The Invisible Hand Wears Prada

The economics of why fashion shows are so weird

ironically for an economics blog, the outfit naomi campbell (left) is wearing is supposed to represent the sin of greed

Something everyone on both my TikTok and Twitter feeds has been talking about recently is the Schiaparelli SS23 fashion show (video here), a rare occurrence given how rarely the “TL” talks about fashion. Singer Doja Cat, in coordination with the brand, covered herself in tens of thousands of red Swarovski crystals; as seen in the banner, supermodels Shalom Harlow, Irina Shayk, and Naomi Campbell wore dresses adorned with giant (fake) animal heads; there were bags with faces, earrings with ears, and shoes with overlaid toes. The clothes were all strange and unwearable, the models all had weird faces and gigantic heihgts, and the whole affair was baffling to an outsider. Other high fashion affairs, for instance the Met Gala, are the same. If you’ve ever seen a fashion show, seen pictures of a fashion show, or heard about the idea of a fashion show, then you know they’re insanely elaborate affairs so: why?

I would rather sit naked on a hot grill than wear something off the rack

Above is Alexander McQueen’s “Plato’s Atlantis” SS10 show, which was (like almost all fashion shows), about 15 minutes long. The official stated theme was global warming and, in true McQueen fashion, it was bizarre and weird. You won’t find anything normal in other famous fashion shows, like Vivienne Westwood’s Anglomania, Mugler’s Little Monster, or anything from the current collection (Valentino, Margiela, Dior, Louis Vuitton, and whatnot have all been supremely weird - one had a massive cardboard elephant running around in the background!).

What’s the point here? Because nobody is buying those clothes, nobody is going to dress like that, and honestly it’s all such a weird spectacle that it’s hard to see the logic. There’s two big reasons why brands do big, lavish fashion shows, and it’s that it advertsises the brand, and it advertises the products.

Let’s start with the products. The biggest misconception people have about fashion shows is that they’re intended to sell clothes. While some of the clothes are for sale (mostly to extremely rich people and celebrities), most of them aren’t, and instead showcase some aspect of the brand’s collection: the materials, the styles, the colors, etc. Additionally, a lot of the time they are advertising a product, but it’s an accesory and not clothing: the shoes, the bags, the jewelry, etc. A lot of the revenue for the major fashion houses comes from shoes, bags, and jewelry - items that can revitalize a brand, like the resurgence of interest in Vivienne Westwood after her necklaces went viral on TikTok, or (notorious antisemite) John Galliano’s revitalization of the moribund Maison Martin Margiela through the tabis, a series of shoes with a “hoof” at the ends. Miu Miu head Miuccia Prada’s influence on the industry comes, to a large extent, due to her ability to design iconic “viral” garments - like 2022’s tailor mini skirt. Importantly, there are fashion shows for “mass market”clothes, which are called pret-a-porter (or ready to wear if you’re not an absolute ponce), and they’re substantially less strange than traditional haute couture (high fashion for the ignoramus) shows.

The distinction is not super clear between and among brands, but historically, most people had their clothes made for them, and haute couture was simply more elaborate - people like (Nazi sympathizer) Coco Chanel, Cristóbal Balenciaga, Christian Dior, or Elsa Schiaparelli simply made very nice and popular clothes for the elites. The tailor made quality of high fashion persisted until the 1960s, when Yves Saint Laurent decided to focus his luxury brand on pret-a-porter and not on bespoke garments, and the model later spread to other brands, which had both couture AND “mass market” divisions. The high fashion industry overall grew a lot starting in the 1960s, and especially after the 90s, and runway shows became increasingly more and more like a performance to highlight the advertisement-esque quality of them.

Do they make economic sense? Maybe, but it should be noted that (at the time I’m writing this, January 24th) the world’s richest man is Bernard Arnault, owner of luxury goods conglomerate LVHM - the LV stands for “Louis Vuitton”, and he owns some of the largest (tho not the best) players in the industry. Arnault is also one of the biggest boosters of extravagant couture shows, which he considered very important to the industry back when he acquired Christian Dior. The owners of other large fashion brands, like the Kering Group (overseers of Gucci and problem child Balenciaga, among others) also consider fashion shows a savvy business move, as do large but independent companies like Prada. Getting out of the regular fashion show rotation can be a disastrous business move - Azzedine Alaia lost his preeminence (he was “a totally major designer”, per Clueless) after moving his fashion shows off the regular schedule, which got him blacklisted from Vogue as part of a longstanding feud with editor Anna Wintour (which, to be fair, wasn’t a completely petty decision - Wintour couldn’t guarantee Alaia’s clothes would be available to consumers when she published articles about them).

That sweater is not just blue, it’s not turquoise, it’s not lapis, it’s actually cerulean

Fashion is dead. Designers nowadays do not create anything, they only make clothes so people and the press would talk about them. The real money for designers lie within perfumes and handbags. It is all about image.

Catherine Lardeur, former editor of Marie Claire magazine, in 2011.

The big fashion shows also advertise brands and designers. The biggest fashion moment of 2022 was supermodel Bella Hadid walking on stage at the Coperni Fall/Winter show naked, and then getting a dress sprayed onto her - in reference to an iconic 1999 Alexander McQueen show where iconic model Shalom Harlow (who, in an everything is connected moment, is wearing the leopard print in the banner) was sprayed with paint while wearing a white dress.

