The Asia retail apparel industry is a large, highly fragmented. There are sizeable companies which conduct by number of chain stores and small companies run by individuals. The profitability are driven by many factors, such as cost control, pricing, economic conditions, fashion trend and etc. Porter! |s five forces model analysis: Threat of Substitutes Clothing is common known as the basic needs for human life. It is a kind of necessity that is hard to have substitution and replacement. Basically, apparel products are no major different in nature of function.
But the main differentiation may come from the brands. Thus, the treat of substitutes is a minor factor. Threat of Entry As mentioned above, the retail apparel industry has numerous big and small-size companies. The entry to the apparel industry as an individual retail or private label is quite simple and easy. There are always new comers in the industry. The power of entry barriers is insignificant.
Rivalry between Established Competitors The competitions between companies are with the same intense. The risks of failure are high. Although there are no single retailer or group can dominated the industry. Sizeable companies can gain economic of scale and the power of small companies to compete with them is minimal. There is lower diversity of competitors as same level of competitors usually has the similar products, cost, strategies and management style lead to intense price competition. Bargaining Power of Buyers In the retail apparel industry, the buyers are the end user of the products or consumers.
They have high bargaining power as the intense competition. The consumers are price sensitive. There is nearly perfect information as the price of each product is open. The consumers are tending to search the value-for-their-money product among retailers. And due to the similarity of the products, the consumers switch among retailers without any hesitation. Bargaining Power of Supplier Supporting this large industry, there are also a lot of manufacturer supplying the apparel products.
The bargaining power of the supplier are depends on the size of the retailers. Manufacturer often has less bargaining power to sizeable companies comparing to small companies as the former usually buy in bulk quantity and less cost to switch manufacturer. On the other hand, labour forces also the supplier of the industry. However, as sales is not a skillful position. The education or technical requirement is low; and the labour supply is large. As a result, the bargaining power of the labour force is low.
To conclude, the retail apparel industry is attractive industry due to lack of substitutes, easy to entry, the bargaining power of buyer is high.