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THE RETAIL APPAREL
INDUSTRY IN BRAZIL
A strategic analysis prepared for
H&M HENNES & MAURITZ AB
Lauren Isaak 7 May 2010
CONTENTS
SCOPE OF THIS REPORT
3
EXECUTIVE SUMMARY
3
INTRODUCTION
4
H&M’S POSITION
5
PESTEL ANALYSIS
6
CONSUMER TRENDS WITHIN BRAZIL
8
TRENDS IN THE COMPETITIVE LANDSCAPE
9
-
Zara in Brazil
11
STRATEGIC RECOMMENDATIONS
11
FINAL RECOMMENDATION AND CONCLUSION
14
REFERENCES
15
APPENDIX I
18
APPENDIX II
5
THE RETAIL APPAREL INDUSTRY IN BRAZIL | Lauren Isaak
2
SCOPE OF THIS REPORT
The following report will analyse the Brazilian retail apparel industry with
a view to assessing the feasibility of Foreign Direct Investment (FDI)
by the company H&M. PESTEL analysis will be applied to provide a
well-rounded view of the environment in which the company would be
operating. In examining the current and future competitive landscape, the
report will apply and elaborate on an analysis conducted using Porter’s
Five Forces framework. Due to its importance, analysis of the consumer
market is included, but will be brief due to report size restrictions.
Preliminary strategic recommendations will be presented. It is proposed
that further research and analyses focus on consumers, the logistics of
establishing operations, and competitors’ strategies.
EXECUTIVE SUMMARY
As the global economic environment restructures itself post-downturn,
new markets are emerging with positive prospects for investment.
To date, H&M has focused on developed markets in the Northern
Hemisphere, while its key rival – industry leader Inditex, with its brand
Zara – has expanded into emerging markets as a first mover.
In selecting a new market with which to broaden its portfolio, H&M has
chosen Brazil for consideration. As the dominant market for apparel sales
in the Latin American region, Brazil has a large, emerging middle class
and good economic credentials. While some areas are holding Brazil
back, the country has been confirmed as a safe investment destination;
the time for first movers is now.
The retail apparel industry in Brazil is characterised by fragmentation
and impacted on by Brazil’s large informal economy. While low barriers
to entry increase rivalry, opportunities do exist for foreign retailers with a
strong brand identity, experience and a point of differentiation.
There is a real opportunity for H&M to succeed in Brazil and add value
to the Brazilian retail apparel market. Positioning H&M as the brand for
middle-class Brazilians who shop at established leading retailers such as
C&A, Lojas Renner and Lojas Riachuelo, but who aspire to shopping at
Zara, the company would bridge an important gap in the market.
3
INTRODUCTION
BRAZIL is the world’s fifth largest apparel market (McKinsey & Company,
2007), and the largest by far in the Latin American region (Euromonitor
International, 2009b). (See Clothing Footwear Value Sales figure below)
The Brazilian fashion industry was worth US$37.2 billion in 2007, and is
growing at a rate of over 7% per year (A.T. Kearney, 2008). Growth has
been driven by 25 million consumers reaching adulthood over the last
decade (WGSN).
AT Kearney’s Retail
Apparel Index 2008
ranked Brazil as
the world’s most
attractive emerging
market for retail
apparel investment
Employing 1.7% of the population, the industry is the second largest
generator of ‘first jobs’ in Brazil (WGSN, 2008a), and as such is an
industry intrinsically linked to Brazil’s social and economic development.
The inward focus of Brazilian fashion retailers may present a barrier to
foreign entrants. Due to a lack of trade relationships with the United States
of America and Europe, clothing exports are low, and 97% of production
is destined for the domestic market (ref). Investment in new machinery,
technology and research and development (R&D) in the sector has
increased, and currently amounts to US$1 billion annually (WGSN, 2008a).
Despite a possible lingering inward focus in the industry, A.T. Kearney’s
Retail Apparel Index 2008 ranked Brazil as the world’s most attractive
emerging market for retail apparel investment, ahead of China and India.
An opportunity exists for H&M to be at the forefront of success in this
potentially huge emerging market.
Clothing Footwear Value Sales in Latin America by Country 2008
Chile
Argentina
Mexico
Brazil
4
H&M’S POSITION
H&M is the world’s second largest clothing and footwear
specialist retailer (Euromonitor International, 2009c).
