The clothing business is a diverse ever-changing fashion industry. H and M however has managed to be found over 60 years ago and stands as a billion-dollar multi nationwide company. The clothing business can be challenging because fashion is constantly changing. Although its humble beginnings begin with only selling woman’s clothing, now the company globally sells clothing for all genders and ages (H;M history). H and m competes against a lot of other retailers and still manages to remain in the market. The clothing industry is monopolistically competitive because firms have differentiated products and market power.
H and M creates their revenue by selling clothing, accessories, shoes etc. to male and female of all ages. This is how they make money through their consumers. The clothing industry is a highly competitive environment. There are hundreds and hundreds of other retailers out there, especially in the malls all over America where H and M stores are usually located. Location is never a problem for this company, because whatever a consumer cannot find within their stores, their online site can deliver the same products and then some for consumer wants.
When it comes to this industry, a lot of other competitors like Express for example sell similar clothing or just as trendy merchandise. A big difference between H and M and Express is that Express sells their clothing merchandise at a much higher price than H and M. There are a large number of competitors like Express and therefore all sellers try and create a monopolistic competition to state that their clothing is the most “fashionable”. When it comes to pricing H and M has always had a constant turnover with product merchandise. For example, H and M has much reasonable pricing than Express and other high price retailers. How is H and M able to afford and determine their lower pricing? Tun Zaw (2018), fast fashion is an idea of moving large volumes of merchandise from the designer tables to the showroom floor to their store floor with little time as possible. H and M achieves this goal by having higher merchandise turnover and by constantly resupplying the product pipeline with the latest fashion trends. This is how H and M determines there pricing, because they are able to sell clothing a lot faster than other competitors. Other competitors most likely sell less at a higher price.
Firms can enter and exit this market easily because it is imperfect competition that sells similar or identical merchandise and product. Most if not all clothing firms have a small amount of market power. Some firms do have more market power than others due to the fact of name brands and who also represents the company like celebrities for example in order to sell their product as “better”. Again, the natural barriers to entry of this market are low. This is due to the fact that anyone can mimic merchandise or start a fashion trend to make it appeal to the consumer. Startup costs would be relatively low because someone could sell their merchandise online through their site or others like eBay. If firms like H and M were to exit this industry, the loyal consumers would go elsewhere to find reasonable pricing that sell similar fashionable clothing. This also applies to other clothing retailers if they were to exit this industry. This makes exiting this industry quite easy.
H and M follows a constant flow of new fashion trends. The fact they get their new merchandise out faster than other competitors gives this retailer an advantage over and fraction of the cost of others as well. Another strength the company has is its diversified global presence. It has stores in over 60 countries across 6 continents. This global presence helps reduce business risk by entering more markets across the world to create revenue. In addition, the company sells a variety of products including apparels, cosmetics, shoes and accessories. This gives the consumer more of a variety for the consumer to purchase. H;M in 2015 showed a growth in revenue of 19.4% over the fiscal year of 2014. A stronger financial performance will show investors to see the financial flexibility and growth to the company (Hitesh, 2018).
From a personal experience, I have noticed that H ; M quality is sometimes not up to par like other brands. With affordable quality that H ; M gives its consumers, sometimes affects the quality of their merchandise. If you shop at H ; M, then you will notice that the company itself has a lot of 3rd party suppliers that give them their merchandise to sell. You can see this by checking out the tags on clothing within the stores and see who actually created it and where I came from. This is sometimes not so good to have so many suppliers, because they have very low control over production.
Since the beginning of opening its first store within the 40’s, H & M has gradually adjusted accordingly to its times as well as its expansion of the company. Hitesh (2018), The company has added over 300 stores in the fiscal year of 2016. In addition, H & M is always partnering up with athletes and celebrities to be an ambassador for the company’s clothing. Zaczikiewics (2018), This being said, H ; M actually could focus more on its e-commerce like other retailers do. For example, allowing people in the United States to purchase clothing on the H ; M site that is strictly for Europe only. If H ; M could make it more accessible for US citizens to purchase that style from Europe then that gives the consumers more choices and thus creates a better chance of increasing revenue.
Reiterating what I said earlier, e-commerce is an advantage but can also allow new entrants. Online allows newer or current brands to be present on the same or similar platform like H ; M. This can could create an impact on brands like H ; M, if the other entrant knows exactly what to do, but do it better. Although H ; M is always on the fast fashion trend, the apparel industry is a tough one. Competition is everywhere and so therefore H ; M has to be aware of what the next 10 steps or so in order to maintain ahead of the game. As time goes on labor cost is always on the rise. This is inevitable. The cost will always affect the profitability of a company. As for H ; M, developed countries can increase the cost of production for its industry.
Bargaining Supplier Power:
H ;M has a numerous number of manufacturers and suppliers that produce what they need in order to give the consumer what they want. This being said, the bargaining supplier power is actually quite low. The fashion industry alone has an abundant amount of manufacturers ; suppliers and thus have more options to source like H ; M does with its business. In addition, H ; M opening up cheap labor markets in Asian countries allows the company to ensure low costs and better quality if needed. Switching costs within Asian markets are considered relatively quite low. This benefits H ; M the greatest, because having a variety of suppliers contributes to the company as whole.
Power of Buyers:
The power of buyers can tricky. The bargaining power of buyers that H ; M face is high because there are so many other retailers out there. An example of a few main competitive retailers against H ; M are Zara, gap, and UNIQLO. UNIQLO is a Japanese that operates its business there and other countries as well. Chu (2018), Just like H ; M, UNIQLO It is just as fast retailing in terms of constant fashion turnover. The switching cost between these retailers and much like other is little or no switching costs.