Clothes I believe had some practical use as you've already mentioned, but when practicality stops, its still retained, and when you question why? I would say the answer is distinction.

We humans like to be individuals, and as individuals we want to stand out or at least identify ourselves as unique and different from others. If you're "naked" you would likely paint your body, or add accessories to yourself. With clothes, you do so with different styles and patterns.

When this distinction is created on an individual level, slowly it "evolves" into a group. Where people start to "copy" from one another or form groups based on certain "dress codes". Which is why you have clothes which denote status/rank. Then within this group, you will continue to have people trying to set themselves apart from others. Best example would be formal men wear. Mostly the same, but if you pay attention you can see subtle differences in the tie, shoes, cufflinks, etc.

Once a dress code is established to denote certain rank/status/membership, then you have to consider that you have to dress like that group to be part of it. Its social compliance, and if you do not follow the "rules" you're either called a rebel, or if you're charismatic enough, the leader of a new trend

It all boils down to trying to be a distinct individual in society.