A major disruption is happening in the apparel industry. After its first week of operation in July 1995, with an order total of 12,000 dollars, the online player Amazon nowadays ships 35 orders per second.
There are some critical factors which a customer evaluates when deciding whether to make a purchase or not. The first one is the product assortment. Shops have a wide range of various products nowadays and the more variety, the higher the chance that a customer buys a product. A second factor is the information richness. The availability of information about the product, as well as the ability to compare the attributes of various products directly increases the chance of purchase. Another factor is the virtual storefront. Good user interface and ease of access can speed up the buying process and lead a customer to the point of purchase. The perceived service quality is also taken into consideration. Virtual stores serve both as marketing channels and information systems, which makes them have double purpose in the process. Perceived service quality is defined as the distinction of what customers expect and what customers receive. The last factor observed is trust and credibility. Perceived trust is influenced by privacy and data concerns. If the customer feels that the online shop does not safely handle data, their intent of purchase might diminish.
The increasing popularity of the online apparel industry could be explained with the “Anatomy of the Long Tail” theory. Retailers want to reach a big customer base at the lowest costs possible and offer a variety of products. Online stores achieve both objectives. They allow a retailer to be able to sell high quantities of less popular, personalized products rather than rely on quantities of popular products. Online, customers also take advantage of customer reviews, search and feedback tools. Essentially, physical stores are local, while virtual stores are global!
Another explanation of the disruption could be drawn from the theory of Newly Vulnerable Markets. The retail industry is currently easy to enter because of low bargaining power of suppliers, low barriers to entry, and availability of information and the internet. Online players can achieve higher objectives at a lower cost. The market is attractive to attack because the new online players can offer a bigger assortment of products to a larger customer base. The market is difficult to defend because of the high fixed costs physical stores have. Thus, it is hard for physical stores to compete with the pricing and variety of online ones.
The Five Forces model reveals that the online apparel industry would be unattractive to individual players in the future. Thus, stores should try to deliver more than convenience and online availability.
As for the future, online retailers should aim at personalized shopping experience, which would engage customers on an emotional and visceral level. Differentiate from others! To get a better understanding of the analysis, use the link below!
