Horizontal differentiation in men and women's fashion
A trip to Macy's explains gender differences in consumer spending and relative market sizes.
In 2008, Boston Consulting Group conducted a study that determined 4.3 out of 5.9 trillion dollars of American consumer spending is controlled by women. In other words, one half of the population directs a whopping 73% of consumer spending while the other is relegated to a measly 27%. This is quite the disproportionate outcome! While I had heard this figure thrown around in some of my economics classes, I struggled to believe it… until I accompanied my mom to a Macy’s.
On the first floor of Manhattan’s 34th st Macy’s, I did not spot a single store that was marketed to male consumers or even to men and women equally. This is not to say that there weren’t men in the department store; there were plenty. Ultimately, however, the men there were, like me, accompanying women, or purchasing items for the cherished women in their lives. To be fair, on the balcony from which I took this photo—let’s call it floor 1.5—there was a candy store that I’d imagine is gender-neutral. Frankly, I don’t know who purchases candy besides children but I’d imagine that there isn’t a large gender skew in this market. I imagined incorrectly.1
When I arrived at the fifth floor, the disparity in consumer spending by gender was plain to see. While there was a small corner for men’s clothes on the far end of the floor, the lion’s share was dedicated to the myriad styles, colors, and variations of women’s clothing. While I do not know how I would begin to quantify the reality of what I saw, I can do so qualitatively: there is much more optionality in women’s attire than men’s. In other words, the market for women’s clothes exhibits much more horizontal differentiation: differences in goods related to consumer taste/preference aside from product quality (this would be vertical differentiation).
What do I mean by all of this economics gobbledygook? A personal anecdote is illustrative: my mom did not simply want a dress for the Christmas party she is attending with my dad, she wanted a particular dress uniquely suited for the occasion. Conversely, my dad requires a dress shirt, suit jacket, and slacks for the event. When my mom sees the dress, she is willing to pay up to her consumer surplus for that dress because there are no perfect substitutes.2 My dad, however, derives the same amount of surplus (or darn near close) from a standard white shirt from Joseph A. Bank as he does from Brooks Brothers; the products are homogenous and the former is cheaper than the latter.
I conjecture that the abundance of horizontal differentiation in women’s fashion and the dearth thereof in men’s implies a great difference in size between the two markets. Is this hypothesis borne out empirically? IBISWorld estimates the market for women’s clothing stores to be $40.4B (2022) and that for men’s to be $5.5B (2022), i.e., the market for women’s fashion is 635% larger than men’s! Considering there is much more profit to be made in women’s fashion due to product differentiation, its greater market size and share of consumer spending come as no surprise.3
Shout-out to Prof. John Welborn for teaching a stupendous industrial organization class! And a final shout-out to Prof. Luís Cabral, author of my IO textbook.
If the following report I accessed on ResearchGate is to be believed, women eat twice as much candy as men a day, on average. I’ll be damned!
For those economists reading, the product is not homogenous.
To be fair, I would have to perform an econometric analysis to substantiate my causal inference. There are certainly many explanatory variables that determine the size of a given market, but I think it is prima facie reasonable to assume that product differentiation is leaded by a large coefficient in the would-be regression model.