Headquartered in Sweden, the company has a presence in 37
markets (H&M, 2010). H&M has predominantly focused on
European and North American markets to date, while its major
competitor – industry leader Inditex – has been able to reap first
mover advantages in emerging markets under a more aggressive
expansion strategy (Euromonitor International, 2009c).
H&M seeks to increase the number of H&M stores by 10-15%
per year (H&M, 2009).
Notwithstanding Inditex’s presence, the potential of emerging
markets is relatively undiscovered. Due to a downward trend in
H&M’s northern hemisphere markets (Euromonitor Internation,
A fast fashion
retail strategy and
solid competitive
advantages place
H&M in a good
position to consider
the Brazilian market
2009e), combined with increasingly fierce and diverse
competition (Euromonitor International, 2009c), H&M has judged
it timely to assess the feasibility of expansion into Latin America,
via Brazil. As one of the BRIC economies, Brazil is emerging as
a major market. Early entry would put H&M in a good position to
take advantage of the growing economy to expand and establish
a wide customer base.
A fast fashion retail strategy and solid competitive advantages
place H&M in a good position to consider the Brazilian market.
The company’s business model, which has evolved to stay viable
in the competitive fast fashion industry, comprises strong control
of the logistics process, low inventory, and flexibility to change
collections rapidly to adapt to consumer tastes, and allows H&M
to undercut most rivals (Euromonitor International, 2009c). This
strategy is suited to populous markets, a criterion Brazil easily
satisfies. Positioning in the low-priced clothing segment would
allow H&M to appeal to a wide range of consumers, while its
clear competitive advantage in terms of fashion, desirability and
international reputation would provide a means to differentiate
from local competitors.
5
PESTEL ANALYSIS
Political
Brazil will hold a presidential election in October 2010. The ruling leftist
Workers Party (PT) is expected to win the election, which will see Brazil’s
statist model of development continue (EIU, 2010).
Tax reform is urgently needed, but not foreseen to occur in 2010
(Euromonitor International, 2010c). Clothing and footwear retailers incur
taxes of up to 42% (Association for Shopping Centre Retailers [Alshop] in
Euromonitor International, 2010c).
A dramatic increase in the number of Chinese clothing exports to Brazil,
and the effect of the flood of cheaper garments on the domestic clothing
manufacturing industry is causing domestic associations and unions
to lobby the Brazilian government (Euromonitor International, 2009e).
Although no action has yet been taken, the government may take
protectionist measures if the trend continues.
There is a high level of corruption in Brazil. Companies operating in Brazil
will be subject to learning jeitinho – the way to get things done with the
Brazilain public sector (Euromonitor International, 2010d).
Brazil belongs to the free trade zone Mercosur, offering foreign companies
access to Argentina, Uruguay and Paraguay (Euromonitor International,
2010d). Brazil imposes a tariff of 35% on textile and footwear imports
from countries outside Mercosur (WGSN, 2008a).
Economic
Macroeconomic stability is now well-entrenched in Brazil (Prideaux,
2009). Government policies have targeted low inflation and fostered
strong economic growth (Economist, 2009b; see Appendix I – Real GDP
Growth). As a result, Brazil was the largest recipient of FDI in Latin
America between 2003 and 2008 (ref).
The effects of the global financial crisis were felt in Brazil, where
GDP contracted by 0.7% (Euromonitor International, 2010d). The
government’s response to the crisis was to cut sales taxes and increase
lending by state-owned banks (economist). This spurred domestic
consumption (see Appendix – Consumption as % of GDP), mostly by
lower-income consumers, and is regarded as a main reason for Brazil’s
resilience during the global downturn (Euromonitor International, 2010c).
6
In September 2009, rating agency Moody’s elevated Brazil to investment
grade (Economist). Standard & Poor’s have also upgraded Brazil’s longterm sovereign debt to investment status (WGSN, 2008c).
Sociocultural
At 193.7 million in 2009 (Euromonitor International, 2010d), Brazil is
the largest consumer market in Latin America (see Appendix – Population
growth). Brazil’s is also a young population; around 60% of people are
under 29 years old (A.T. Kearney, 2008) (see Appendix – Population age).
Brazil’s middle class is growing at an unprecedented rate. The
Government’s Accelerated Growth Program (PAC) and Bolsa Família
program are largely credited with this reduction in inequality (Euromonitor
International, 2009e).
