How Social Media Has Transformed the Economics of Fashion Marketing

Social media is a marketing powerhouse which has completely changed the way fashion marketing operates, revolutionising fashion economics. We all heard of the “Jane Birkin Bag Trend”, “Brat Summer” and “Alix Earle Bringing Back Skinny Jeans”. It changed how consumers interact with fashion, and its exclusivity and unattainable feel which brands monetized. Big luxury brands and high end designers ran the industry, the way trends spread was slow and controlled,  marketing fashion was through glossy magazine ads and extravagant runway shows. But with platforms like instagram, tiktok and pinterest, everything has changed, today influencers and everyday consumers have a direct say in what's fashionable making the fashion landscape more competitive and fast. This transformation of how fashion is interacted with had major effects on the economics of fashion marketing. Brands, no matter how big or small, now have a direct path to consumers, an opportunity to give them what they want. Social media has lowered marketing costs and allowed smaller, less established brands to compete on a global scale. But what does it mean to the economics side of fashion?

Fashion Marketing Before Social Media

Historically, the fashion industry operated as a highly exclusive market with high barriers to entry. Luxury brands and big name designers held power over trends, and communicated them through ads and runway shows, which were very cost heavy. The “Old Way” supply chain for fashion, from designer to consumer, was slow and expensive, the newest product was always unattainable by the average consumer but also kept small businesses away from the global market. Trend cycles were lengthy, the gap between fashion shows and new products ending up on retail shelves would be months. Therefore, this slow loop between products supplied and consumer demand meant that brands would be capable of over production of items that were no longer in demand. It was an outdated economic model that was incapable of adjusting to consumer preferences in sufficient time. From an economics perspective, the traditional market structure can be seen as a monopoly. Bigger and more popular fashion houses controlled the demand, the trends, as well as what was supplied to consumers, and consequently the pricing point. A single Vogue advertisement could cost thousand of USD, while one runway show would be up to hundereds of thousands, these high marketing costs created significant barriers to entry for newer, independent brands, creating a clear hierarchy.

Social Media Lowering Barriers and Increasing Market Efficiency

Social media transformed the marketing scheme for fashion, introducing a more decentralised approach. Platforms such as tiktok and instagram help brands communicate with their consumers directly, with no barriers, helping them gain an understanding of what they want, creating a more efficient way of satisfying consumers’ wants and needs. The direct-to-consumer (DTC) model significantly reduced the cost of marketing and improved how fast brands can respond to market trends. In terms of market efficiency, social media changed the costs of fashion marketing. Instead of investing millions into billboards and magazine features, brands can now reach thousands of potential customers with a single ideo of tiktok or instagram post at a fraction of the cost. According to Grand View Research, the global fashion influencer market is expected to grow at an annual growth rate of 35.7%, reaching 17.2 billion USD by 2027, while Fashion Type predict 9.2 billion USD by 2026 compared to 3.69 billion USD in 2020. This highlights the reduction of entry costs for new brands, giving them an opportunity to compete on the global market thanks to influencers. Moreover, social media platforms allow brands to gather data on consumer preferences, therefore improving their market responsiveness. 

Consumer engagement with different products can now be measured, with post interactions and feedback. Therefore marketing campaigns are not only cost effective, but can also be targeted to a specific audience via social media, increasing efficiency. Instead of relying on generalised ads, brands can focus on more niche markets, providing products to a specific segment of consumers, for example,customising their content to appeal to a GenZ audience. 

Influence of Social Media on Consumer Behavior and Demand 

The impact social media has on consumer behavior is significant, with the rise of influencers who have become the new tastemakers of the industry. Influencers change demand dynamics in the fashion market via digital platforms, as an example we can look at bag charms, never in high demand and only seen as a tacky accessory now being the trendiest item to have in 2024. Brands like Prada heavily capitalised on the trend, presenting their fashion shows with bag charms and sending them in PR packages to influencers, showing how a few tik tok videos can transform all of the fashion market. Influencers, whether mega famous or micro influencers, exert a significant power over their audience. Studies show that 63% of consumers on social media trust influencers’ opinions and recommendations, rather than traditional ads. This shows how consumers perceive value, that rather than relying on celebrities or designers, consumers now place more trust in influencers who feel more accessible and relatable. 

