Pricing in the Clothing Industry for Demand - myassignmenthelp

Question: Discuss about thePricing in the Clothing Industry for Demand and Supply. Answer: Factors Affecting the demand and Supply of Clothing in Australia Introduction The clothing industry is a very competitive industry in the whole world. Both domestic and international competitors facilitate the increased supply for clothings in Australia. The international competition has been so fierce and has led to increased innovation in this industry (Truett and Truett, 2017). This industry is so large and raises an annual revenue of over $19 billion; the number of people employed in the clothing industry are so many. According to Ibisworld.com.au (2017), the annual percentage growth of this industry from 2012 to 2017 is 3.9%. The clothing retailing entails the purchase of accessories and apparel products directly from a manufacture of from other wholesalers and selling them to the consumers without making any special alteration. The retailers sell in many shops of which some are operated on an online platform. Some of them offer special service such that a product purchased online can be home-delivered. Some of the industrys products include; infants clot hing, womens clothing, mens clothing, boys clothing, girls clothing and accessories. Analysis The supply and demand for clothing is influenced by the number and size of suppliers and the number of sellers among other factors. Price influences both supply and demand and the interaction reads to establishment of an equilibrium point (Daniel and VanHoose, 2014). This is mostly the case for competitive markets like the clothing industry. The falling are the non-price factors affecting both demand and supply. Factors Influencing Demand Demand influencing factors include; consumer preferences; demand for an item that is more preferred rises, availability of goods sold on credit; many consumers have no ready incomes are if the goods are available on credit, they raise demand and pay in the future, the consumers income level; the higher the income level the higher the demand and vice versa, increased population growth; this increases the number of buyers and thus demand rises, the price for substitutes; a low price for substitutes lowers the demand for the item. Fig: Movement in the demand curve If price is the influencing factor, movement is along the demand curve, but if its due to non-price factor, the demand curve shifts either to the left or to the right (Gillespie, 2013). Factors Influencing Supply Welch and Welch (2016) noted that some of the factors influencing supply include costs of production; an increased cost of production as is the case for Australian manufactures results in a reduced supply of the items produced. The Australian governments corporate tax bracket for the manufactures is very high and is making it more costly to produce more items and this is driving out the Australian clothing industry given the external competition (Low, 2017). The other factor is future market expectations; an expectation of reduced future consumers income may cause supply for certain goods to fall. Other profitable ventures may also influence supply; a supplier may shift to the more profitable venture and interrupt the initial supply. Lastly, the number of sellers, the more the number of sellers the higher the supply and vice versa. Fig: Movement in the demand curve If price is the influencing factor, movement is along the supply curve, but if its due to non-price factor, the supply curve shifts either to the left or to the right. Elasticity of Clothing Demand to Price Changes The demand for clothing is elastic to price changes. People may take time before they demand some new clothing as the initially owned clothes may take time before they become torn and old fashioned. A cloth is something that purchase cannot be made on a daily basis. The demand being elastic means that it is sensitive to the price changes. At a very low price, consumers are interested in purchasing more clothing; but when the price is high, the consumers skip purchasing the goods. For this reason, it is not easy for a retailer to fix his/her price at a very high level unless there is a certain trending fashion that is on demand by the middle income people. The only strategy that can allow retailers to charge the highest price from the clothing industry is through price discrimination where the prices charged are dependent on the location. Fig (a): Elastic demand (low income) Fig (a): Inelastic demand (High income) A small price change in fig (a) causes demand to change by a big proportion whereas a big change in price in fig (b) causes demand to fall by a small proportion (James, Burrow and Kleindl, 2011). Conclusion The clothing industry should understand the market they operate in and choose the right pricing strategies. They can do this by doing a research on the income level of the potential customers. Price discrimination is a good pricing strategy in the clothing market. The demand for clothing in a place flocked by high-income earners is inelastic and thus price is not a factor they consider when making their purchases; all they are interested in is the quality and the fashion. This explains why a certain brand of clothing is sold at a very high price in the urban areas, whereas the same brand sells at a low price in the rural areas. References Ibisworld.com.au. (2017). Clothing Retailing in Australia. [Online] Available at: https://www.ibisworld.com.au/industry-trends/market-research-reports/retail-trade/other-store-based-retailing/clothing-retailing.html [Accessed 29 Aug. 2017]. Daniel, J. and VanHoose, D. (2014). Global Economic Issues and Policies (3rd Ed). Routledge. Gillespie, A. (2013). Business economics. 2nd ed. Oxford: Oxford University Press. James, L., Burrow, J. and Kleindl, B. (2011). Principles of Business (8th Ed). Cengage Learning. Low, C. (2017). How the global giants are squeezing out Australian fashion. [Online] The Sydney Morning Herald. Available at: https://www.smh.com.au/business/retail/stitched-up-how-the-global-giants-are-squeezing-out-australian-fashion-20170209-gu9arc.html [Accessed 29 Aug. 2017]. Truett, L. and Truett, D. (2017). Cost relationships and globalization in the Australian clothing industry. [Online] Taylor Francis. Available at: https://www.tandfonline.com/doi/abs/10.1080/00036846.2017.1287864?journalCode=raec20 [Accessed 29 Aug. 2017]. Welch, J. and Welch, F. (2016). Economics: Theory practice (11th Ed). Hoboken, NJ: John Wiley Sons, Inc.