pages 29-40, APRIL.
    11. repec:eee:proeco:v:191:y:2017:i:c:p:170-177 is not listed on IDEAS
    12. Herbert Dawid & Reinhold Decker & Thomas Hermann & Hermann Jahnke & Wilhelm Klat & Rolf König & Christian Stummer, 2017. "Management science in the era of smart consumer products: challenges and research perspectives," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 25(1), pages 203-230, March.
    13. repec:eee:proeco:v:198:y:2018:i:c:p:70-78 is not listed on IDEAS
    14. Yang, Daojian & Qi, Ershi & Li, Yajiao, 2015. "Quick response and supply chain structure with strategic consumers," Omega, Elsevier, vol. 52(C), pages 1-14.
    15. Zhao, Yingxue & Choi, Tsan-Ming & Cheng, T.C.E. & Sethi, Suresh P. & Wang, Shouyang, 2014. "Buyback contracts with price-dependent demands: Effects of demand uncertainty," European Journal of Operational Research, Elsevier, vol. 239(3), pages 663-673.
    16. Du, Jie & Zhang, Juliang & Hua, Guowei, 2015. "Pricing and inventory management in the presence of strategic customers with risk preference and decreasing value," International Journal of Production Economics, Elsevier, vol. 164(C), pages 160-166.
    17. repec:eee:joreco:v:20:y:2013:i:2:p:200-206 is not listed on IDEAS
    18. Hsin Hsin Chang & Yao-Chuan Tsai & Chen-Su Fu & Shu-Hui Chen & Yao Peng, 2016. "Exploring the antecedents and consequences of technology and knowledge integration mechanisms in the context of NPD," Information Systems Frontiers, Springer, vol. 18(6), pages 1165-1189, December.

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