Today we focus on analysing the Spanish fashion industry. Spain´s most important fashion sectors are textile and footwear, which have both gained major success not only in the national but also in the international market. A good example of such immense success is Inditex that alongside Mango shares the name of one of the biggest fashion textile groups in the world. Together they operate more than 9,000 shops globally. Inditex was founded in 1985 as a fashion distribution group. Today, it includes eight brands such as Zara and Bershka which are represented in 88 countries worldwide.

Globalization and the massive arrival of new competitors with a large competitive advantage in prices are some of the reasons that lead our companies to go through international borders. Spanish Fashion Industry has a high percentage of get into the international markets, reaching a percentage of the 90% with some companies.

So the conclusion is that, to ensure the future of our companies into the fashion sector, it’s essential considering the internationalization with the goal of make the difference. In the following lines we include a summary of the main points to consider in the Spanish fashion industry.

 

Rivalry in the Spanish fashion industry

Within this sector competition it is very high due to there are a huge number of small and medium fashion companies.

What is really important in this sector is make a difference to obtain benefits. Given the variety of offer available, it is essential to provide some quality at a good price. Difficult, of course. Only firms with stability at national level can face the process of internationalization, where our company will be key for them.

Nevertheless, in recent years, small and medium companies have also undertaken the risk of expanding internationally. According to estimations from the Ministry of Industry, Energy and Tourism of Spain more than half of small and medium sized firms in the textile sector are exporting. This has also lead to an increase in employment.

Some examples of the main textile firms in the Spanish Industry are the following:

INDITEX

  • Includes: Zara, Massimo Dutti, Bershka, Stradivarius, Pull&Bear, Üterque, Oysho, Zara Home…
  • Foundation: 1985 in A Coruña (Spain)
  • Headquarters: A Coruña (Spain)
  • Stores: over 7.013
  • International presence: over 88 countries
  • Sales (2015): over 20.900 M €
  • Percentage of international sales: 82’3%

CORTEFIEL GROUP

  • Includes: Cortefiel, Women’secret, Springfield, Pedro del Hierro…
  • Foundation in 1933 in Madrid (Spain)
  • Headquarters: Madrid (Spain)
  • Stores: over 2054
  • International presence: over 84 countries
  • Sales (2015): more than 1.011 M €
  • Percentage of international sales: 50%

MANGO

  • Includes: Mango, He by Mango, Mango Man, Mango Kids, Violeta by Mango…
  • Foundation: 1984
  • Headquarters: Barcelona (Madrid)
  • Stores: over 2.700 stores
  • International presence: over 107 countries
  • Sales (2015): 2.327 M €
  • Percentage of international sales: 83%

DESIGUAL

  • Foundation: 1984
  • Headquarters: Barcelona (Spain)
  • Stores: 552 stores
  • International presence: 109 countries
  • Sales (2015): 933 M €
  • Percentage of international sales: 77%

BIMBA & LOLA

  • Foundation: in 2006 (Bilbao – Spain)
  • Headquarters: Vigo (Spain)
  • Stores: over  160 stores
  • International presence: over 17 countries
  • Sales (2015): 115,7 M €
  • Percentage from international: 26%

CAMPER

  • Foundation: 1975
  • Headquarters: Mallorca (Spain)
  • Stores: around 370 stores
  • International presence: 58 countries
  • Sales (2015): 204,83 M €
  • Percentage of international sales: 75%

PRONOVIAS (international leader in Nuptial Fashion Sector)

  • Foundation: 1964
  • Headquarters: Barcelona (Spain)
  • Stores: around 154 stores
  • International presence: 101 countries
  • Sales (2015): 160 M €
  • Percentage of international sales: 65%

 

FIRM Stores Intern. presence Sales 2015 (Millions €) % of Intern. Sales
INDITEX 7.013 88 countries 20.900 82’3%
CORTEFIEL 2.054 84 countries 1.011 50%
MANGO 2.700 107 countries 2.327 83%
DESIGUAL 552 109 countries 933 77%
BIMBA&LOLA 160 17 countries 115’7 26%
CAMPER 370 58 countries 204’83 75%
PRONOVIAS 154 101 countries 160 65%

Threat of new entrants

Spanish fashion industry is a booming market and attractive to enter. Obviously, the great reference as noted above is Inditex, but from there and especially in the last years there are dozens of designers who are trying to launch their own brand. It is for this reason that the threat of new market entrants is medium tending to high and there is strong competition between small and medium businesses companies looking to differentiate themselves from large companies and consolidate their brand.

