The Design, Marketing Distribution and Sales of the apparel industry has been mostly done by large global retailers based in either the European Union (EU) or the United States (US). We can term this segment as the Retailing segment of the apparel industry, and can look at at it both from a firm perspective and geographical perspective, since there is not a huge concentration within this segment using either perspectives.
The chart above looks at the key players in terms of imports from a geographical perspective. Countries in the European Union (EU) and the United states have been the largest importers of apparel since the 1980’s and continue to be so in 2015, with a share in world import of apparel at about 53.2% and 19.4% respectively in 2015. There has been a trend of increasing import of apparel in other developed countries apart from the US and the ones in EU, as we can see in the chart above. You can learn more about the trends within each of the main importing zones, i.e. EU and US, in the Profile: Lead Importing Regions.
There are a few global retailing chains as well as departmental stores based in the US and the EU that control most of this segment of the value chain. Within this segment the concentration is not very high, and the segment is getting more consolidated still with the popularization of online retailing. You can find more details about some of the top retailers in the Profiles: Lead Firms page.
Sources of Power in the Industry
Power that these firms have comes from several distinct sources, including:
- Proximity to end markets:They usually operate countless distribution centers in the U.S and the EU, which would be really hard to set up from scratch by the manufacturing companies.
- High start up costs: The amount of capital required to enter the industry serves as a huge barrier to entry to companies seeking to break into the retail segment of the industry. This problem is compounded by the fact that in order to be competitive in the industry firms must have a very large capital base as well as buying power, as economies of scale are the only way in which operators can keep their prices competitive and this is impossible to do as a small operator.
- Integrated control of several supply side processes: Controlling downstream supply-side processes such as distribution, packaging and retailing is crucial to driving costs, such as transportation costs, down drastically.