Annual disposable income in Brazil is also steadily increasing across all
classes (See Appendix – ADI, and ADI of decile 10). Apparel has been
among the first categories to benefit from an increase in disposable
income (see Appendix – Consumption expenditure on clothing).
The Brazilian attitude towards consuming is shaped by habits developed
during Brazil’s era of hyperinflation in the 1980s and early 1990s, when
consumers would “rush to spend their wage packets before rapidly rising
products wiped out their value” (Euromonitor International, 2010a).
Technological
Government spending on transport infrastructure was 0.1% in 2007,
in comparison to the 7% recommended of developing countries by the
World Bank (Economist, 2009c). In general, transport infrastructure in
Brazil is in urgent need of renewal. President Luiz Inácio Lula da Silva
has announced an US$886 billion infrastructure investment plan to be
carried out by his successor should the party win the election (Soliani
& Simoes, 2010). Major infrastructure projects planned in preparation
for the 2014 World Cup and 2016 Olympics (Moura, 2010), may spur
further renewal.
Advances in technology are poised to enable retailers to use store cards
to track customers’ purchases for the first time, allowing them to develop
customized marketing and more targeted promotions (ref).
Legal
The informal market is a major issue for retailers in Brazil. However,
new laws introduced in 2009 to ‘officially establish the individual
microentrepreneur’ will bring a significant number of individuals into the
formal economy (Euromonitor International, 2010c).
7
CONSUMER TRENDS WITHIN BRAZIL
Demand is increasing at a higher rate among lower-income classes (WGSN, 2005).
Having never had as open access to certain products and services, shopping is a
novelty for middle-class consumers, who are keen to experiment. Two important
characteristics of Brazil’s population are size and age – 60% of the population is
under 29 years of age (A.T. Kearney, 2008). Young Latin Americans’ interest in novel,
innovative and creativity-driven products (WGSN, 2007a) will be beneficial for new
brands that can market themselves well.
Brazilian consumers like to spend (McKinsey & Company, 2007) but do not tend to plan
purchases in advance. The experience of luxury brands Tiffany & Co. and Louis Vuitton
in Brazil indicates Brazilians’ affinity for spending; Tiffany has more stores in São Paulo
than anywhere else in the world, and until recently Louis Vuitton made its largest profits
per square foot from its São Paulo stores (Economist, 2009a). A survey taken by WGSN
(2007b) revealed that 48% of Brazilians bought on impulse. Further, it found that 85% of
buying decisions in Brazil are made at point of sale, compared to 64-72% common in
most countries (WGSN, 2008d).
Brazilian consumers are very open to purchasing on credit (McKinsey & Company,
2007), a tendency that has been fostered by Brazilian retailers. Many major Brazilian
department stores and apparel companies targeting the middle class issue ‘privatelabel’ credit cards which allow customers to pay for items in monthly installments. Such
policies have had a large impact on the middle-class consumer’s purchase behaviour;
he or she will first consider whether they can afford the installment, rather than if the
product is worth the total end price (WGSN, 2008d).
The purchase behaviour of Brazil’s middle class is characterised by aspiration. However,
many Brazilian fashion chains and shopping malls employ a strategy using both
aspiration and inclusion – convincing the consumer that he or she can buy a product
and feel comfortable in the store - to attract middle-class consumers (WGSN, 2008d).
It is also important to acknowledge the influence of telenovelas (TV soap operas) over
the desires of the middle class. For millions of Brazilian women, telenovelas are the
primary source of fashion information (WGSN, 2007a). To capitalise on the shows’
popularity, Brazilian fashion retailers have featured famous soap opera actresses in their
campaigns, and run barbecues – a popular pastime for the middle class - with celebrity
guests as a promotion activity (WGSN, 2008d). European apparel retailer C&A has run
campaigns featuring Brazilian supermodels.
8
TRENDS IN THE
COMPETITIVE LANDSCAPE
Industry analysis using Porter’s Five Forces framework found that rivalry
and barriers to entry are most responsible for reducing the profitability of
the industry. Bargaining power of buyers and suppliers had a moderate
impact. (See Appendix Porter)
Industry structure
There is a high degree of fragmentation in the retail apparel market. An
important feature of market share in the industry is the fact that many
small retailers are involved in informal business activities, and capture
a cost advantage by practising tax evasion. Consequently, leading
retailers account for as little as 10% of total volume sales, in comparison
to the 60% of sales believed to be captured by smaller local retailers
(Euromonitor International, 2009d). Informal retailing is beginning to be
addressed through a combination of police crackdowns and initiatives
to bring informal players into the formal market, such as tax reform
(Euromonitor International, 2010c). Supermarkets such as Extra and
Carrefour also sell private label clothing brands, but are perceived to be of
inferior quality (Euromonitor International, 2009d).
