Retailing: Why does XL abound but M and L always sell out?
Efficiency & Allocation January 13th, 2008Most of us have experienced buying clothes but never being able to find the size we want. Particularly during clearance times, it seems that there are always excess articles in XL and XXL sizes but rarely any left in M and L. Economic reasoning tell me that this should not be so – it represents a relative misallocation of resources that could be more optimally arranged.
At its most basic level this phenomenon can be described as a relative shortage or surplus. There is a relative surplus of XL’s and a relative shortage of L, M, and S (sometimes there is a surplus of smalls though also; typically its L and M that sell out). Economists know that shortages and surpluses should generally not occur if there are no price controls in the market.
Given this situation, the producer should have an economic incentive to reduce production of XL articles of clothing and increase production of mediums and larges, since doing so will cause more transactions to occur at a higher profit level for the producer.
Because how widespread this phenomenon is, my intuition tells me that there is something else going on here. Anyone have any insights?
April 13th, 2008 at 11:28 pm
This is a nice question. One possibility is that there are more people in the M and L sizes, and therefore the manufacturer needs to make more S and XL than is expected, to minimize the probability of breaking the stock. Another possibility is that M and L surpluses get exported (there is a huge market for overstocks).
A related question: I believe most men are L and XL, and most women are S and XS. I think is if beacause most men want to be taller than avg, and most women want to be smaller than avg.
May 4th, 2008 at 8:54 pm
You’ve hit on a good possibility: the stock of shirts is not continuous but rather discrete, more like a step function. As such, it may be that companies that for example estimate 2.1 shirts will be demanded in extra large will order 3 shirts. If the same company estimates 20.1 shirts will be demanded in medium and gets 21 to round up, the rounding effect is proportionally higher for the smaller-demanded items. Still though, it would seem to me that this “discreteness” hypothesis would only explain part of the discrepancy. I’m inclined to believe it’s just subpar management.
May 7th, 2008 at 11:41 pm
Is it possible that these letters stand for more than just size, perhaps also a perspective derived from size? I hear similar comments from all sizes about the desired clothing coming only in other sizes and experience it frequently myself. So I’ve decided that as an XL, I have an XL perspective and it is more likely that the shirt I like will be liked more by XLs than Ms and Ls. Hence, I always find an abundance of the wrong sizes for the shirts I like.