Porter’s Five Forces

-Threat of new entrants

Entering the industry doesn’t take large capital outlays.

Setting up a single, independent clothing store is within the means of many individuals.

However, existing retailers are likely to retaliate with tactics such as a pricing battle.

Essentially, the threat of new entrants to the

luxury goods industry is STRONG.

-Competitive Rivalry

The luxury goods market is rather fragmented, where there is room for large numbers of small players.

Major increases in capacity may be fairly costly to smaller players, if they require the outlay of opening additional outlets.

While some retailers selling apparel are diverse, many keep a strong emphasis on clothing, intensifying rivalry.

The modest market performance over the past five years only partly alleviates rivalry, being moderate overall.

-Bargaining power of buyers

Demographic and psychological significance are highly important to consumers, making the buyers power weak.

Customers have low switching costs. Where this is brand loyalty, this strengthens that power.

Fashion is very unpredictable. This strengthens the customers power.

This is assessed as low to moderate.

-Bargaining power of suppliers

Key suppliers in the luxury goods market are wholesalers and manufacturers. Retailers source from foreign manufacturers mostly, which increases supplier fragmentation.

Suppliers are weakened by the lack of diversity. This is low to moderate supplier power in this market.

-Threat of substitutes

Substitutes include buying directly from manufacturers. Given the socio-political environments that individuals live in, matched with the need for group and individual group identity, this makes luxury retail clothing essential to customers. This makes the threat of substitutes to luxury good weak.