Recent events in Brazil’s fashion industry will impact upon the
competitive landscape in the retail apparel industry. While Brazil’s
fashion industry is still considered to be in its infancy, it has begun to
see dynamic merger and acquisition activity (WGSN, 2008b). Seeking to
create brand management groups similar to the European conglomerates
Louis-Vuitton-Moet-Hennessy (LVMH) and Pinault-Printemps-Redoute
(PPR), private investors have acquired leading brands previously
owned by families. Major holding groups include AMC Textil, I’M Group,
Inbrands and Artesia (Euromonitor International, 2009e).
Consolidation will benefit Brazil’s fashion industry, but may present initial
challenges to established retailers. For current retailers, consolidation is
expected to increase competition in the high-end market. As a holding
group experiences economies of scale in resource procurement,
and gains bargaining power with suppliers, it will be in a position to
provide greater growth opportunities to designers’ brands (Euromonitor
International, 2009e). Although a long-term prospect, an increase in
the number of brands, especially ones with strong brand identities, will
inevitable force weaker players out of the market. In such circumstances,
the industry may see a trend whereby leading retailers begin to acquire
smaller brands to sustain their growth (Euromonitor Internationanl, 2009e).
9
Leading retailers’ strategies and tactics
The top three retailers in Brazil are Lojas Riachuelo, Lojas Renner and
Europe’s C&A (Euromonitor International, 2009d). A constant challenge
faced by the leading retailers is gaining market share from the informal
market. Middle class expansion has presented an opportunity for growth,
and retailers have capitalised by increasing distribution to middle-class
areas in major cities, launching exclusive clothing lines at more affordable
prices, and expanding their facility to offer consumer credit (Euromonitor
International, 2009e). Small retailers are limited in their capacity to
compete on this level.
“Most people buy
at C&A or other
big chains. I see a
gap for shops more
oriented by fast
fashion like Hennes &
Mauritz. We look for
a Zara, but with more
economic tags.”
Offering a ‘fidelity’ store card is a widespread practice, allowing retailers
- WGSN, 2007a
A report by WGSN (2005) suggests that Brazilian retailers must improve
to keep track of their customer base and encourage store loyalty. In
2007, C&A issued 16.5 million cards, Lojas Riachuelo issued 13.2 million
and Lojas Renner 12 million (ref). At present the main benefit of store
cards is to increase brand loyalty as a means of increasing sales, however,
developments in the technology will soon allow retailers to collect more
information about their customers (Euromonitor International, 2009b). Midsized retailers are expected to begin to offer store cards in the near future.
in the following areas.
• Development of a consistent brand identity
• Provision of a more dynamic in-store experience for shoppers
• Long-term planning
• Investment in training for local staff, to improve employee retention
rates (ref) and customer service, with a view to developing
relationships between employees, customers and the brand.
The expansion of Inditex’s Zara into Brazil has introduced local retailers
to the concept of fast fashion. The top three leading retailers as well as
some mid-sized retailers such as Marisa and Hering have incorporated
some aspects of fast fashion into their business models by producing
‘planned collection items’ (adapted from fashion shows) as well as ‘quick
reaction items’ (adapted from soap opera trends) and increasing the
frequency with which collections are launched (Euromonitor International,
2009e). While Brazilian retailers lag behind their European counterparts
with undeveloped systems for logistics and trendspotting, the introduction
of aspects of fast-fashion into retailers’ operations has won them market
share from the informal market and stimulated consumption of clothing
(Euromonitor International, 2009e). Development of systems and further
income growth over the longer term is expected to embed the fastfashion concept in the Brazilian clothing retail industry (Euromonitor
International, 2009e).
10
Zara in Brazil
While C&A and Lojas Renner increasingly target consumers with lower incomes, Zara
Brasil Ltda positions itself as an aspirational brand for Brazil’s slightly more affluent
consumers (Euromonitor International, 2010b), emphasising the stylish and fashionable
qualities of the brand.
Zara has 25 Brazilian stores, located at upmarket shopping malls in major urban centres
(Euromonitor International, 2010b).
