Although they serve no functional purpose. It does create unique looks amongst your units. I use the clothes to address units that I want to have no armor, to reduce training times and general upkeep costs of the unit. An archer doesn't really need leather armor, nor do mages. These clothes can be modded to have a benefit to using only clothing, say a +1 to initiative or even +1 dodge.
Something that one can put into the game, and I do like the clothes look as I create and design units with clothing, even when the armor is replacing the clothing.