Inditex is a Spanish public limited company dealing in the retail industry and providing goods and services in the clothing and fashion sector across the country and most countries in the world. In context to the retail segment, the company was founded in 1985, having its headquarters in Arteixo, Spain. As of 2019, the corporation showed significant sales of 28.2 Billion Euros and has involved an employment figure of almost 176,000 (Inditex, 2019). In addition, the firm is operating over a vast network of around 7292 stores at different locations worldwide. Therefore, from the global retail industry perspective, the assessment of Porter’s five forces would be a realistic means for maintaining appropriate strategies to better understand the company standing position.
Competitive Rivalry in the Market
The competitive rivalry in the fashion and clothing retail industry is high due to societal trends and increased demand and supply of clothing and styles to meet the needs. As a consequence of this increase, several brands and firms have captured the market to provide multiple platforms for the customers to purchase from, resulting in severe competition among an established group of actors. The major competitors of the group are Punto Fa, Tendam and Tous in the retail industry. As of 2020, Inditex is considered the consistent market leader in terms of the highest numbers of employees, with approximately 176 thousand employees. Mango, a brand of Punto Fa, with almost 15 thousand workforces, is a distant second. Tendam, with some 10 thousand employees, and Tous, with a total of four thousand workforces, are key prominent retailers (Statista, 2020). Hence the presence of such big names in the industry makes the environment more complex for each other.
Threat of Substitutes
The threat of having substitutes is typically low in the retail industry because, to meet the demand and supply of clothing and fashion products and goods, a large number of brands are already operating. However, the differentiating factor of a limited selection of substitutes can pose a minor threat as consumers can become attracted by rivals. Furthermore, some alternatives are more costly than the quality and service of existing retailers. The use of technology in dealing with operations and improvement in procedures (Sorace et al, 2015) cannot be termed an alternative for retailing. Hence, a making less threat of substitution in the industry.
The Threat of New Entrants
The threat of new entrants in the clothing retail business is usually low as many brands are available in the market with local, luxury and niche products. Along with the current majority, the new actors would have to bring some form of clientele. Because manufacturers rely significantly on recommendations and word of mouth. It’s difficult to attract new clients if you don’t have a brand presence, product differentiation could be barriers to entry (Sutter et al, 2015). Moreover, the costs associated with sample collections and designers could be a hurdle to enter. Government policies do become a difficult situation to handle sometimes for the newbie. It increases a sense of healthy competition among firms due to the nature of the retail industry. Hence, the new entrant likelihood is high.
Bargaining Power of Buyers
The Bargaining power of customers in the fashion and clothing retail industry is more because there are various brands in the market; individuals can buy from any particular brand in the industry. Furthermore, the product offers and prices of brands competing are comparable, resulting in a significant level of buyer power. Furthermore, the awareness of the customers has increased due to the internet channels regarding the product prices and offers, which influence the buying behaviour of customers. Also, there is no binding to shop from a specific retailer, and the cost of switching between brands and retailers have no bindings for customer loyalty (Izni and Wandebori, 2020), adding more to buying power. Therefore, customers have more authority in the context of the retail industry.
Bargaining Power of Suppliers
The Bargaining power of suppliers in the industry is considered low to moderate because of the presence of a considerable number of suppliers in the industry, which imposes a low pressure on the brands. Furthermore, Individual Suppliers have a reduced effect on large retail brands. Most apparel firms get their items from third-world suppliers who only get a small portion of the amount. In addition, suppliers have limited control over the fashion business as, consequently, the increased supply capacity makes it more challenging for them (Wang, Tang and Zhao, 2018). Hence, supplier power of bargaining in context to the fashion and clothing retail industry is kept low to moderate.
References
Inditex, 2019. At Inditex, they aspire to be part of everyday and extraordinary moments, looking to the future. They aspire to improve the environment around us, without compromising who we are. Find out how in its new Annual Report. [online] 2019 Annual Report. Available at: http://static.inditex.com/annual_report_2019/en/.
Izni, A.A. and Wandebori, H., 2020. Proposed Business Strategy for Small Medium Enterprises (SMEs)(Case Study: Rimbang SMEs of Clothing Industry). European Journal of Business and Management Research, 5(4).
Sorace, S., Pantano, E., Priporas, C.V. and Iazzolino, G., 2015, November. The future role of digital technologies in emerging technology-based retail environments. In 2015 8th International Conference on u-and e-Service, Science and Technology (UNESST) (pp. 72-76). IEEE.
Statista, 2020. Fashion: leading companies Spain 2020, by employees | Statista. [online] Statista. Available at: https://www.statista.com/statistics/458784/largest-fashion-companies-in-spain-based-on-number-of-employees/.
Sutter, M.B., Galleli, B., MacLennan, M.L.F., Polo, E.F. and Correa, H.L., 2015. Brazil’s fashion and clothing industry: sustainability, competitiveness and differentiation. Latin American Journal of Management for Sustainable Development, 2(3-4), pp.280-295.
Wang, Y., Tang, W. and Zhao, R., 2018. Information sharing and information concealment in the presence of a dominant retailer. Computers & Industrial Engineering, 121, pp.36-50.