As a foreign retailer, Zara has resisted issuing a private label credit card, and does
not use popular Brazilian fashion models or actresses in its advertising (Euromonitor
International, 2010b). In comparison to leading clothing retailer C&A, whose success is
partly drawn from its extensive advertising campaigns (Euromonitor International, 2010c),
Zara’s advertising is minimal (Euromonitor International, 2010b).
Zara mainly imports its merchandise, with products transported by air to increase the
frequency with which new items arrive at stores (Euromonitor International, 2010b).
However, it has also developed relationships with around seventy local suppliers, and
provides training to build Brazilian clothing manufacturers’ capabilities (Euromonitor
International, 2010b).
STRATEGIC
RECOMMENDATIONS
The best business location
In line with the company’s practice of locating each H&M store in the
best business location (H&M, 2009), H&M should commence its Latin
American expansion in São Paulo. São Paulo ranks above Santiago,
Buenos Aires, Mexico City and Miami as the best city to conduct business
in Latin America (América Economía Intelligence, as cited in Euromonitor
International, 2009a). São Paulo is located in the Southeast of the
country. Also containing the city of Rio de Janeiro, this region offers the
largest potential in Brazil in terms of market size and consumption. In
2006, the Southeast accounted for 55.5% of all household expenditure,
equivalent to US$358 billion (Euromonitor International, 2008). Migration
to São Paulo is forecast to continue at a steady rate (Euromonitor
International, 2008), guaranteeing access to a large market as Brazilian
incomes simultaneously rise (See Figure city map).
11
São Paulo ranks among the top five leisure destinations in Brazil, and
hosts nearly 75% of the largest international events that are held in Brazil
(Euromonitor International, 2009a). This also offers H&M opportunities to
capture the tourist market.
12
Positioning
H&M’s key rival Inditex has positioned its label Zara as an aspirational
brand for Brazil’s more affluent consumers, situating stores in upmarket
shopping malls in major urban centres (Euromonitor International,
2010b). It is important that H&M pursues similar positioning, to maintain
the image of quality and style that it has been successful in establishing
worldwide.
However, an insight showing existing demand for international style and
quality at affordable prices is a reminder that Brazil is undergoing major
structural change to its current demographics. Brazilians are becoming
wealthier. This presents H&M with a significant opportunity to enter Brazil
relatively early and take advantage of the growing economy to expand
and establish a wide customer base, as Inditex was able to do in the
Russian market (Euromonitor International, 2009c). H&M should not
ignore the opportunity to win the loyalty of middle-class Brazilians as their
purchasing power increases. Capitalising on aspiration and inclusion as
drivers of desire in Brazilians’ fashion purchases, this report recommends
...a significant
opportunity to enter
Brazil relatively early
and take advantage
of the growing
economy to expand
and establish a wide
customer base
that the company position shopping at H&M as an attainable goal;
possible and worth striving for. A pricing strategy offering a percentage
of products at lower and more achievable prices could support such a
position.
There is much room for H&M to differentiate itself from Zara and achieve
great success in Brazil. The strength of the H&M brand lies in high profile
advertising, collaborations with influential designers and personalities,
dynamic stores and international experience (Euromonitor International,
2009c). Zara Brasil does not advertise extensively, and does not use local
celebrities to promote its brand (Euromonitor International, 2010b). This
report recommends that H&M build on its strengths to take a contrasting
approach. Launching H&M in Brazil with a collaboration between H&M
and a high-profile, influential Brazilian fashion icon such as model Gisele
Bundchen, would convey understanding and appreciation of local culture,
and be a huge hit among the fashion-conscious customers of Brazil.
Production
To date, H&M works with independent suppliers via regional H&M
production offices, and does not own any factories (H&M, 2009). In the
short term, a greater percentage of items may need to be imported from
H&M production offices in other regions. However, it is advisable that
H&M aim to establish a production office in Brazil and work with local
suppliers, similarly to Inditex, to demonstrate its commitment to Brazil
and guard against any possible protectionist measures the Brazilian
Government may impose on clothing imports.
13
Final recommendation
and conclusion
Preliminary research and analysis into the Brazilian market and retail
apparel industry show Brazil’s great potential as an investment destination
for H&M. H&M’s past success has occurred in exciting markets where
high purchasing power and interest in fashion characterise the population
(H&M, 2009). Brazil is widely tipped to be the world’s fifth biggest
economy by Rio de Janeiro’s 2016 Olympics (Euromonitor International,
2010a), a prospect exciting to both Brazilians and foreigners (Economist,
2009b). Further, with a huge population, strong middle class growth
and consumers who love to spend, Brazil shows strong promise for
companies in the fast moving consumer goods sector.
