Optimizing Fashion Branding Strategies: Management of Variety of Items and Length of Lifecycles in a Stochastically Fluctuating Market

Chapter
Part of the International Series on Consumer Science book series (ISCS)

Abstract

In the fashion and apparel industry, an increasing number of clothing retailers offer a greater number of products in smaller lines. This results in a continuously changing of their products in their storefronts. The present study, by utilizing optimal stopping theory, attempts to build a stochastic dynamic model to investigate how a clothing retailer should introduce and withdraw the products with respect to the stochastic consumer market. More precisely, this chapter formulates market fluctuation as a stochastic process and attempts to examine how to optimally manage the number of “seasons” in a fluctuating market. The analysis reveals that clothing retailers should increase the variety of items with short lifecycles if (1) the clothing retailer is vulnerable to other clothing retailers’ introductions of new items or (2) the market as a whole is certain. These will directly enhance consumer welfare as fashion consumers commonly treasure more trendy clothing. Since these results identify the effect of each factor, they are important when clothing retailers consider the difference between product vulnerability and market uncertainty.

Keywords

Optimal stopping theory Stochastic consumer market Consumer welfare Stochastic process Stochastic dynamic model Wiener process Poisson process Brownian motion 

References

  1. Baldursson, F., & Karatzas, I. (1997). Irreversible investment and industry equilibrium. Finance and Stochastics, 1, 69–90.CrossRefGoogle Scholar
  2. Bentolila, S., & Bertola, G. (1990). Firing costs and labor demand: How bad is Eurosclerosis. Review of Economic Studies, 57(3), 381–402.CrossRefGoogle Scholar
  3. Caballero, R., & Pindyck, R. (1996). Uncertainty, investment, and industry evolution. International Economic Review, 37(3), 641–662.CrossRefGoogle Scholar
  4. Cachon, G. P., & Swinney, R. (2011). The value of fast fashion: Quick response, enhanced design, and strategic consumer behavior. Management Science (April), 57(4), 778–795.CrossRefGoogle Scholar
  5. Caro, F., & Gallien, J. (2010). Inventory Management of a fast-fashion retail network. Operations Research, 58(2), 257–273.CrossRefGoogle Scholar
  6. Choi, T. M., & Cheng, T. C. E. (Eds.). (2010). Innovative quick response programmes in logistics and supply chain management. Springer, International Handbooks on Information Systems Series.Google Scholar
  7. Christopher, M. (2000). The agile supply chain: Competing in volatile markets. Industrial Marketing Management, 29, 37–44.CrossRefGoogle Scholar
  8. Christopher, M., & Towill, D. (2001). An integrated model for the model of agile supply chains. International Journal of Physical Distribution and Logistics Management, 13(4), 235–246.CrossRefGoogle Scholar
  9. Christopher, M., Lowson, R., & Peck, H. (2004). Creating agile supply chains in the fashion industry. International Journal of Retail and Distribution Management, 32(8/9), 367–377.CrossRefGoogle Scholar
  10. Dixit, A. K. (1989). Hysteresis, import penetration, and exchange rate pass through. Quarterly Journal of Economics, 104, 205–228.CrossRefGoogle Scholar
  11. Dixit, A. K., & Pindyck, R. S. (1994). Investment Under Uncertainty. Princeton: Princeton University Press.Google Scholar
  12. Eisenhardt, K. M. (1989). Making fast strategic decisions in high-velocity environments. Academy of Management Journal, 32, 543–576.CrossRefGoogle Scholar
  13. Farzin, Y. H., Huisman, K. J. M., & Kort, P. M. (1988). Optimal timing of technology adoption. Journal of Economic Dynamics and Control, 22, 779–799.CrossRefGoogle Scholar
  14. Ferdows, K., Lewis, M. A., & Machuca, J. A. D. (2004). Rapid-fire fulfillment. Harvard Business Review, 82(11), 104–110.Google Scholar
  15. Fines, C. H. (1998). Clockspeed: Winning industry control in the age of temporary advantage. Perseus: Reading, MA.Google Scholar
  16. Fujita, Y. (2007a). Toward a new modeling of international economics: An attempt to reformulate an international trade model based on real option theory. Physica A: Statistical Mechanics and its Applications, 383(2), 507–512.CrossRefGoogle Scholar
  17. Fujita, Y. (2007b). Excess entry theorem reconsidered for a stochastically fluctuating economy with irreversible decisions. Studies in Applied Economics, 1, 201–208.Google Scholar
  18. Fujita, Y. (2007c). A new analytical framework of agile supply chain strategies. International Journal of Agile Systems and Management, 2(4), 345–359.Google Scholar
  19. Fujita, Y. (2008a). Competition and welfare for a stochastically fluctuating market with irreversible decisions. Physica A. Statistical Mechanics and its Applications, 387(12), 2846–2850.CrossRefGoogle Scholar
  20. Fujita, Y. (2008b). A new look at fashion brand management-product switching strategies in the face of imitation. Research Journal of Textile and Apparel, 12(3), 38–46.Google Scholar
  21. Harrison, A., Christopher, M., & van Hoek, R. (1999) Creating the agile supply chain. UK: Institute of Logistics and Transport.Google Scholar
  22. Leahy, J. V. (1993). Investment in competitive equilibrium: The optimality of myopic behavior. Quarterly Journal of Economics, 108(4), 1105–1133.CrossRefGoogle Scholar
  23. McDonald, R., & Siegel, D. (1986). The Value of Waiting to Invest. The Quarterly Journal of Economics, 101(707-), 727.Google Scholar
  24. Passariello, C. (2008). Logistics are in vogue with designers as slump threatens luxury goods, systems to track consumer tastes and tweak offerings win converts. The Wall Street Journal. Updated June 27, 2008 12:01 a.m. ETGoogle Scholar
  25. Rohwedder, C., & Johnson, K. (2008). Pace-setting Zara seeks more speed to fight its rising cheap-chic rivals. The Wall Street Journal Google Scholar
  26. Williams, J. R. (1994). Strategy and the search for rents: The evolution of diversity among firms. In R. Rumelt, D. E. Schendel, & D. J. Teece (Eds.), Fundamental issues in strategy (pp. 229–246). Boston: Harvard Business School Press.Google Scholar

Copyright information

© Springer Science+Business Media New York 2014

Authors and Affiliations

  1. 1.Department of EconomicsKeio UniversityTokyoJapan

Personalised recommendations