Essay About Smaller Boutique-Style Clothing Stores And Banana Republic Brand

Gapreport Case
Gap faces little threat of increases in price competition by entry of new firms
into the market. Smaller boutique-style clothing stores may be able to compete on
a local level with the Banana Republic brand, however such firms likely would not
be able to expand, and both Gap and Old Navy enjoy a cost advantage in producing
staple articles of clothing, such as jeans and sweaters. Due to economies of scale in
producing large amounts of clothing, entrants will have an extremely hard time
producing clothing at cheap enough prices to compete with Gap and its
competitors. Entrants would also have difficulty in finding supplier firms who would
produce their clothing at a competitive cost level. Costs drop per unit of clothing
produced, and an entering firm would need to order a large amount of clothing in
order to enjoy the same economies of scale that Gap enjoys.
Brand loyalty is also important in fashion. Because many consumers have
strong preferences for certain brands or styles of clothing, new entrants would find
difficulty in increasing the amount of customers they attract to their stores without
incurring significant advertising expenses. Because of their size advantage and
economies of scale in advertising, Gap has a significant advertising advantage over
all other direct competitors within the specialty apparel market. They can afford to
run well-known nationwide television advertising campaigns while other firms in the
market do little or no TV advertising. A new entrant trying to steal away brand loyal
customers from Gap would need vast advertising resources in order to establish
their brand and be competitive, which is unlikely for an emerging firm.
Other than monetary considerations, the inputs necessary