The point of this is, pretty much, to attract attention to the brand and the collection, as well as a part of the performance and the artistic vision. This certainly worked - I, like many people, had never heard of Coperni until they dressed someone with a can of fluid, and a common complaint is that brands design items, campaigns, and even collections exclusively to go viral online. But as well as promote the brand to consumers, the goal is to promote it to other designers, so they will imitate elements from the brand’s collections and elevate the designer, items, and style further. The greatest example of this is the most iconic scene from Devil Wears Prada:

Oh, okay. I see, you think this has nothing to do with you. You… go to your closet, and you select… I don’t know, that lumpy blue sweater for instance, (…), but what you don’t know is that that sweater is not just blue, it’s not turquoise, it’s not lapis, it’s actually cerulean. You’re also blithely unaware of the fact that, in 2002, Oscar de la Renta did a collection of cerulean gowns, and then I think it was Yves Saint Laurent, wasn’t it?… who showed cerulean military jackets. (…) And then cerulean quickly showed up in the collections of eight different designers. Then it filtered down through the department stores, and then trickled on down into some tragic casual corner where you, no doubt, fished it out of some clearance bin. However, that blue represents millions of dollars of countless jobs, and it’s sort of comical how you think that you’ve made a choice that exempts you from the fashion industry, when in fact, you’re wearing a sweater that was selected for you by the people in this room… from a pile of “stuff.”

The clearest way to conceptualize what’s going on here is through the canonical Stackelberg model of duopoly. In this model, firms compete by setting quantities supplied at different times; a firm that moves first, called the leader, optimizes based on the expected reaction by the other firm (the follower), who decides on the basis of both its own cost and demand and what the leader expects it to do. Obviously the leader has significant leverage even at identical conditions, so firms would want to be in this position - if the creativity (i.e. weirdness) of high fashion concepts has a positive relationship with the chance of being a leader in any given collection, then it’s optimal behavior to have crazy ideas and variations on existing concepts. This might help explain the cyclical patterns of fashion, since it’s easier for big firms to reestablish leadership by just copying their past selves.

Everybody wants this. Everybody wants to be us

Now let’s look at the labor market side of things: what goes on there?

Weirdly, being a model has been a profession for an astonishingly short time: originally, models were known as mannequins, and fashion shows were similar to display rooms - they’d just walk around for a bit to show off the clothes, and the requirements were being pretty, thin, and somewhat taller than average (due to the optics of the shows). They started getting more performance-like in the 60s and 70s, and modelling became more of a “craft” then, with some big names (like Twiggy or Iman, of “marrying David Bowie” fame) emerging in this era.

Of course, the big shift was in the 1990s, the era of the “Big Six” and the supermodels, prompted by an exogenous shift in labor demand - many designers, following Gianni Versace, decided to turn models into the centerpiece of the shows, to some extent. Given the enormous opportunities to profit, as modeling was a “high status” job and celebrities were, for the most part, reluctant to participate in ads, high wages did not decline even with the incentives for entry they provided. Average earnings for a model back in the mid 90s were of 50,000 dollars (about 100k adjusted for inflation), compared to roughly 25k in 2012. The profession became substantially less profitable for three major reasons: first, advertisement money (for both broadcasts of shows and models themselves) declined; second, most of the big boosters of models either died (Versace) or lost relevance, and major players in the 2000s industry like Miuccia Prada were not at all fans of the supermodel craze; thirdly, the dotcom bubble bursting and provoking a recession shortly before 9/11, which actually happened on the first day of Fashion Month 2001 (and in fact happened on day one of New York Fashion Week 2001), which resulted in a cataclysmically bad performance for basically all designers in that year and, therefore, in cutbacks on model pay.

But not all modeling jobs are created equal. There’s, broadly speaking, two types of models: commercial and runway. While some runway models (especially successful or famous ones) do commercial work, and some runway shows are for commercial brands like Zara or Top Shop and not luxury couture designers, the distinction is central to understanding the labor market. Commercial work is much less demanding in terms of physical appearance: models need to be middle-class coded (which is less restrictive in terms of race and size, at least currently) and attractive, versus runway models, who need to be at least 5’8 (172cm), which is 4 inches taller than the average female height of 5’4 (or 162cm), as well as extraordinarily thin and flat-chested, have features more on the angular side, and normally have some distinguishing and stirking feature, like bleached or dyed hair. Despite the lower barriers of entry, commercial work is much higher paying, mainly because it is seen as less respectable and therfore commands a premium as a career choice - what’s known as a compensating differential.

Importantly, since there are low barriers to entry (besides being thin and having the correct look) and remarkably few employers, the high fashion labor makret is incredibly monopsonistic - there is a lot of demand-side (i.e. employer side) market power, translating in lower wages and worse conditions. As a result, not only do model’s earnings absorb adverse shocks, but also extremely bad behavior on the behalf of designers (like John Galliano being recorded going on antisemitic tirades worse than Kanye West’s, or Alexander Wang being credibly accused of sexual misconduct by 11 people) goes unpunished; and arbitrary decisions, like Prada choosing not to employ any Black models to preserve homogeneity in their runway during the 2000s, being upheld (even high level icons like Naomi Campbell, whose career had already peaked, had to plead for less racism on the industry on television).

Conclusion

Fashion is an industry, and like all industries, economics is at its beating heart - everything that is done, on top of being an artistic performance, is also a calculated business move. I don’t think this is at all optimal, but it’s what it is, and the business overtaking the art is nothing new - despite their current reputation for being a boundary-breaking avant garde atelier currently, founder Elsa Schiaparelli found little success in her original designer looks, and only managed to turn a profit through mass-market pret a porter looks that were nonetheless forgotten by the industry.