Five Forces Analysis of Fashion Retail Industry
The fashion retail landscape has grown highly competitive in the 21st century. While there are a large
number of brands, several of them provide relatively similar products. The market has grown densely
populated with fashion brands and still new brands can enter the market with new concepts. There are
several factors including the fluctuations in the global economy, rise of the digital, technology, demand
for fast fashion that are affecting the fashion retail market. Power is in the hands of the customers in
this era and therefore the focus of the brands is also on crafting a better consumer experience. Thus,
there are several forces affecting the market position of the fashion brands. This is a five forces analysis
of the fashion retail industry based on the Porter’s five forces model.
Bargaining power of customers:
Individual customers may have very little bargaining power in the fashion retail industry. However, there
are various factors that make the customers as a group an influential force. 21st century has handed
over the switch to the customers who are well informed, can choose from several alternatives and can
switch easily between the several brands in the market. The high level of competition and the
availability of so many brands and options makes the customers’ tasks easy. Fashion brands compete to
attract and retain customers and that’s the reason behind the high spending on marketing.
Brands employ several types of customer retention strategies including discounts and memberships. so,
overall the buying power of the customers is a significant force in the fashion retail industry. Even if the
customers do not influence a brand’s position directly, they do son indirectly. Brands are in a race to
serve and influence the customers in the best possible manner. technology is being utilized to improve
the customer experience and engage customers as well. Websites and apps have become indispensable
if a brand wants to create space in its consumers’ hearts.
Bargaining power of suppliers:
Suppliers are not a significant force in the fashion retail industry. very little action goes on at the back
end. Mostly the suppliers a re from the third world countries and have to follow the rules set by the
buying brands. Brands have the purchasing power and can easily switch from one supplier to another.
Brands use their financial clout to influence prices. So, overall, the suppliers have very little control and
therefore their bargaining power is insignificant.
Threat of new entrants:
Threat of new entrants is a weak force in the fashion industry. As already mentioned, it is a densely
populated industry and for a new brand to find success, it must use a significant level of differentiation.
Still, brands can find unique ways to grow popular and acquire success. The increasing popularity of fast
fashion is a proof of this fact. Moreover, investment is also a significant barrier. Apart from
infrastructure, there is investment in marketing, distribution chain and human resources. So, the threat
of new entrants is not a significant force in the fashion retail industry.
Threat of substitutes:
The threat of substitutes comes from inside the industry. Since the competition is intense, no brand can
stay assured that it will keep selling and remains celebrity without focusing on customers. Every brand
has several competitors and the space is continuously getting limited. From the high end to the low end
segment, brands have populated the fashion landscape. So, even if cloths in general do not have a
substitute, brands have many. Even for those who cannot afford luxury brands there are substitutes that
can make high end styles available at lower prices. For example, Zara.
Competitive Rivalry in the industry:
The fashion retain industry is remarkable for the intense level of competitive rivalry in it. There are a
large number of brands with similar product offerings. This makes the competitive rivalry intense.
However, some brands also drive loyalty based on features and quality. Fast fashion is an emerging area.
However, rest areas have become densely populated. Brands that have a strong brand image are able
to charge higher prices. Still, the race for winning customers has gotten so tough that there is pretty little
space for the new comers. Overall, the competitive rivalry is a strong force in this industry. brands make
use of discounts, offers and marketing to overcome this force.
