Sustainable fashion: A statistical analysis of consumers’ behaviors by stated choice experiment

Abstract

The manufacturing process, supply chain and consumption pattern of fashion impose high risks on the environment. Besides, the utilization of cheap labor in developing countries by Western fashion brands entails great concern about labor rights of sweatshop workers. To tackle the daunting sustainable issues in fashion industry, various nascent firms have utilized novel technologies to transform their production, supply chain, planning and marketing activities. However, the market size of sustainable clothes is still relatively small. As a matter of fact, consumers are supportive of sustainable clothes, but their positive attitude does not always turn into actual purchasing behavior. Prior research has shown that there is a discrepancy between people’s value and their action. No studies have used an objective rating system for sustainability attributes and calculated consumers’ willingness to pay for improvement in those ratings. My thesis aims to bridge this gap by studying how consumers trade off price against hypothetically constructed ratings of environmental and labor rights practices. 7 main variables representing information on clothes labels (price, country of origin, fiber content, washing instruction, drying instruction, environment rating, labor rights rating) and 12 background variables (including 6 sociodemographic, 3 spending habit and 3 attitudinal variables) were chosen for this project. A stated choice experiment was constructed to collect data from 123 people, and discrete choice modelling was employed to analyze the data. The results showed that 5 out of 7 main variables (price, fiber content, washing instruction, environment rating and labor rights rating) play a significant role in respondents’ choice. Consumers prefer lower price, pure cotton (vs mixed blend) and the option to use washing machine (vs washing by hand). Regarding the environment and labor rights attributes, higher ratings are preferred, and the preference for higher ratings follows the law of diminishing marginal utility. In the final model, 4 background variables including gender, country of residence, concern about sweatshops and skepticism of eco-labels were shown to moderate the effects of main variables. Women and residents in high-income countries are more sensitive to price. People who are more concerned about sweatshops attach a higher importance to labor rights rating, whereas people who are more skeptical of eco-labels care less about the it. A typical individual in our sample is willing to pay €12 to €36 more for 1-point improvement of either environment rating or labor rights rating. Consequently, sustainable fashion brands can deploy either of the following two strategies to enhance their sales: (1) charge this price premium without losing their market share or (2) keep the same price to gain more customers.