My approach (and it was only my own approach, so I'm only offering my personal opinion here) was to try to let my kids be fashionable enough that they didn't look like "oddballs", but then to draw the line on some things I really wasn't OK with. I did something similar with video games: Some I was OK with (none that were violent),and some I just didn't care what other kids had them or didn't. I explained to my kids that I just wasn't about to buy the ones I didn't think a kid should be spending his "brain time" on.
How old the child was mattered to me too. At my daughter's preschool one of the mothers said how she couldn't get her child away from video games. (FOUR year old!) My thinking was that no four-year-old child needs to/ought to be playing video games more than occasionally (and that aren't aimed at preschoolers). On the other hand, when my teen-aged son and his buddy would entertain themselves playing video games, rather than be out "prowling the streets", I didn't think the games were such a bad thing for kids who were too young to work and drive and too old to be out playing the way younger kids do.
I do think, though, that it's important to help kids learn to sort out things like how to be fashionable but draw a line on what's "too much", or how to enjoy something like the games but recognize that some really don't make for "the best entertainment" for kids.
Believe me, I'm not one to be obsessed with fashion, and I was never one to compromise (with my kids) on the things I thought weren't appropriate for kids (or anyone); but I don't think there has to be an either/or thing when it comes to this stuff. I think helping kids learn how to be a little discerning helps them learn how to figure out what's right for them, and think for themselves; without either acting like mindless sheep or else rejecting everything "out there" just because it's popular.
(My two sons and daughter are now grown. I'm happy with their taste in clothes, awareness of what's appropriate attire for what circumstances/events, and the fact that they wear what looks nicest on them (but is fashionable) and won't wear some. things that they think are "tasteless". I'm only saying this to point out that trying to help them be discerning (without making oddballs of them) seems to have worked in our family.)