From an economics perspective, consumer surplus can be impacted by influencers, which is the difference between what consumers are willing to pay for a product, and what they actually pay. Influencers create an essence of brand trust which enhances the product’s value to a consumer, encouraging them to purchase a product they may have never even considered. To brands, a relationship with influencers can be a pathway to collaborative marketing, where the influencer can advertise a product, using their credibility to increase consumer confidence in the brand’s product, enhancing demand. Nara Smith for example, partnered with Marc Jacobs to showcase their tote bags, emphasizing the bag’s style and functionality, attracting attention with her signature cooking videos. The power of influencers is reflected in their direct impact on purchasing behavior, in fact, 82% of consumers are more likely to follow a recommendation from a micro influencer, even if they don't have a large platform. In addition, brands started featuring influencers in their campaigns, instead of just models, they now want someone with a platform and trusted by their audience to provide marketing for their products. Alex Consani for example, was very recently featured in a Jacquemus campaign, helping it reach a wide audience with her engaging presence and personality. This suggests that in many cases, consumer decisions are now influenced by how authentic an advertisement is to them, therefore relying on real humans rather than big name brands. 

Consumers as Marketers

The shift in the fashion industry from a supply driven model to a model which is more demand driven, has allowed consumers to actively participate in fashion marketing. Through UGC (user generated content) consumers can play a role in shaping fashion trends. When a consumer makes a post of them wearing a brand’s clothes or shares a “try on haul”, they provide a free ad for that brand, which to other consumers is seen as more authentic and trustworthy, this has become a powerful marketing tool to fashion brands. UGC forms an efficient form of marketing, brands can gain extra exposure without any costs. Research shows that 92% of consumers trust user generated content, and 79% of instagram users say that UGC influences their purchasing decisions. The advantage brands gain from UGC is the way it enhances their brand equity, which is the value of the brand determined by the consumer’s perception of its quality, consumer’s desire to purchase their goods. 

Fashion as a Crowded Digital Marketplace

As more brands gain a social media presence, the digital marketplace becomes more crowded, challenging fashion labels to stand out. Instagram alone has over 1.4 billion active users, and Tiktok’s user base is 1.5 billion. While this can present itself as an opportunity for exposure, it also means that there is competition for consumer attention. A brand that can be used as evidence is Miu Miu, their strong social media presence and influencer appeal helps them maintain relevance, and looking at how most trends over the last 2 years was inspired by the Miu Miu runway, their presenc on social media seems to be attracting consumers. 

The economics concept of monopolistic competition is perfectly relevant to today’s fashion industry. Brands must now not only differentiate themselves from others with unique products, but also they must have creative marketing strategies to be different and appeal to consumers.As the digital marketplace grows, consumer loyalty is more and more dependent on a brand’s ability to innovate and maintain a unique identity, and those that fail to do so can face decreases in consumer retention, where customers no longer want to be repeat buyers of the brand, which can lead to declining sales and market share. 

The Future of Fashion Marketing: AI and Virtual Fashion 

Looking ahead, fashion marketing can face more change with virtual fashion and artificial intelligence. Virtual fashion, where brands sell clothes in the digital world, for avatars, is growing rapidly. An example can be Nike and The North Face collaborating with Snapchat for bitmoji clothes. The segment of the market is expected to reach 50 billion USD by 2030, fueled by expected technological advancements. AI is also revolutionising how brands approach consumer behavior, AI tools can be used for a personalised shopping experience, virtual try ons on Farfetch and Prada or Automated recommendations on Zara. These technologies allow brands to maximise consumer utility, the satisfaction consumers will gain from purchasing their product.

As digital spaces continue to expand, sustainability in fashion marketing becomes more relevant, as consumers are increasingly concerned for the environment and how ethical their purchases are. Brands can take advantage of the sustainability movement today and appeal to consumers via social media campaigns, gaining a competitive edge. 

Conclusion 

There is no doubt that social media changed the game of fashion  marketing. Once an exclusive, high cost industry dominated by luxury brands transformed into a dynamic anf fast paced marketplace, where accessibility is the key. From influencers acting as brand ambassadors, to consumers creating free marketing content, the fashion industry is now more efficient and diverse. And as the digital landscape continues to evolve, the new market structure will need to be operated with by brands carefully. by embracing technological innovations, utilising social media’s direct-to-consumer model and paying attention to the economics demands of sustainability, brands can thrive in the new world of fashion marketing driven by social media. The future of fashion economics will be held by engagement, inclusivity instead of exclusivity and innovation.

Article written by Samina Kholmuradova | Proofread by Zhangir Zhangaskin