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Porters 5

In: Business and Management

Submitted By sashi333
Words 302
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The apparel industry has very low entry barriers. Entering the market does not require huge amount of capital. The setup can be as simple as a person selling his own designed apparel online which only required relatively low skills level.
In fact, the fashion retailing is a diversified market with numerous single shop retailers, local chain stores, international fashion chain stores, online shop… etc. However, if we focus on the fashion retail chain with economy of scale in production and distribution, that would create significant barrier for entry. Moreover, brand identification and production differentiation also set a barrier for entrance.

Threat of substitute products or services
The threat of substitute products in the fashion retailing is very high. Customer can buy another piece of garment in turn satisfying the same need. The competitors can even copy the “hit of the season” easily, customer can find similar products in the market with different price positions.
The switching cost on the substitute apparel is also very low. What’s more, many female considered shopping as leisure activities. Retailers also lower the switching cost by providing online platform for shopping which in turn provide price information to customer as well.
To retain their customers, fashion brand has put a lot of resource on building their brand and establish the perceived value on their product (i.e. level of quality and style).

2.3.3 Bargaining power of customers

Customers’ switching costs are low and the brand loyalty is also low in the apparel industry. There are also substitute in the market available to them. However, if we look at the buyer’s concentration to retailer concentration, together with low possibility of customer integration, the fashion retail chain also enforced certain power over their customers.
For Inditex, they have put effort on…...

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