Competition

Hello dear readers! Hope you are doing well and today we are going to talk about competition on the fast fashion market. So stay tuned ;)

Below you can see a table, describing main fast fashion players on the French market.

	Zara	H&M	Mango	GAP	Massimo Dutti	Bershka
Operating revenue (2013)	910 790 000 €	1 062 526 000 €	157 856 000 €	124 206 000 €	59 516 000 €	98 530 000 €
P/L for period (2013)	44 348 000 €	23 030 000 €	-5 047 000 €	-6 103 000 €	169 000 €	6 703 000 €
Total assets (2013)	573 516 000 €	369 267 000 €	116 397 000 €	78 873 000 €	60 444 000 €	55 819 000 €
Employees (2014)	5 275	5 452	907	826	421	755

Source : Amadeus database

The competition in fashion apparel industry is extremely high, but if we take fast fashion market, we can say that there are several main players in it. What is more, the threat of new companies to enter that market is not very high because of the fact that cost is regarded to be high due to economies of scale. It is really difficult for new entrant to obtain high market share as existing brands have already acquired a reasonable amount of brand resonance. Due to suppressed demand, economies of scale cannot be achieved and the entrant usually faces losses in the beginning. Market experience, brand establishment and product differentiation are the main things that serve as barriers for new entrants. There are experience and expertise that give high valuation to the main fast fashion companies. 

In November, 2014 Forbes has put together a list of world's most valuable brands, placing H&M on the 31st place with $16.8 billion brand value and Zara on the 51st place with $10.1 billion brand value. And despite that fact and as long as H&M, Zara, Mango, Primark, Massimo Dutti, Bershka and several other brands could be considered as main competitors, several facts tell that Zara can be named as a leading brand in terms of price and style. It operates on a whole new business model which provides Zara with a major competitive edge. 

Zara’s production in small batches creates a level of exclusivity not seen amongst competitors. Despite Zara offering over 33,000 item varieties in a year compared to industry average of 3000 items, it is twelve times faster than Gap and at least six months ahead of H&M which is its closest competitor. In this way while other retail chains often slash prices by 50 percent to move mass quantities out of stock, Zara does the same but only by 15 percent.

The fashion market is very competitive and the constant need to update product ranges means that many retailers are trying to extend the number of seasons. Fashion retailers are encouraging consumers to visit their stores more frequently by launching small collections of garments, with the use of the expression limited edition. This is exactly how Zara does. “The average Zara customer visits the store 17 times a year compared to just 3 visits” for its competitors (Gallaugher, 2008). This leads to a shorter life cycle and higher profit margins from the sale of fast selling clothes. The desire to have variety and instant gratification is motivating consumers to buy their clothes less expensive. 

See the perception map below to see a wider selection of clothing retailers in the French market and their perceived value vs style measures.

If we look at this positioning map and compare 4 brands we have been talking about, we can make following conclusions. Taking the classic black T-shirt as a reference, Primark, according to its brand image, is the cheapest, followed by H&M, Mango and then Zara. In terms of quality and style, Zara is considered to be a leader, then goes Mango, H&M. Primark is thought to be the least fashionable and qualitative.

Sources:
https://gupea.ub.gu.se/bitstream/2077/22658/1/gupea_2077_22658_1.pdf
http://www.ukessays.com/essays/business/threat-of-new-entrants-business-essay.php#ixzz3KOB7mc6C
http://www.forbes.com/powerful-brands/