Fashion Industry Profile

Topics: Fashion, Retailing, Clothing Pages: 19 (2406 words) Published: March 17, 2015


Marketing Campaign
Noelle Androuin

Fashion Industry Profile
The Apparel Industry consists of companies that design and sell clothing, footwear and accessories. Product categories include everything from basics, such as underwear, to luxury items, for example, cashmere sweaters and alligator-skin handbags. Traditionally, Apparel companies are wholesalers, selling large quantities of goods to retailers, which markup items and sell them to consumers for a profit. However, it's become more difficult to draw a line between wholesalers and retailers; most Apparel companies now have both types of operations.

Retail Operations
There are a number of reasons why Apparel companies establish retail divisions. Having stores dedicated to a single brand gives a company control over a line's image and identity. Dedicated retail stores allow a company to highlight its own merchandise, without worrying about competing labels. Retail stores are typically more profitable than their wholesale brethren. By selling its own merchandise at retail, an Apparel company can cut out the middle man and increase profits. However, this strategy can be risky. Instead of just designing and producing clothes and filling wholesale orders, companies with retail operations also have to find store locations with good potential, manage inventory and avoid big markdowns. The Internet is another important platform for retailers, especially since consumers are increasingly Web-savvy and have access virtually anywhere. Shoppers want to quickly find what they are looking for on line, and demand fast processing and shipping. Direct sales via the Internet can be a boon to a company. These sales do not entail expensive storefronts and related staffing and, thus, are more profitable than traditional business.

Apparel sales at the retail level tend to be highly seasonal, with the majority of revenue booked during the holiday and back-to-school periods. Market analysts review total year-to-year sales to identify trends. Notably, they focus on "comparable-store" sales, which indicate the year-to-year performance of locations open for a year or more. Sales-per-square-foot is another important metric that measures how efficiently a retailer utilizes its floor space. As with wholesalers, the success of retailers is visible in their reported gross and operating margins. Retail margins are influenced by several factors, including markdowns and promotions and SG&A expenses. Product mix also plays a role in determining profitability. For instance, a weighting toward accessories is favorable, given their high margins. Accessories' one-size-fits-all nature involves lower costs than do fitted clothes. Market Analysis Summary

In 2005, retail spending on clothing or apparel reached approximately €900 billion worldwide. According to one set of estimates, (Western) Europe accounted for 34% of the total market, the United States for 29%, and Asia for 23%. Differences in market size reflected significant differences in per capita spending on apparel as well as in population levels. Per capita spending on apparel tended to grow less than proportionately with increases in per capita income, so that its share of expenditures typically decreased as income increased. Per capita spending was also affected by price levels, which were influenced by variations in per capita income, in costs, and in the intensity of competition (given that competition continued to be localized to a significant extent). There was also significant local variation in customers’ attributes and preferences, even within a region or a country. Just within Western Europe, for instance, one study concluded that the British sought out stores based on social affinity, that the French focused on variety/quality, and that Germans were more price-sensitive. Relatedly, the French and the Italians were considered more fashion-forward than the Germans or the British. Spaniards were...
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