The barriers to entry are low for new entrants: New brands do not need a large initial investment or have their own store. The most important is a strong innovative and entrepreneurial spirit to get established in this highly competitive market.

Moreover, restrictions on textile imports from China were lifted in 2005, a fact that supposed a boom in low-cost products, and the fashion sector began to rival in a low prices market.

As a result of the end of textile imports restrictions from China and the economic crisis, consumers have become used to receive constantly offers from different firms, and they usually wait to bargains and compare prices before make their purchases.

Chinese Stores

Taking advantage of this context, it’s emerging a new wave of firms arriving from the Asian Continent, standing strong in our country and creating a new concept of the “made in China” products, getting away from the prejudices and the “Chinese store” idea.

Chinese companies have recently entered in Spain increasing price competition and fast retailing rivalry in our country. Sign of these new entrants is giving us by Mulaya, a firm which has been compared to Zara because of its rapid expansion and their offer of the latest trends at very low prices. Mulaya, along with other firms such as Okeysi or Uniqlo, are focused on the most important shopping points of the main cities, Madrid and Barcelona, becoming an attraction for the Shopping Tourism.

For its part, Uniqlo is going to open its first store in Spain (Barcelona) next year. First Uniqlo Store was opened in May 1984 in Hiroshima under the name of “Unique Clothing Warehouse”, and since its foundation it’s experimented an incredible development. Owned to Fast Retailing Group is known as the Japanese Zara and its growth is unstoppable; holds the fourth place in the global analysis of the SPA Apparel Company Strategy.

Company Country End of Fiscal Year Sales (Billions of $)
INDITEX (ZARA) Spain Jan. 2016 22,81
H&M Sweden Nov. 2015 21,11
GAP USA Jan. 2016 15,79
FAST RETAILING (UNIQLO) Japan Aug. 2015 14,79

**Table based on the information of SPA analysis (Specialty Store Retailer of Private Label Apparel)

Threat of substitutes

When it comes to the threat of substitutes within the Spanish fashion industry, what is being analyzed is under which circumstances the consumer decides to buy the competitor´s product. Determining factors include the price and quality of the product as well as the profit the competitor is earning.  

The threat of substitutes within the Spanish fashion industry is high as the switching costs for retail customers are more or less nonexistent. Nevertheless, the Inditex offers a wide range of products and is appealing in various different markets, which also decreases the substitution risk. Moreover, their customers include men and women from all different ages. Finally, the companies of Inditex also offer low and mid high prices to their customers.  

 

Bargaining power of customers

The bargaining power of customers in the fashion industry, that is buyer power, is a relatively large force. While clothes shoppers are typically individuals with little to none direct bargaining power (as compared to huge companies, buying in bulk, who might be the main clients in other industries), they have many alternative locations to shop for apparel and little incentive to stay with one particular company, giving them plenty of indirect bargaining power.

In addition, any meaningful variation in buying habits due to lifestyle, demographic or cultural changes, gives room to alterations in market demand, which makes the reliability of clients very volatile.

 

Bargaining power of suppliers

In the fashion industry, supplier power is a relatively small force. Most fashion companies source their products from third world manufacturers who receive just fractions of the profit. Suppliers have little control over the fashion industry as, unfortunately, they are dispensable and can always be swapped out. As a result, input prices for this industry are relatively low and will stay there until the global development gap closes up significantly.

 

Conclusions

Fashion Industry has undergone a strong growth during the last years. There are millions of textile companies so how could we differentiate and be successful in this kind of industry?

We believe the key to success is in the innovation, the difference, and creativity. It’s a huge market and new firms must join creativity and innovation with competitive prices.

Nowadays, the economic crisis causes a huge decrease in market demand, therefore fashion firms are forced to reduce prices.

Due to all of this, we are the perfect solution for those new firms and companies that are focused to introduce themselves in the Fashion Industry and grow in terms of industrialization. We’re making available all the required resources to achieve your goals and make the difference in an international context, growing stronger and creating a global reputation.