Sector Definition, Competidor Analysis and Consumer Identification Luxury/premium Clothes

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Marketing III task

Pedro Luiz Ximenes Rossari

Sector definition, competidor analysis and consumer identification

Luxury/premium clothes

São Paulo

2011

CSOS3A R.A: 11010712

Index

Sector definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . pg. 1

Competidors identification . . . . . . . . . . . . . . . . . . . . . . . . . pg. 4

Consumer identification . . . . . . . . . . . . . . . . . . . . . . . . . . . pg. 6

Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . pg. 7

Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . pg. 7

Sector definition

Luxury/premium clothes

As a first thought we may see clothes as something quite simple, something that is a part of the textile sector (or of the apparel sector, to be more specific) and that is responsible for satisfying our most basic and common needs. As a matter of fact, they are, indeed, responsible for heating us, for protecting our body against a plethora of events and possible ills, among other things. However, their importance is also known to be much more deeper, as it is also true that we buy clothes not only because of their physical benefits, but also because we need to satisfy our psychological and our individual necessities. And this is something that is special true when we come to think about a more specific segment of the clothing sector, the luxury/premium apparel segment.

We buy or clothes (specially the expensive ones) not only because of their quality, or their price; we buy our clothes based on the brands we are friendly to and on the image we want to pass. Much more than Polo's and Dress shirts, brands like Lacoste, Brooksfield and Tommy Hilfiger (among others) try to sell self-steem, confidence, respect. The types of clothes you use, the combinations you make with them, the brands to wich they belong, are all factors that are supposed to be ways to communicate who you are and to wich groups you intend to belong.

Therefore, instead of saying that the luxury/premium clothes acts in the "Safety" level, we can describle the main need they fulfill as being located in the "Love/Belonging" and in the "Esteem" level. Wearing your favourite clothes/brands give you confidence, self-steem, make you respected, and as a consequence, it makes you feel that you are part of a group.

Market analysis

In order to better understand the luxury market, its attractiveness and its disadvantages, we must first understand wich are the strong and the weak points of the textile and of the apparel sector.

Some explanations about the textile sector are required:

Basically, the sector is splited into four major groups:

Spinning (production of wires, etc);

Weaving and knitting (production of woven, tissues, etc);

"Aviamento" (production of zipers, etc);

Apparel (production of clothes, etc).

For "teaching" purposes the data that is showed are only related to textile sector (in general), and tend to focus mainly in the apparel sector.

Nowadays, Brasil counts with approximately 30.000 companies in the textile sector; since the year of 1985 the number of companies acting in this sector have increased approximately 140%, with a more concentrated growth in the south, in the midwest and in the nortwest region of Brazil. The country is the sixth biggest textile producer in the world (China and India are the first and the second respectively). Currently the sector respond for more than 1.7 billion jobs, and is tending to expansion; currently it is experiencing revenues of more than 43 billion dollars/year.

The volume of exports and imports grew significantly (more than 30% in the past years). However, even with its meaningful growth, the ITV (Industria têxtil e de vestuário) is still focusing on its internal market; even being able to do so, some companies choose not to export its products. Because of that, the amount of exports produced by the country represents less than 1% of the total exports in the world; specialists have predicted that in 2030 it will still represent less than 1%/

The fact that the sector is favouring its internal market is a benefitial happening for the companies in the luxury/premium clothes sector, because, if combined with the rapid growth that Brazil is experiencing in its luxury/premium market (it is estimated that every 35 days a Ferrari is sold in Brazil. The country already own the "title" of the country in wich its sold more Ferrai's in a year) a big number of opportunities are being created. Not even the effects of the crises could restrain its growth. The market earned 6,45 billion of dollars in the year of 2009, 8% more than in the year of 2008. And for the next years the expectation is that a growth of more than 50% occurs.

Some considerable changes are ocurring in the market, and, if used correctly can represent a good competitive advantage for those companies. The major changes happening are:

The changing nature of the workplace: each and every day the workplace is working to become a more informal place (even in very traditional companies) where it will no longer be required that employees use complete suits;

Increased number of woman working: and as a consequence increased demand and buying power;

Increased buying power of teenagers and young adults: nowadays, specially in wealthy families, parents are investing and giving them more money, what is raising their buying power. Some companies, such as Brooksfield already have stores that are focused on this type of public (Brooksfield Teen).

Forces affecting the market

Another beneficial factor is the fact that there is a huge number of suppliers offering almost the same type of raw material (as it was already said, the market is in expansion, and is sending the vast majority of its production to the internal market). As a consequence, suppliers have few (almost no) power over the companies, once their products are widely available in the market (Sometimes those companies need different types of raw materials, more distinct ones, to produce special lines and/or products. In those cases, the supplier may have some power over the company, whereas the type of product they sell is not wide available. This cases, however, are quite rare).

In this type of market (specially in Brazil, that work mostly with old fashioned technology) price is not an entry barrier in this market, as well as scale economy. This way, the best defenses those companies can have against new competidors is their distribution channel (they have to be well located in order to block new competidors from installing) and their brand name (in this type of market the purchase is strongly guided by the brand image, reputation and position).

There is a very low risky, almost inexistent, of new products that will arise and that will substitute the products those companies sell (perhaps because they sell clothes, that is a very unique type of clothes, that has no other substitute - or you use clothes, or you stay naked). It can, sometimes, happen that the design of the clothes is old fashioned, but that is something "simple" to be corrected. And even if a substitute existed, the type of customer those premium companies seek is not looking for low price; they are looking for the highest perceived value. This way, a new companie that arises, offering a substitute product at a cheaper price but that dont have a well stabilished brand will not be a threat so big.

The Luxury/clothing market can be considered a competitive segment, with a big number of companies, selling products that are different but not that much (those companies don't focus on the type of tissues they use to try to differentiate. On the contrary, they try to differentiate trought intangible benefits), that are always investing huge amounts of money