This element of the Five Forces analysis considers the influence of customers on firms’ effectiveness in the retail industry environment. Bargaining Power of Costco’s Customers/Buyers (Strong Force)Ĭostco must ensure that it satisfies consumers. Thus, based on this element of the Five Forces analysis, competition is among Costco’s most important concerns. In addition, the low switching costs are an external factor that makes it easy for consumers to transfer from Costco to other firms. Also, the high variety of firms makes the competition tougher, as firms capitalize on their unique competencies to compete against Costco. The retail industry is saturated, with many firms aggressively competing against Costco. The following are the external factors that contribute to the strong force of competitive rivalry against Costco: This element of the Five Forces analysis refers to the influence of competing firms on each other. Competitive Rivalry or Competition with Costco Wholesale (Strong Force)Ĭostco Wholesale Corporation must counteract the effects of competition on the retail industry environment. Costco also needs to improve its goods and services over time to address the potential negative effects of substitutes. To remain effective and to keep its position in the retail market, Costco needs to continue enhancing its competencies to combat the effects of competition and new entrants. The bargaining power of suppliers is the least of Costco’s concerns. However, new entries might find unique ways to popularize their own products (which might not even be particularly special), and as such build novel brands - perhaps through clever use of social media.The above synopsis of the Five Forces analysis of Costco Wholesale shows that the company faces challenges linked to most of the five forces. In this sense, the fashion industry is a very difficult one to get into, and is almost becoming a ‘race to the bottom’ - not good news for retailers! Threat of New EntriesĪs mentioned previously, there is little that is unique to bring to the table in this industry, so this force is also somewhat small. Nowadays there is little innovation in this space, so the market is quickly becoming saturated with very similar products. There are large numbers of retailers who sell very similar products, but there’s also the concept of brands, which allow some companies to sell apparel for ridiculous rates. The fashion industry is an interesting one when it comes to analyzing through the intensity of competitive rivalry.
This article will attempt to analyze the viability of the fashion retail industry as a whole, by means of a Five Forces analysis. The fashion retail industry has a market value of several hundred billions of dollars, with the average price per product coming in at a healthy $19.
Porter’s Five Forces analysis is an approach to determining just how competitive a given market is, and consequently, how profitable it may be for a business.