Is the Economy Headed for a Downturn? Blame the Maxi Skirts
Believe it or not, we’re heading into a recession because girls are wearing maxi skirts again. As strange as it sounds, fashion trends have long been indicators of economic downturns. From the rise of corporate wear to the "lipstick index," subtle shifts in consumer behaviour often reflect broader financial conditions. Right now, we’re seeing the resurgence of minimalist fashion, professional attire, and yes - maxi skirts. And if history is any guide, this could be a red flag.
Fashion has long mirrored the economy, adjusting in response to periods of boom and bust. For example, the 1920s: a time of prosperity following World War I, when the Roaring Twenties ushered in an era of opulence. Gilded parties and the glamorous flapper style encapsulated a society eager to flaunt newfound wealth. However, after the Great Depression hit in 1929, the fashion world pivoted dramatically. Gone were the bold, extravagant styles. In their place, simpler, more practical, and frugal designs emerged as people assimilated to a new economic reality.
So, what does that mean for you? While some industries brace for impact, others thrive in downturns. The key isn’t to panic - it’s to pivot. Whether you’re a business owner, investor, or just someone paying attention, understanding these economic signals can help you make smarter decisions. Instead of fearing the shift, it’s time to get strategic. Play your cards right, and this recession could work in your favour.
Why Fashion Trends Can Predict Economic Downturns
Historically, certain fashion trends have reflected economic shifts with surprising accuracy. Consider the "lipstick index," coined during the 2001 recession by Estée Lauder chairman Leonard Lauder, who observed that lipstick sales rose as the economy declined. The theory? When budgets tighten, consumers turn to small, affordable luxuries to lift their spirits - like a new lipstick in place of a new handbag. These subtle shifts in spending habits reveal how fashion often becomes a barometer of broader societal moods, offering insight into how people respond to uncertainty, constraint, or optimism.
Similarly, during past economic slowdowns, there’s been a noticeable uptick in corporate wear and minimalism. As job security becomes a concern, people lean towards more professional attire, aiming to impress in the workplace. At the same time, minimalist trends - a focus on versatile, evergreen pieces over flashy, trend-driven fashion - tend to rise. Consumers start to prioritise value, investing in wardrobe staples that can weather the storm of an unpredictable economy.
Fast forward to today, and we’re seeing those exact same trends gaining momentum. Minimalist aesthetics are everywhere, whether you call it ‘quiet luxury,’ ‘clean girl aesthetic,’ or ‘recession core.’ Meanwhile, formal, professional looks are creeping back into vogue—think ‘office siren,’ ‘power dressing,’ or even the ‘CEO aesthetic.’ Ring any bells? It’s not definitive proof of an impending recession, but the fashion industry’s shifts are raising eyebrows.
One of the most famous theories linking fashion to the economy is the Hemline Index, which suggests that the hemlines of women's skirts tend to rise when the economy is doing well and fall during economic downturns. The theory was proposed by economist George Taylor in the 1920s, and while it might not be a perfect predictor of financial conditions, it has provided an interesting lens through which we can view the intersection of fashion and economics.
How to Profit in a Recession (if only it was that simple)
If a downturn is coming, you don’t want to be caught unprepared. The best move? Source or build a business that remains profitable no matter the economy. Essential services - such as healthcare, repair businesses, and grocery stores - continue generating revenue when other industries struggle.
For example, businesses like plumbing or HVAC services are considered recession-resistant. During the 2008 financial crisis, the home repair and maintenance industry experienced only a slight dip, with companies in essential services still maintaining steady demand. According to IBISWorld, the Australian plumbing industry generated over $16 billion in revenue in 2020, and it continues to be resilient during economic slowdowns due to the ongoing need for repairs and maintenance.
The opportunity lies in how business valuations shift when recessions hit. According to a study by McKinsey & Company, companies that were able to maintain profitability through downturns saw their market value increase by up to 10% more than their competitors during the recovery phase. During a recession, many businesses see their valuations drop - sometimes significantly - allowing savvy investors to acquire them at a fraction of their potential value.
With a Small Business Loan Guarantee Scheme (similar to an SBA loan in the U.S.) and some seller financing, you could secure a recession-resistant business. Government-backed loans in Australia typically require a down payment of 10% to 20%, making them an accessible option for entrepreneurs looking to invest during an economic downturn.
Once you’ve obtained one, you can use your profits to reinvest into consolidating your position by buying up competitors at lower valuations. When the economy rebounds, you’ll be in a strong position to dominate your industry.
Making Fashion Businesses More Recession-Resistant
For those already in the fashion industry, a recession doesn’t have to spell disaster. Instead of being caught off guard, consider these strategies to make your business more resilient:
Diversify Your Offerings – Shift focus to wardrobe staples, timeless pieces, and professional wear that consumers prioritise in lean times.
Emphasise Sustainability – Durable, eco-friendly fashion becomes more attractive when people are making calculated purchases.
