According to estimation, there are approximately 3,600 active clothing stores in Israel. According to data collected by the Central Bureau of Statistics, an average Israeli family spends 380 NIS each month on clothing.
The industry is divided into sub-divisions according to specific market sectors: men’s clothing, women’s clothing, children and teenage clothing.
The industry is further divided according to the rank of business and clothing: prestige and designer stores, chain stores, fashion design and boutiques, trend stores, clothing stores, bazaars.
Main characteristics of the clothing industry:
- Brands- there has recently been a massive, nationwide penetration of fashion franchises (Israeli and international).
- Stores are generally migrating into malls and traditional trade areas in town centers are demising.
- High seasonality.
- Trends and fashions.
- Customer’s high involvement in choice.
- The industry is affected by the general state of economy.
Customers: Defining the Target Market and its Size, Market segmenting
Target market encompasses the country’s general population, segmented according to age and gender, use, and income levels.
The industry is highly competitive. Clothing franchises invest many resources in marketing and publicizing their brand names, and thus make it difficult for independent stores to compete.
- The store’s location and shop window’s design is highly important.
- Discount sales and particularly end of season sales.
- Stores selling brand names or franchises enjoy national advertisement by the manufacturer via additional media such as television and print.
- Customer clubs, internet site.
Factors Affecting Success:
Store location and competitors in the vicinity, store and window design, uniqueness of the clothing sold, inventory level, reputation.
Entrance threshold is relatively low, and requires medium level investment.
Employees in the industry are usually non-professionals, although it is preferable that store manager and sales representatives have previous experience. Usually age and gender of the sales representative are respective to age and gender of potential customers.
Store renovation, initial inventory, equipment, furniture and shelves, cash register or computer.
Investment is respective to size, level, and location of the store.
Industry revenue and profitability
Store revenue is affected by location, competition, and products sold.
Typical Terms of Payment
Customer transactions usually take place in cash, credit cards, or personal checks. A transaction may take place in a number of installments.
Normally vendors allow a 5-10% discount for payment in cash.
Typically, credit in the industry is given for 90-120 days, although deviation from this does occur at times.
Vendors who sell exclusive or more sought after products will dictate tougher credit terms.
Risk level is medium. Business failure will lead to loss of the initial investment in remodeling and furnishing of the store, and possibly other costs such as rent. In addition, a financial loss may be incurred due to inventory sale at cost or loss price however, transferring the store as a live business could cut these losses.
Business insurance (for content and inventory), third party insurance, employer’s liability insurance, and loss of income insurance. In addition to the above, an insurance agent should be consulted in regards to the need for additional insurance.