What are some barriers to entry in the fashion retail industry?

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thanatassa's profile pic

thanatassa | College Teacher | (Level 3) Educator Emeritus

Posted on

There are far fewer barriers to entry in the fashion retail industry than in many other areas. Unlike utilities, transportation, or education, fashion retailing has few issues of government intervention and is only lightly regulated. 

Of natural barriers to entry, fashion retailing has fairly low startup costs compared to industries such as heavy manufacturing or pharmaceuticals where companies must invest millions of dollars before they bring in any revenue at all. A crafter can start a small online boutique with no investment beyond a smart phone and a pair of knitting needles. While opening a huge big box store or an international chain requires greater startup costs, the model of fashion retailing based on having a huge bricks-and-mortar presence is being disrupted by alternative channels such as pop-ups, online retailing, craft fairs, co-ops, and other innovative models.

This very lack of other barriers to entry, though, means that competition is robust and is the major obstacle to entry. In almost every market segment a new entrant needs to take market share from established businesses. At the low end of the market, large chains have economies of scale and global supply chains, meaning that their costs will be lower than those of many new entrants. At the high end of the market, established brands have a certain type of prestige, although fashion forward consumers are always searching for the new and latest thing, giving newcomers an opening. 

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pohnpei397's profile pic

pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted on

The main barriers to entry in the fashion retail industry would be economies of scale (and the need for capital) on the one hand and product differentiation on the other.

Fashion retail stores and chains will typically need to be large.  They will need to be able to buy in bulk to get the best prices.  This need for size will also bring with it a need for a relatively large amount of capital.  Both of these will make it hard for any new entrants to the market.

Second, these stores will need to make names for themselves.  Most consumers will have stores that they trust and with which they feel comfortable.  This is something that cannot easily be won by a new entrant to the market.

For these reasons, it can be hard to enter this market.

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