Is this a model walking the catwalk for a world renowned designer, or a martian who exited a UFO? The lines are sometimes fuzzy in high fashion.

Nearly two weeks ago, the final Fashion Week concluded in Paris. This biannual event- there is one for fall/winter and another for spring/summer-attracts scores of fashion aficionados eager to see the new trends. The event highlights the global nature of the clothing industry, as it takes place in New York, London, Milan, and Paris, respectively. Naturally, it attracts the wealthy, jet setting crowd who like to see and be seen. It is a crucial opportunity for top brands, as well as up and coming ones, to showcase their collections for the upcoming season. The goal is to satisfy the needs of their loyal fan base while also enamoring others, in the hopes of expanding their clientele and bringing in new business. A successful show results in invaluable media publicity and requests for exclusive privileges to certain outfits. The fashion world is a dynamic, growing industry that taps into all socio-economic and cultural groups.

In this iconic photo, Audrey Hepburn dons a classic Little Black Dress by Chanel. A simple dress like this is timeless and a terrific investment.

This spring, certain trends will dominate. One of my secret passions is following the developments of the fashion world. Just like in business, this unique art form is ever changing and impacts our daily lives. For women, we will see clothing inspired by previous decades: there will be ‘90s inspired necklines (a much needed respite from the horrible resurgence of ‘90s inspired crop tops) as well as wide legged trousers and flirty/hippy patterns circa 1970s. Of course, you cannot go wrong with black, especially with the Little Black Dress. The LBD is a necessary investment, as it is a staple in any woman’s wardrobe. As frugal as I am, I advocate splurging on the perfect one. (NBD that I have 3 LBD’s.)

Electric blue suit? Check. Wider, checkered tie? Check. Tailored to perfection? Check. This look is a home run!

Though I do not follow men’s fashion so closely, I am familiar with formal menswear. While royal blue used to reign, the color palate has now been cranked up a notch: everyone is going to be rocking electric blue. Ties, after a period of being extremely skinny, are finally getting wider. As for tie patterns, the most popular are checkered and pastel floral; the latter, when done properly, can be extremely masculine. Of course, it goes without saying that a suit that is on trend but poorly fitted is ultimately a failure.

When I enter a store, I gauge what is popular not by what is there, but by what is not there; the clothing that flies off the shelves is what all the cool kids are wearing.

Why does it matter what is in style, from a business perspective? The trends that are introduced during Fashion Week determine market demand. Manufacturers must act quickly to fill orders for distributors and stores that wish to stock their inventory with the latest looks. Naturally, the most popular looks are the ones that will fly off the shelves the most quickly. While investors do not care about what particular clothing sells, they do care about how fast it sells. For example, a popular valuation in retail is the Inventory Turnover Ratio. Calculated as (Average Inventory/Cost of Goods Sold)*365, this metric calculates the number of days it takes the store to sell its inventory before reordering. It is an accurate indicator of how efficiently the company generates sales; the lower it is, the better.

This is one of my favorite creations on the show Project Runway. Clearly, it is a statement piece and cannot be worn to any ordinary event. But elements of it can serve as inspiration for trends. Ruffles, for example, resonate well with the masses.

Despite its ubiquitous influence, that which is shown at Fashion week is not intended for the masses. Whether avant garde, couture, or haute couture, they are works of art not intended for the plebeians. Only the upper crust, with their financial means and societal clout, have the opportunity to wear these looks to formal events such as galas, award shows, and charity events. Rather, what ultimately arrives in chain stores for the mainstream society are more reasonably priced pieces that are inspired by the runway looks.

This more affordable Ralph Lauren line still bears elements of the high end Ralph Lauren line.

Despite branding themselves as catering exclusively to the elite, high-end brands have recently begun distributing more affordable versions. Marc Jacobs did this with Marc by Marc Jacobs; Ralph Lauren does this with Lauren by Ralph Lauren. Moreover, designers are collaborating with chain stores by creating exclusive looks for them. For example, Phillip Lim, Prabal Gurung, and Lily Pulitzer, all of whom have high-end labels, have all launched labels in Target, whose main audience is the lower-middle class. The pieces cost approximately the same as regular Target brand name items.

These collaborations have been wildly successful. For too long, there has been demand from lower socioeconomic groups for clothing that looks designer but that is also affordable. Now, the demand is finally being met. They did not need it to be one of a kind, but they wanted a taste of something from a luxurious label. The result was mutually beneficial: customers get to own a designer good, while the designer can tap into a new audience.

The shoes are nearly identical. The Valentino ones, left, are more than $1000 more expensive. And yet, people would choose to buy them, thinking they are better quality and more luxurious.

That high-end brands are now encroaching into the more affordable retail market underscores the major schism that exists between designer labels and generic/store brands. When it comes to luxury brand names, consumers are willing to pay more; products from pricy designers are Veblen goods. Psychologically, people perceive the higher price as a signal that the brand is of superior quality. However, such signaling is flawed and reflects information asymmetry at its finest: the customer knows nothing about the product, and yet the higher price convinces them that it is better than that of its competitors! Often, prices are artificially inflated-for this exact purpose- and yet the quality remains shoddy.

The concept of mass production originates from the assembly line, the brainchild of Henry Ford in his production plant. Over 100 years later, we have designers like Tom Ford who use much more advanced technology in mass producing its clothing and accessories.

The unfortunate stigma attached to store brands is that they are of poorer quality. People are quicker to connote store brands with mass production, even though luxury labels also mass produce! Indeed, designer brands claim that their products are limited and exclusive. They could easily increase production, but choose not to do so in order to keep prices high. For firms, it is cheaper to mass-produce because of economies of scale; the more that is produced, the cheaper it is per unit. Unsurprisingly, in the past century, the price of clothing has gone down tremendously, even when taking inflation into account.

The fashion industry has found a way to successfully exploit human narcissism and vanity. With each new season, designers convince us that our current wardrobes are outdated, and that we must revamp our style by buying the latest trends. It comes as no surprise, then, that the market for clothing, for both men and woman, continues to mushroom every year. But of course, it’s not all about looks…