The Macroeconomics of TikTok's 'Girl Math'
How Gen-Z's POV on pricing is changing shopping habits
Earlier this year, the Prada Raffia Crochet Tote instantly became the bag of the summer. The lightweight crochet knit, unique interpretation of the iconic Prada logo, and co-sign from big influencers was a recipe for success. Despite being seemingly everywhere, the bag retails at $2,050 USD. Considering the economic climate and the target demographic of Gen-Z and Millennials, it’s hard to justify a purchase like that so these consumers turn to metrics to help rationalize their decision making. One of the most tried and true metrics is Cost-Per-Wear. The thought process goes like this: If I wear this bag every day for 2 years, that’s effectively only $2.80 every time I wear it. This also doesn’t factor in the potential savings from buying other bags, which shows that the younger demographic is starting to evaluate opportunity cost. This thought process instantly went viral among Gen-Z and creators endearingly began calling this process along with the thought process of justifying purchases ‘Girl Math.’ While ‘Girl Math’ or Cost-Per-Wear is not a new concept, it shows a very important mental shift towards price sensitivity, Gen-Z’s understanding of opportunity costs, and perceived luxury.Â
Over the past few years, the public has realized that luxury products as an asset class usually beats the market. Between designer bags, luxury watches, and even high-end jewelry, the inherent scarcity of these items has entirely redefined the traditional buying process because you no longer have as much time to deliberate over your purchase. If you wait too long, you’re going to miss out. The limited production model coupled with influencers increasingly getting involved in the luxury space means that consumers are becoming less price sensitive and more supply sensitive. If a highly desired item is above your perceived price, you may still buy it and make concessions later to balance out your budget because you know that if you wait and it sells out, you will be paying a big premium on the secondary market.
Cost-Per-Wear is largely dependent on longevity, both that the item will hold up for multiple years, and also that you won’t get tired of it. If rationalizing purchases through Cost-Per-Wear, the consumer is going to focus less on trends and more on items they see themselves wearing long term. As a result, we will start to see a greater mix of luxury items paired with more accessible pieces since the luxury items will remain a staple across the trend cycle.Â
Aside from the quantitative aspects of ‘Girl Math,’ there are also some spending habits that feel more intuitive rather than rooted in pure logic, but they all have underlying economic rationales. The age-old phrase ‘don’t cry over spilled milk’ is a reference to Sunk Costs. In economics, a sunk cost is a cost that has already been incurred and cannot be recovered. Translated by TikTok, the Girl Math example is ‘if I buy a $100 shirt and then return that shirt, anything I buy with that $100 is basically free.’ While meant to be part-comedic, most consumers know the $100 in the previous example is not ‘free money’ but the viral explanation did what TikTok does best, translating broader concepts within more niche communities.
Potential long-tail macro outlook based on the rise of ‘Girl Math’ :
FinTech startups like Affirm and AfterPay will thrive because of the need for instant capital at low interest rates. We may start to see fintech companies verticalize in luxury/fashion and these companies will start to ramp up spend on influencer activations
Gen-Z financial wellness will be a big category for 2024 as debt rates continue to climb
Luxury brands will price their core offerings even higher knowing that there is new demand from the younger generation
High luxury prices will drive consumers to secondary markets opening up a market opportunity for sustainability and the revival of thrifting