Adjust Pricing Strategies – Offer a mix of premium and affordable options to appeal to both cautious spenders and loyal high-end customers.
Strengthen E-Commerce – When budgets tighten, online shopping often becomes the preferred way to compare prices and find deals. Optimise your digital presence to capture these shoppers.
Secure Your Supply Chain – Work with reliable suppliers and consider local production to avoid disruptions that could hit profitability. You may even want to explore micro-factories. These small-scale, localised production units enable fashion brands to be more agile and responsive to changing consumer demands. With smaller batch production, you can reduce surplus stock and avoid overproduction, which can be a costly risk during a recession. Additionally, micro-factories help lower logistics fees by cutting down on shipping distances and time. They also offer better control over quality and customisation, allowing businesses to create limited-edition collections or on-demand items - appealing to more discerning customers. Plus, for the eco-conscious shopper, this model aligns with their values by supporting local production and reducing waste.
Trend Forecasting in a Recession
Recession-induced fashion trends often offer valuable clues for smart brands. While economic uncertainty may prompt consumers to pull back on purchases, it also opens the door for more strategic, value-driven buying decisions. So, how do you forecast the next big trends when the economy isn’t at its best?
Utility fashion is one trend that is gaining momentum. Clothing designed with both function and style in mind - garments that provide practical benefits, like jackets with embedded heating elements or UV-protective fabrics. As consumers become more selective with their purchases, versatility and functionality are key. According to McKinsey, the "smart apparel" market is projected to grow by 15% annually over the next five years, showing that tech-infused, functional pieces are becoming a go-to for consumers who want both style and utilitarianism.
Additionally, multi-functional and adaptable pieces are set to prosper. During economic downturns, consumers tend to invest in wardrobe staples that serve multiple purposes. Research by WGSN shows that 58% of consumers are increasingly prioritising clothing that can be worn in various settings, from work to casual outings, due to the need for value. As people aim to stretch their wardrobes further, multi-use pieces deliver greater benefit without compromising on style.
Lastly, the return of classic, tailored styles is expected. As economic pressures grow, there’s a greater emphasis on investing in quality, timeless pieces over fleeting, fast-fashion trends. A 2022 report from Deloitte found that 64% of shoppers stated they would rather buy fewer, higher-quality items than more, lower-cost pieces during economic downturns. This trend points to a resurgence in tailored, well-made garments.
Notice the common thread? All these trends share one key theme - sustainability. From tech-infused fashion to versatile, classic staples, consumers are prioritising longevity, functionality, and quality. These shifts aren’t just recession responses - they’re part of a broader, lasting move towards a more sustainable, thoughtful fashion industry.
Recession-Proof Brands in the Flesh
lululemon is a prime example of resilience during the 2008 financial crisis. While many brands struggled, Lululemon saw a surge in demand, driven by the growing athleisure trend. According to Lululemon's 2009 reporting, their revenue grew by 28.1% in fiscal year 2009, from $353.5 million in 2008 to $452.9 million. Today, Lululemon remains a dominant player in the activewear market.
Patagonia is another standout in the world of recession-proof brands. Known for its unwavering commitment to sustainability, Patagonia has built a loyal customer base that values durability and eco-consciousness. Even in challenging economic times, such as the COVID-19 pandemic, the brand continued to flourish. In 2020, Patagonia’s revenue surpassed $1 billion - the proof is in the pudding.
Integrating Financial Insights or Expert Opinions
To effectively navigate a recession, it’s crucial to integrate expert financial insights. As we've established, businesses that plan strategically and invest during downturns often see stronger recoveries once the economy rebounds. This was evident in the 2008 financial crisis, when companies like Apple and Amazon continued to invest in innovation and infrastructure, resulting in long-term growth. Amazon’s revenue grew by 28% in 2009, just a year after the downturn, showcasing the potential for rebound when businesses take a proactive approach.
Experts recommend a balance of "defensive" strategies, such as streamlining operations and fortifying supply chains, along with "offensive" moves - like targeting sectors that tend to be more resilient during recessions, such as e-commerce. Data from the U.S. Department of Commerce shows that e-commerce sales grew by 16.3% in 2008, even during the depths of the financial crisis, as consumers turned to online shopping for convenience and cost savings. Similar trends were observed globally, with Australian businesses in e-commerce also seeing growth during downturns.
Final Thoughts: Luck Favours the Prepared (Edna Mode - The Incredibles, 2004)
Fashion may seem like an unlikely economic barometer, but the industry is deeply tied to consumer confidence. In times of prosperity, people splurge on statement pieces, luxury goods, and experimental trends. When uncertainty looms, spending patterns shift - prioritising practicality, durability, and timeless styles.
Maxi skirts might be trending, and the economy might be shifting, but smart moves now can ensure you’re not just surviving - you’re thriving. When the dust settles, the question won’t be whether you endured the upheaval, but how much stronger you emerged on the other side.
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