Whether you are starting a new fashion line or managing a large apparel brand one thing is for sure, you must create a competitive business model that typically revolves around competing for the lowest price or highest quality. Consumer products can typically be broken into 2 categories premium (high quality) and discount (lower priced). In order for a business to be successful the management team must decide to compete by offering higher quality products at the same or higher price than the competition or sacrifice quality in exchanging for being able to sell a product at a lower retail price. Most successful businesses typically compete in price or quality and not both as it can be confusing to customers what the brand represents from a quality standpoint. Apple Inc. for example competes as a premium product retailer with the customer knowing to expect to pay more for a higher quality product.
Every business wants their customers to feel confident in their purchase and believe they received a high amount of value. Value is the correlation between a products price and its quality. Nearly identical products that range greatly in price can still both have a high amount of value to the customer. Regardless of what business model a brand chooses to use it is important that the customer believes they are receiving a good amount of value from their purchase.
A business that competes in price bases their business model around selling their products at a low price or a discounted rate. Business that use a business model that revolves around keeping the price down often have to cut costs which can lead to sacrificing product quality and customer service. A business can also choose to compete by offering higher quality products at a premium price. While some consumers are worried about overspending, others are willing to pay for higher quality even if it means a higher price.
How To Develop a Business Model for a New Retail Apparel Brand
One of the first decisions a new apparel brand must do is decide if their business model will revolve around retailing cheap(er) priced products or promote themselves as a premium high(er) quality brand. Neither business model is better than the other, but it is extremely important to remember who your target market is and what they can afford to spend on your product(s). For example, a business that is located in a mall that is in a high income area should focus on a premium business model. The business model an apparel business uses reflects what the brand represents.
When it comes to starting a new apparel line, the odds are that you are going to purchase blank garments, re-tag them and print a design or your logo on the garment. You might eventually get big or skilled enough where you can sew your own products together. However, in the beginning, almost everyone must purchase from a blank apparel supplier. When your starting a new apparel fashion brand it is important to know your product line from the inside out, especially pricing. It is also very important to know who your direct and indirect competitors are and conduct a SWOT (Strengths, Weaknesses, Opportunities, Threats) Analysis on each of them. Keep your customers (friends) close, but your competition (enemies) closer.
A new apparel business promoting itself as a premium brand simply comes down to the consumer’s perceived value. For example, Nordstrom Inc. can easily, and often does, charge an excessive amount for a blank t-shirt. Consumers will purchase this shirt because of Nordstrom’s Inc., and the product’s, high perceived value. While Walmart Inc. would be hard-pressed to offer the same product inside one of their stores as Nordstrom Inc., they also sell blank t-shirts, but at around 1/10 of the price. When starting a new retail brand it is important to choose the right product to offer to your target market and how you plan to compete with your competition.
Apparel products are very unique in that the brand’s name is the true selling point. While brands often have a lot of equity and loyalty few products are as powerful as apparel in which consumers pay to advertise the brand of the product they are wearing. In other words, customers are paying to be a walking billboard. Apparel brands like Abercrombie and Fitch Co. and Hollister Co. love to put their company’s brand name or logo across the primary decoration area of a garment.
Business Model (Company/ Brand): Compete with Price
Every consumer is on a budget, either small or large so one of the most important factors of whether or not they make a purchase is the price of the product. Hence, the prevalence of business models based around pricing. Competing with pricing is beneficial because it increases the amount of sales a business sees, but the markups often have to be minimal. So, it is essential that these business conduct enough sales to turn a profit. Additionally, quality is typically comprised in exchange for the low price that the product is offered at.
Companies like Forever 21 Inc. and H&M AB competes in the fashion industry through their low prices, for instance. Companies such as these are known as fast fashion brands who replicate designer looks (not exactly, but close) as soon as possible after designers premier their lines. Then, they sell the replications at very cheap prices. However, conducting business this way comes at cost that goes beyond monetary value. There is clear artistic theft, and the means that these companies go to in order to make this happen is more than questionable. Still, these companies do insurmountable sales, and are worth billions of dollars. So, clearly there is an advantage in competing in price as far as business models go.
Business Model (Company/ Brand): Compete with Quality
Besides selling a product at a lower price that the competition, a business may choose to compete in the market based on offering higher than average quality. Coach LLC., known for their purses, is an example of a company who competes with quality while knowing that their customers will pay a higher price. The Coach brand is much more expensive than the average fashion brand, but a consumer is sure to only receive top quality products from them that exude elegance. Additionally, there is the prestige that goes along with carrying a Coach purse or walking in their shoes that draws consumers, and companies who compete with price cannot offer this.
