Apparel Industry Essays - American Brands, Sears Holdings, Retailing

Apparel Industry INDUSTRY: APPAREL RETAILERS INTRODUCTION Retailers in the apparel industry are primarily engaged in the distribution, merchandising, and sale of men's, women's, and/or children's clothing to consumers. Apparel retailers include department stores, mass merchandisers, specialty stores, national chains, discount and off-price stores, outlets, and mail-order companies. A relatively new development is the rise of electronic forms of retailing such as interactive TV and on-line shopping services. Some retailers who sell their own private labels go beyond their traditional role as distributors and become directly involved in the design and production of garments from manufacturers and contractors. SIC CODES RELATED TO THIS INDUSTRY SIC Code Industry Name 5136 Men's and boys' clothing 5137 Women's and children's clothing 5611 Men's & boys' clothing stores 5621 Women's clothing stores 5632 Women's accessory & specialty stores 5641 Children's and infants' wear stores 5651 Family clothing stores 5699 Misc. apparel & accessory stores INDUSTRY CHARACTERISTICS Apparel sales have shown positive gains over the years which reflect a vibrant U.S. economy and increasing incomes. All apparel retailing industry sectors are heavily dependent on consumer spending. Since, consumer spending represents two-thirds of the U.S. economy these retailers become extremely vulnerable to wide economic swings. These retailers must do a good job of managing their inventory levels, personnel needs, and style/fashion trends to ensure they will not lose their consumers business during up and down periods. That is why many major apparel retailers such as The Gap, and Wal-Mart can have 20 percent growth over 20-some years. They stay focused on their businesses and are always trying to do better. They constantly question everything, though even the best companies make merchandising mistakes. But the leaders in this industry know how to rectify their mistakes. Recently, the apparel industry hasn't been doing all that well. During the 2nd Quarter of 2000, apparel sales have tapered off for several reasons. Increasing interest rates have slowed the U.S. economy, consumers have built up their stock of most clothing items, and there has been a lack of exciting new fashions on the market INDUSTRY ENVIRONMENT Distribution Channels As discussed earlier, apparel retailers include department stores, mass merchandisers, specialty stores, national chains, discount and off-price stores, outlets, mail-order companies, and online sales. Department stores were once-and some still are- perceived as the apparel leaders, but these stores in reality only sell about nine percent of the garments consumers buy annually. Meanwhile specialty stores like Old Navy, The Gap, and Abercrombie & Fitch have about a 13 percent apparel unit share. Mid-tier retailers like Sears, JCPenny and Kohl's have a 14 percent unit share. According to NPD, a market research company, catalog companies represent almost 10% of apparel retail sales through direct mail. Consumers have less time to shop and thus, catalog purchasing offers a time-saving convenience for straight re-buy purchases. The internet represents approximately $6.5 million of e-commerce purchases, but only represents 0.6% of total apparel on-line sales. This segment is lower because of concerns regarding speed, ease-of-use, and security problems. When these problems are solved, this sector is likely to mirror the catalog sales channel and may substitute for catalog sales. Lastly, discount stores, such as Wal-Mart and Kmart have 45% of the apparel market. These statistics are shown in the pie chart below: CONSUMERS As shown in the chart above, the women's consumer segment dominated the U.S. apparel sales market in 1999. Throughout the years, women have been constant and dominant consumers in this industry. Womens apparel sales growth was 3.7% and men's apparel growth was 4.1%. Women buy at a constant rate, whereas men's apparel sales have been growing. Men have outpaced total market growth for the second year in a row. Girl's and boy's apparel rose 0.5% and 3.8%. Women's apparel accounted for 52% of all apparel sales. The men's segment accounted for 31% of total apparel sales. COMPETING AND COMPLIMENTARY PRODUCTS In a broad view, the retail apparel industry competes with all the other sectors in the retail industry. These different sectors include electronic retailers, wholesales, other discount stores, shoe stores, convenience stores, and so on. Many of these different sectors also have combined together. In this industry, a company often operates in various divisions because it is more profitable that way. The charts below show the state of