Enhancing Economic Sustainability by Markdown Money Supply Contracts in the Fashion Industry: China vs U.S.A.

Abstract

Supply chain contracts, such as the markdown money policy (MMP), are commonly adopted in the fashion industry. In this paper, we explore how fashion companies can use MMP to enhance economic sustainability from the cross-cultural perspective. We conduct case studies on two fashion firms (suppliers), one from China and one from U.S.A., that are adopting MMP in their respective supply chains. Via semi-structured interviews with staff members and some public data searching of the target companies, we find that the cultural factors, such as power distance and collectivism/individualism, affect contract selection, contract management, supplier-retailer leadership, and supplier-retailer relationship. We use the Hofstede's national cultural dimensions theory to explain our insights. Specifically, in China, a country with a relatively high degree of power distance and collectivism, the companies tend to care more about the group interest and loyalty. The Chinese fashion companies are more willing to play the leading role in managing the relationships with their retailers, and offer MMP to them. In the U.S.A., a country with a relatively low degree of power distance and individualism, the companies are more likely to emphasize their own interest in trading. In fact, we find that American fashion suppliers tend to bargain with their retailers, and they are less willing to proactively provide the markdown money as a sponsor. Finally, managerial implications are provided, and several future challenges on MMP are examined.

Sustainable Retailing in the Fashion Industry: A Systematic Literature Review

“…Reverse logistics is critical to fashion retailers' success and is important in both developing and developed countries. Shen et al [41] examine the effect of MMP, a type of reverse logistics, in the fashion industry from a cross-cultural perspective. They show that cultural factors could influence the effect of MMP in the fashion industry.…”

“…Beh et al [36] indicate that retailers in developing countries have characteristics of both traditional business models and off-price retailing. Shen et al [41] explored the effect of the markdown money policy (MMP), a similar policy to the returns/buy-back policy, on sustainable retailing. They find that retailers in China are more likely to be offered MMP than retailers in the United States.…”

“…After that, the articles were further refined by these themes as the data analysis proceeded. The results of data analysis indicated that these research articles could be categorized into five major content areas, which include: (1) sustainable retailing in disposable fashion, fast fashion, and slow fashion [14][15][16][17][18][19][20][21][22]; (2) green branding and eco-labeling [15,17,20,[23][24][25][26][27][28][29][30][31][32][33][34][35][36]; (3) retailing of secondhand fashion [15,18,21,26,32,[36][37][38][39]; (4) reverse logistics in fashion retailing [21,22,[36][37][38]40,41]; (5) emerging retailing opportunities in e-commerce [15,21,22,[42][43]…”

Sustainability Issues in Textile and Apparel Supply Chains

“…To meet stakeholders' increasing expectations and reduce the risk of negative social and environmental externalities, apparel firms across all market levels, such as fast fashion brand H&M, outdoor wear brand Patagonia, and luxury brand Louis Vuitton, have implemented various approaches to enhance the level of sustainability in their supply chain management [6][7][8]. Being more sustainable is now key to developing the textile and apparel supply chain, and a number of issues and innovations relating to this goal have been examined in academic literature so far, including product returns, low carbon supply chain, corporate social responsibility, sustainable design operations, and sustainable competition [3,4,[8][9][10][11][12][13][14][15][16][17][18][19]. However, there is still a lack of further and intensive investigation of many other current issues relating to sustainable supply chain management in today's global textiles and apparel industry.…”

A Product Line Analysis for Eco-Designed Fashion Products: Evidence from an Outdoor Sportswear Brand

“…In future research, it would be interesting to compare eco-design practices among different fashion brands [58]. Second, fashion design and product development processes are dependent on other supply chain factors, such as supplier selection process [59][60][61]. In future research, it would be significant to evaluate Patagonia's sustainable supply chain.…”