Business models in the garment industry

In Europe there are six main types of business models in the garment industry:

1)     Independent multi-brand stores

Independent multi-brand stores can be described as “stand alone” retailers who may havevery diverse assortment strategies because they cover the whole range of quality and price and vary in the degree of specialisation in clothing. Typical for this business model is that it is impossible to influence the design, cut, and branding. Compared to other business models, the lead times are comparatively long and may account for about 6 month or sometimes even longer. Multi-brand stores do not have private labels since they do neither own production facilities nor cooperate with subcontract manufacturers. This distribution channel is dominated by SME´s, which will not have very extensive supply chain processes.

2)     Specialised chains

Specialised chains sell their own branded production, which is produced by contracted manufacturers or their own manufacturing sites. Garments is offered under private or brand labels. These vertically integrated chains can be split in the following three categories depending on their business strategies:

a) Private label

European players like H&M, C&A and Zara are common private label chains, which may also be called “fast fashion companies”. Their focus is to reduce lead times to a minimum, avoid warehousing costs, and continuously renew their collections rather than replenish stock. These strategies enable them to offer very fashionable garment at low to average prices and quality. The distribution of garments to the stores will be carried out daily or every two days through distribution centres.

b) Mono Brand fashion

Mono brand fashion companies like Benetton, Esprit, and Lacoste have established brand labels from average to very high quality and price level in the market. Similarities with the private label approaches in their supply chain processes can be found. Especially the average priced brand fashion companies are also considerably flexible regarding the number of collections, lead times, and replenishment strategies.

The complete responsibility of design, cut and, marketing activities for their brands is also characteristic.

c) Category killers

Another differentiation can be found in stores, which have specialised in selected product categories like the lingerie retailer Palmers. Characteristic for them is a considerably narrow but deep assortment. Their supply chain processes and approaches are similar to the other two specialized chains in most cases.

3)     Department stores

Department stores usually sell clothing as part of their assortment and have private branded collections as well as brand manufactured clothing in their range of clothing. Department stores like Kaufhof and Galeries Lafayette mainly work with contracted manufacturers and sub-contractors. Characteristic for them is a considerably wide range of assortments across all garment categories for basic and fashionable clothing at different price and quality levels.

4)     Hyper-and supermarkets

Hyper and supermarkets like and Metro usually offer specific product ranges such as kids wear or lingerie. They tend to offer more basic garments and “weekly promotional garment”. The supply method is mainly finished-product-purchasing for promotional garment and sub-contracting for private label. The fashion factor is relatively low and store deliveries are fewer compared to the specialised chain models.

5)     Traditional manufacturers

Traditional manufacturers such usually stay competitive through specialization in a comparatively narrow product range, competitive prices, and high quality. Distribution is often carried out through department stores or independent multi-brand stores. But also a trend to enter the retail market is recognised. Examples for a successful penetration of the retail market are the specialised chains, which have their origin in garment manufacturing.

6)     Other distribution channels

Other distribution channels are factory outlets and mail order companies including subchannels like catalogue, internet and TV sales. A trend to develop “multichannel companies” in these distribution channels can be recognised.