Clothing Stores
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Industry Overview
The US retail clothing industry includes 100,000 stores with combined annual revenue of more than $150 billion. Large companies include TJX Companies (TJ Maxx, Marshalls); Gap; Limited Brands; Ross; and Abercrombie & Fitch. The industry is concentrated: the 50 largest companies account for 65 percent of industry revenue.
The industry generally includes clothing accessory stores, but not shoe stores or jewelry stores.
Competitive Landscape
Personal income and fashion trends drive demand for clothing. The profitability of individual companies depends heavily on effective merchandising and marketing. Large companies can offer wide selections of clothing and have advantages in purchasing, distribution, and marketing. Small stores can compete by offering unique merchandise, targeting a specific demographic, providing superior customer service, or serving a local market. The industry is labor-intensive: annual revenue per worker is about $130,000.
Competition includes department stores, mass merchandisers, and Internet and catalog retailers.
Products, Operations & Technology
The clothing retail industry includes stores specializing in family clothing (50 percent of industry sales); women's clothing (25 percent); or men's clothing (6 percent). Stores may also specialize in children's clothing or accessories. Children's clothing stores include infant wear. Accessory stores may specialize in hats or caps, costume jewelry, gloves, handbags, ties, wigs, or belts. Within their specialty, stores typically sell a full range of items including clothing, outerwear, and underwear. Many clothing stores also sell shoes, accessories, makeup, and perfumes.
The industry includes national and regional chains and independent retailers. While family clothing stores represent half of industry sales, women's clothing stores dominate the retail landscape, accounting for over 35 percent of all clothing stores. Store sizes vary greatly. Boutique stores may be smaller than 2,000 square feet; a typical mall-based store is about 7,000; large off-price retailers are about 30,000. Major companies may have large flagship stores in well-known shopping areas. Most clothing stores are located in retail centers, such as shopping or strip malls, and benefit from customer traffic drawn by larger anchor retailers. Large companies may have outlet stores in more remote locations. Companies measure how effectively they use space by monitoring annual sales per square foot.
Most companies have a staff of buyers who make merchandising (product selection) decisions. Products are introduced by brand representatives or at seasonal meetings with major vendors. Trade shows and fashion weeks, where designers showcase upcoming collections, are an important source of information about new fashions. Apparel buyers need thorough knowledge of consumer and fashion trends to make good buying decisions.
Clothing stores buy from independent manufacturers, although a few chains have a manufacturing arm to produce their own brands. Depending on the depth of merchandise selection, companies can deal with hundreds (some, even thousands) of vendors. Large companies may use buying agents to manage vendor relationships. Some chains, such as Gap, may have significant private-label sales. To produce private-label merchandise, companies design their own clothes and outsource production. Because a large percentage of the apparel sold in the US is imported, the supply chain can be long and complicated. Reacting quickly to fashion trends is challenging, particularly for small retailers with limited influence over their supply chain.
The two major clothes selling seasons are spring and fall. Retailers place orders with manufacturers well ahead of time, build inventory in anticipation of these seasons, and replenish inventory as product is sold. Chains usually receive merchandise at a central distribution facility and deliver goods to individual retail stores with their own fleet of trucks or outside carriers.
Clothing market segments include various styles (casual, contemporary, professional, formal); occasions (resort, special occasion, athletic); and price tiers that target a specific type of buyer. Major apparel brand names, such as Calvin Klein, Ralph Lauren, or DKNY, represent a certain lifestyle and appeal to a distinct customer. Designers often have multiple lines, each representing a particular style within a price tier to appeal to different customer types. Clothing stores select the designer line that best represents their target demographic. Companies must also buy the appropriate mix of sizes and colors to satisfy demand.
An effective store layout positions merchandise to maximize sales. Companies may have flexible floor plans that allow them to reposition products as needed. Clothing stores often display merchandise as coordinated outfits to help customers visualize combinations and drive complementary sales. Many clothing stores aim to deliver a distinct shopping experience or image, through unique decor, merchandise displays, a particular type of background music, or customer service.
Most stores use bar-coded tags on clothing and point-of-sale (POS) registers to track sales. Companies that sell expensive apparel typically use electronic merchandise tags to deter theft. Inventory management programs help companies identify slow- and fast-moving items and can sometimes automatically replenish inventory when levels are low. Real-time access to inventory information is especially important when larger companies need to balance merchandise across multiple stores and warehouses. Many companies use electronic data interchange (EDI) to facilitate purchasing with vendors.