From the secure entry point of São Paulo, H&M would be poised to begin
first its Brazilian, and subsequently, Latin American expansion. While
further research is recommended, this report finds Brazilian expansion a
viable prospect for H&M.
14
References
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15
References contd.
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worldofhm.nhtml
McKinsey & Company. (2007). How half the world shops: Apparel in
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in_Brazil_China_and_India_2075
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financing. Retrieved May 1, 2010, from http://www.businessweek.
com/news/2010-02-01/brazil-infrastructure-projects-require-85billion-in-financing.html
16
References contd.
Prideaux, J. (Speaker) (2009). Business and finance in Brazil [streaming
video recording]. Retrieved April 12, 2010, from http://audiovideo.
economist.com/?fr_story=f517e79a20b5fe34e4fc650273eda7f238c
b6296&rf=bm
Soliani, A. , & Simoes, C. (2010). Lula unveils $886 billion Brazil
investment plan for successor. Retrieved May 1, 2010, from http://
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WGSN. (2005). Country profile: Brazil. Retrieved March 29, 2010,
from http://www.wgsn.com/members/business-resource/research/
br2005feb22_012104
WGSN. (2007). Focus on Brazil. Retrieved March 29, 2010, from http://
www.wgsn.com/members/think-tank/features/ti082307_index
WGSN. (2007b).The Brazilian apparel market. Retrieved April 5, 2010,
from http://www.wgsn.com/members/business-resource/regionalfeatures/br2007aug03_081344
WGSN. (2008a). Brazil sourcing guide. Retrieved April 5, 2010, from
http://www.wgsn.com/members/business-resource/global-sourcing/
br2008feb20_083434
WGSN. (2008b). Investors target Brazilian fashion companies. Retrieved
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WGSN. (2008c). Brazil: Fashion’s new frontier. Retrieved April 5, 2010,
from http://www.wgsn.com/members/business-resource/strategytalk/br2008jun12_084654
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Retrieved April 5, 2010, from http://www.wgsn.com/members/
business-resource/regional-features/br2008aug08_085254
17
Annual Disposable Income
Appendix I
Consumer Expenditure on Clothing
Consumer Expenditure as a % of GDP
18
Real GDP Growth
Appendix I
contd,
Population Estimates
Population Age Shift
Euromonitor International, 2010
19
Appendix II
BARGAINING POWER OF BUYERS
Moderate -
RETAIL
APPAREL
INDUSTRY
STRUCTURE
+ Buyers are plentiful, and purchases per
individual are small in volume.
+ Product is increasingly differentiated.
+
Retailers may influence purchases
through branding and advertising, to
appeal to consumer values beyond price,
such as prestige, style and social status.
– High level of choice.
– Despite loyalty programs, buyers’ switching
costs are considered low.
Porter’s Five Forces
RIVALRY AMONG EXISTING COMPETITORS
Intense
THREAT OF SUBSTITUTE PRODUCTS
OR SERVICES
+ Industry growth is strong, at 7% a year.
Low -
– Sector suffers from the informal market.
+ Clothes are essential items.
–
+ While it is possible for buyers to make
their own clothes, as income increases
and time is increasingly filled with work,
they will be less likely to.
Clothing retailers are numerous.
Large retailers must collectively fight a
battle with the informal market, as well
as compete with each other. (Therefore
price competition intense)
+ Bespoke tailoring is not a practical option
+ Small retailers’ ability to capture
advantages of the informal market forces
informal retailers to stay small-scale.
– Rivalry gravitates to price competition.
– Product is ‘perishable’; the shelf life of
most garments end with the next trend.
BARRIERS TO ENTRY
BARGAINING POWER OF SUPPLIERS
Low + Larger, more established retailers
have more purchasing power with clothing
manufacturers.
Moderate+ Suppliers are numerous.
– High tariff attached to imported textiles.
+ Brand loyalty created by store credit
schemes.
– Capital requirements are low enough for
individuals to enter (although obviously on
a small scale).
– The informal market presents a way for
individuals to enter without many
additional set-up costs (excluding capital).
20

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