Call it the $4.95 frock that rocked the fashion world. It costs less than a Grande Caramel Frappuccino at Starbucks, and it’s cheaper than a six-piece Chicken McNuggets Value Meal at McDonalds. You could take that money to your neighborhood CVS and still come up short on a $5.99 tube of Wet N’ Wild Shade Adjusting Foundation. Although H&M has been trumpeting its “high fashion, low cost” ethos for years, the Swedish fashion retailer has reached a new nadir with its freshly slashed prices—cheap even by fast-fashion standards. And that vertically striped, sweetheart-neckline cocktail dress may just be the beginning.

H&M, H and M, fast fashion

FAST-FOOD PRICES

“Our business idea is to offer fashion and quality at the best price,” Håcan Andersson, a spokesman for the company, tells Ecouterre, before referring us to information listed on the company’s website. But company mission aside, at a time when the apparel industry is getting thrashed by price hikes, H&M’s move remains an audacious one. $4.95 dresses? $20 trench coats? What universe does the Swedish retailer live in? And more important, how is H&M getting away with it?

“It just means they are squeezing the stakeholders in their supply chain to pull this off,” says Howard Brown, co-founder of Stewart + Brown, a Los Angeles-based pioneer in sustainable fashion. “Their copycat competitors will do the same. If this trend has any staying power then we might as well kiss the American apparel manufacturing sector, and those hundred thousand are so jobs that are still left, goodbye.”

$4.95 dresses? $20 trench coats? What universe does H&M live in—and how is it pulling it off?

Pay close attention to H&M’s shell game, Brown warns. “Anyone who knows anything about marketing and advertising knows this is a strategy that employs a ‘loss leader’ to send a message to customers that ‘we have super deals’ in hopes of getting people in the stores,” he tells Ecouterre. “The next headline they feed the press will have something to do with the dresses and trench coats being ‘so hot’ they couldn’t keep them in stock. That will make their customer race to the store next time they spot a bargain like this.”

Scarier still is the arms race H&M’s decision might trigger. “Watch for Walmart, Kmart, and Target’s response to this campaign as they are all going after the same customer now,” Brown adds. “It’s a race to the bottom. No thanks.”

H&M, H and M, fast fashion

QUALITY OR QUANTITY

H&M does not own factories of its own. Rather, it buys its garments from roughly 700 suppliers, mainly across Asia and Europe. To regulate its loose-knit conflagration of suppliers, the retailer drew up its own Code of Conduct, based on the UN Convention on the Rights of the Child and the International Labor Standards concerning wages, working conditions, and a ban on child labor.

So here’s the 800-pound gorilla in the room: How can H&M produce clothes so cheaply if it’s abiding by ethical labor standards? “The way factories work is they’re pushed to make the largest quantities in the least amount of time,” Eliza Starbuck, the designer behind Bright Young Things, explains. “This is how the factory makes its money.”

Garment factories are pushed to make the largest quantities of clothing in the least amount of time.

In other words, the greater the number of goods a factory churns out, the more the factory honchos get paid. Basic math, right? Although making double time doesn’t necessarily mean that the garment workers are earning less—their pay rate usually remains unchanged, notes Starbuck, and they might get overtime hours—if the factory has to turn out twice as many garments in the same amount of time with the same number of workers, something has to give. “If they’re making garments that quickly, the quality is completely lost,” she says. “There’s no promising what quality will be like.”

H&M, H and M, fast fashion

CLEAN BY DESIGN

H&M isn’t completely insouciant about Ma Nature. Despite the occasional PR stumble, it has been forthcoming about attaining specific sustainability benchmarks, including increasing its use of organically grown cotton by 50 percent every year until 2013. Working with the Natural Resources Defense Councils’s “Clean by Design” initiative, H&M has also committed to working with its Chinese suppliers to reduce water, energy, and toxic-chemical use in its supply chains.

Textile manufacturing consumes—and pollutes—as much as 200 tons of water per ton of fabric.

Textile manufacturing, after all, consumes—and pollutes—as much as 200 tons of water per ton of fabric, according to the NRDC. If only 100 small-to medium-size textile mills followed the environmental nonprofit’s recommended improvements, China would save more than 16 million metric tons of water annually (enough to provide 12.5 million people potable agua for one year), as well as eliminate nearly the same amount of emissions from 172,000 cars annually.

What’s in it for H&M besides good press and a warm, fuzzy feeling? A case study with the Redbud textile factory in Changsu (a Walmart supplier) showed that by adopting some of the NRDC’s best practices and ponying up an investment of $72,000, the factory is generating savings at a rate of $840,000 annually.

But will the Swedish label’s environmental cleanup efforts amount to a hill of knitted beanies if it compensates by cranking out clothing at an even more furious pace?

H&M, H and M, fast fashion

FASTER FASHION

Designer Eliza Starbuck likens the new, cheaper clothing to candy wrappers. “It’s throwaway fashion or ‘trashion,'” she says. “If their prices are that cheap that people are throwing their disposable income at them—only to find that the clothes fall apart on the hangers and after a wash or two—they’re just creating garbage.”

Designer Eliza Starbuck likens the new, cheaper clothing to candy wrappers.

Concern for recession-pummeled pocketbooks is one thing, she notes, but at what cost? “It takes such a huge amount of human energy and textile fibers, dyes, and chemicals to create even poor-quality clothes,” she says. “They may be offering fashions at a price anyone can afford in an economic crunch, but they’re being irresponsible about what happens to the goods after the consumers purchase them.”

Few people, in the end, have the fortitude to pass up a good deal; like magpies, we’re drawn to what’s newest and shiniest. “When those items are cheap, we can consume more—and therefore compete—with less financial risk,” says Tara St. James, who designs Study NY, a sustainable fashion label in Brooklyn.

St. James isn’t convinced, however, that this isn’t a learned behavior, nor that consumers cannot be reeducated to prize quality over quantity, longevity over novelty. And when demand for higher-quality goods peaks, supply will not be far off. “It creates a responsibility in designers to develop products that not only have longer life spans but also products that will not be discarded after a season of use,” she says.

As mercurial as the speed of the fashion cycle is, it’s as dependent on the customer as it is the designer, since one party fuels the earnestness of the other. But whether the new frugality that the recession has ushered in will precipitate in a desire for long-term investment pieces or short-term throwaway garments—well, that remains the $4.95 question.

+ H&M