The objective of this report is to provide the analysis of the Women's Clothing Stores industry. The industry comprises of the line of the ready-made women clothing, and the category includes a specialized women suits, coats, and dresses. The industry also includes the maternity wear and line of women misses. Since 1990, the structure of the women clothing stores in the United States has changed significantly because of the transition from the "production-driven market to a consumer-driven market" (Baye, 2010 p 8), and the consumer in the United States spent approximately $36.7 billion in women clothing in 2005. In the mid-2000s, the employees in the industry worked as sales associates performing customer service jobs as well as varieties of operational duties that include the product displays and stock organization. Moreover, the store managers' responsibility is to oversee sales, perform oversea functions and operations. Similar to the other industries, women clothing is also being affected by recession. The recession that affected the United States between 2008 and 2009 made the industry to record a decline in sales of 7.6% in 2009.
Background of the Industry
Since 1990s, the structure of the women clothing industry has changed significantly because the introduction of the online stores has made the women clothing stores to reach the global market. By the end of 1999, the online stores record sales of $13 billion, however, the sales trends within the last 5 years increase slightly because of the recent economic recession. The unemployment rates and decline in the American disposable income has reduced the consumer demand. The women clothing business started in Europe and were introduced into the American colonies in 1700s at the time of the clothing production in the United States. During this period, many traders opened retail stores, and the invention of the sewing machine led to the proliferations of the retail stores in the late 19th century. By the 1920s, it was fashionable to buy women clothing from the retail stores.
The purpose of this paper is to carry out the industry analysis of the Women's Clothing Stores. The analysis incorporates the industry variables being described by Porter Five Forces.
Data sources (primary/secondary)
The paper collects data through secondary data sources from the government database such as http://www.census.gov/retail/. The paper also handpicks the book written by Baye, (2010) and titled "Managerial Economics and Business Strategy" for the secondary data. Moreover, the author searches the industry reports from the electronic database such as the EBSCOhost database.
Industry classification provides the information about different industries within the U.S. economy. The "NAICS (American Industry Classification System) is a standardized classification system for the three partners of the North American Free Trade Agreement (NAFTA): Canada, Mexico, and the United States." (Baye, 2010, p 242). As being revealed in the Table 1, the NAICS classification of women clothing industry reveals that the women clothing stores belong to the sector of the retail trade, while its subsector 448 belongs to the clothing and accessories stores. The 4481 industry group belongs to the clothing stores while its NAICS industry of 44812 and the national industry 448120 belong to the women's clothing store. The understanding of the NAICS classification assists in understanding the competitive position of a firm within the industry.
Table 1: NAICS Level
Clothing & clothing accessories stores
Women's clothing stores
Women's clothing stores
Plan of the Paper
The rest of the paper is structured as follows:
First, the paper discusses one of the dependent variables influencing the structure variables in the industry, which include the entry conditions of the buyers and sellers. Moreover, the paper discusses how the power forces in the industry assist in setting the price above the costs. The paper also discusses the performances in the industry, which assists in making the profits in the long run. The paper also discusses the trend line and the interpretation of the data collected.
The paper uses the Porter five forces to evaluate the industry performances and the strategic firms in the industry employ to set the price above the costs.
Porter Five Forces
The Porter 5 forces are the powerful tools to carry out the industry analysis, and the Porter 5 forces assist an organization to understand the entry conditions and competitive forces of an industry. The paper carries out Porter 5 forces for the Women's Clothing Stores using the variables such as Entry Conditions, Power of Buyers, Power of Suppliers, Substitute / Complements and Rivalry.
Porter (2008) argues that ability of an existing firm to make profits and maintain the level of profits is the ease of entering condition in the industry, and the barrier to enter the industry affects the industry profitability. The analysis of the women clothing stores reveals that the threat to enter the women clothing industry is generally low because it requires low financial resources to enter the industry. While financial resources are one of the major conditions to enter the industry, however, the major players in the industry have used their superior financial resources to deter other firms from entering the industry. The strategy is by using the economic of scale to enjoy the market force within the industry, and this involves using the economies of scale position to reduce the variable costs of production thereby setting the price above the costs.
The economies of scale are one of the strategies that the large payers use to enjoy market powers. Typically, industry players use the superior pricing strategy to set the price above the costs because the firms are able to produce their products at a lower price per unit thereby enjoying the market advantages. However, the new entrants may face challenges to compete in the industry because of the inability to use economic of scale to produce.
The government regulation is another entry condition in the industry; however, the government regulation does not deter the new entrants into the industry. The brand is the most powerful force that influences the barrier to entry in the women clothing stores. Since 1990s, brand is synonymous to quality and firms that are ready to compete successfully in the industry should be ready to offer a fashionable women clothing that commands market acceptability.
Branding and the economies of scale are the powerful tools that enhance industry performances that allow firms to enjoy profits in the long run. Essentially, firms are able to maintain the profits in the long run if they develop a brand strategy that will maintain a customer patronage. In the contemporary business environment, firms that are able to offer values to customer will maintain the customer loyalty over a long period thereby enjoying profitability in the long run.
Jedidi, Mela, & Gupta (1999) argue that advertising and promotion are the effective marketing tools to maintain profits in the long run, and enhance brand equity. Typically, the long-term advertising assists firms in enhancing long-term equity, and profitability. Baye, (2010) support this argument by pointing out the advertising is one of the entry conditions to enter the industry. Advertising can shift the demand curve from the left to the right, and the advertising can influence the consumer into buying the high taste women clothing. Suppose firm records the demand of 8,000 units of high taste women clothing per month for $40 before advertising, the firm can increase the demand to 10,000 units per month after advertising by shifting the demand curve from the left to the right as being revealed in the Fig 1. From the fig 1, the existing firm in the industry has already enjoyed the customer loyalty due to advertising. Thus, a new firm wishing to enter the industry will need to incur the costs of advertising to enjoy the market demand.
Fig 1: Shift in the Demand Curve for the Women Clothing due to Advertising
Power of Buyers
The intense competition among the women's clothing stores in the United States has enhanced power of buyers with the ability of consumer to switch from one store to the other. The increase in the number of stores selling women clothing can enhance power of buyers because a buyer can switch from one store to the other to make a purchase. Typically, the industry profits are low when buyers have the power to negotiate for the favorable term. Recent development of internet has also led to the proliferation of online women clothing stores, and the presence of online women clothing has increased the power of buyers because it enhances their ability to switch from one stores to the other. Moreover, concentration of offline and online women clothing stores has increased the power of buyers within in the industry. However, some stores within the industry enjoy more competitive market advantages than other women-clothing store. For example, some buyers prefer doing their shopping in the women clothing stores selling the high quality and affordable clothes. For example, the…