The Effects of the Current Economy on the Apparel Retail Industry

Introduction

"The apparel retail industry consists of the sale of all men's wear, women's wear and Children's wear. The menswear sector includes all garments made for men and boys. It includes both outer and under garments. The women swear sector consists of the retail sale of all women's and girls' garments including dresses, suits and coats, jackets, tops, shirts, skirts, blouses, sweatshirts, sweaters, underwear etc. The children swear sector is calculated as sales of garments for children between the ages of 0-2 years. The industry value is calculated at retail selling price (RSP), and includes all taxes and levies". (Datamonitor [], October 2009)

Today's societies are driven by consumption. Every day trillions of dollars are spent on fashionable apparel merchandise such as accessories, hats, clothing and foot wear. The apparel retail industry contributes tremendously to the economy. The competition within the apparel retail industry is intensively growing, as a variety of fashionable apparel stores continue to dominate this industry.

Clothing retailers operate in a complex and highly competitive environment where profitability depends on the interaction of a variety of factors. These factors include pricing, promotions planning & execution, space, assortment management, as well as loyalty management. These factors are in sync with the apparel retailer's accumulated cost for raw materials such as cotton, fuel to transport goods and even labor in China.

In fact, the overall probability is subject to decline as the competitive intensity continues to increase within the apparel market place. Whilst, cost continues to rise as price sensitivity increases within the current deteriorating economy .The purpose of this research paper is to examine the effects of the current economic woes in the apparel retail industry.

Competition is greatly affected by Porters five forces model, these models include the following: bargaining power of buyers, threat of new entrants, threat of substitutes, bargaining power of suppliers and industry competitors shaping the intensity of rivalry. Consumers are taking advantage of existing price competition, amongst the market's rivals as the apparel retail markets progress towards saturation. The volatile market conditions influence the consumer behavior. Consumer's variations and expectations continue to grow as a result of macroeconomic factors, such as globalization, innovation, competition and technology.

Apparel retailers are elevating their knowledge and expertise with regard to price sensitivity of consumers, as well as strengthening supplier liaison for prominent time cost control. Today's apparel marketplace allows consumers to have sufficient access to various price data from adequate sources, such as catalogues, internet, newspapers ,etc, as most companies are publically traded. It is therefore, imperative for apparel retailers to integrate their strategic marketing decisions with a focus on satisfying the expectation and unpredictable needs of the overall price conscious consumers.

Consumers are using their bargaining power to compare product prices and demanding to pay lower prices for apparel items, before making any actual purchases from their preferred apparel store. Abraham Maslow was a clinical psychologist, who established a structure that formulates different classifications of needs into a hierarchy.

According to Maslow's theory, there are five levels of needs as follows; physiological, safety and security, social ego, and self actualization. Physiological needs are basic needs such as need for water, air, food, accommodation, sex and clothing. The Consumers often strive to fulfill their physiological needs, in order to survive and develop.

Apparel retailers are faced with severe challenges as price sensitivity increases during the current economic recession. These retailers are witnessing a decline in sales traffic as price cautious customers are spending their very bare minimum time and money to satisfy some of their physiological needs, such as clothing and footwear. In addition, these price cautious customers tend to invest more of their time and money on their social, self-actualization, ego and security needs, such as health insurance and job security.

During the present deteriorating economy, customers conventionally spend more of their money on enduring products, such as large appliances, automobiles, etc, which are predicted to have a longer usage, As opposed, to spending less money on non- enduring products, such clothing, shoes, etc, which are predicted to have a shorter usage span. Apparel retailers are prompt to inevitable downturns, because the consumer economy is in a recession. In response to the current economy, a number of apparel retailers have reported drastic percentage drops in sales during peak times, such as holiday seasons.

According to the current reports, looking back to the year 2009, many apparel chains have been shut down, relocated, resized or have decreased their business operations. Including, Linens n' Things, Steve & Barry's and Mervyns clothing store. In the mean time, more clothing stores including "Ann Taylor" and "ROSS dress for less" are closing substantial numbers of some of their stores or outlets. "Indiabulls retail has shut down two stores in Ahmedabad, apparel retailers Arvind Brands, Reebok and Raymond too have started pruning their operations".(Gadhoke).

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