Question

What is competition like in U.S. Retail Family Clothing Industry? Which of the five competitive forces is strongest? Which is weakest? What competitive forces seem to have the greatest effect on industry attractiveness and the potential profitability of new entrants?

Answer 1

M. E Porter’s Five Forces analyses (How competitive forces shape strategy) is an approach to determine how competitive a given market is and how profitable it may be for a business.

The Five forces model of competition

All five forces in the retail clothing industry are analysed;

Buyer Power

In retail family clothing industry (we can also consider it as fashion industry) buyer power is a relatively large force. Retail cloth buyers have less direct bargaining power. But they have alternative options to shop for clothes and little incentive to stay with one particular company, which gives them indirect bargaining power.

Supplier Power

In the retail clothing industry, supplier power is a relatively small force. Since firms source their input products from third world manufacturers, the suppliers control over fashion industry becomes negligent level.

Competitive Rivalry

In the fashion industry, large numbers of retailers are selling similar products, but there’s also the concept of brands, which will make some firms to sell clothes for unacceptable rates. So the industry is becoming saturated with very similar products.

Threat of New Entries

Threat of new entries to retail clothing industry is relatively small. If they want to make their own place in the industry, they need to find unique ways to popularize their own products. The current state of fashion industry can be defined as ‘high risk, high reward’ for new entrants coming up.

Threat of Substitution

In the retail clothing industry, there is only a small force of substitution which is almost negligible. Because here there is only competition, not substitution.

Strongest force and weakest force

After doing the analysis we can say, the strongest force is rivalry among competing sellers of clothing, which always growing and intensifying day by day. The weakest force will be threat of new entrants. Since the cost of starting a globally popular brand is really high and the industry densely populated, the threat face by new entrants to the industry is really smaller.

Competitive forces with greatest effect on industry attractiveness and the potential profitability of new entrants

The current state of the industry can be analysed to find the solution. The increasing level of competition can be attributed to both the established competitors (famous brands) and the growth of online shopping with the decrease in high street shopping numbers. While competitors mainly competed on the brand name, price-conscious buyers may decide to buy a different brand if the price is lower than the other one, or shop through online channels. Thus discounts offered through online shopping, which people prefer more than the high street stores, increased competition. The rise in non-traditional competitors, such as Amazon and other online shopping sites further increased competition by giving easy shopping experience to customers. Potential profitability of new entrants are challenged on the basis of how they differentiate from other competitors.