2ObjectivesWhat are the three main market segments of the fashion industry?What are the primary forms of business ownership?What are the key risks faced by fashion businesses?
3Fashion Industry Segments Primary market – industry segment that includes businesses that grow and produce the raw materials that become fashion apparel or accessories.Secondary market – the industry segment that includes businesses that transform the raw materials into fashion in the merchandise production phase.Both markets serve as a link to the retail world.
4Fashion Industry Segments 3. Tertiary market – the industry segment that includes retail businesses such as stores.People who work in the segments must have knowledge of the other segments of the industry.Ex. Creator of fabrics must understand how fabrics will translate into finished garments.
5Primary Market A key role in the development of fashion. Phase involves technical research, planning, and complex production processes.Must be aware of current consumer needs and fashion trends.Production schedule is ahead other than other segmentsGenerate the products used in the production of the final products.
6Primary Market - Textiles Textiles – a broad term referring to any material that can be made into fabric by any method.The largest segment of the primary market.Produces fiber, fabric, leather, fur, plastic, metal, paper and any other substance involved in production.Helps other industries such as home furnishings and interior decorating businesses.The foundation in the building process of fashions.
7Secondary MarketProduce garments by transforming textiles to the finished product, or wearing apparel.Producers – are responsible for designing, producing, and selling the goods to retailers.Interrelated and Interdependent.Main types are: manufacturers, wholesalers, contractors, product development teams.
8Manufacturers Handle all operations such as: buying the fabric, designing or buying designs,making garments,selling and delivering the finished garments.
9Wholesalers Similar to manufacturers, but do not make the clothing. Design staff that produces the designs.Purchase textiles or other raw materials necessary for the designs and then plan the cutting of the materials.Coordinate the selling and delivery processes.Many of the top fashion design companies are classified as wholesalers.
10ContractorsMay be responsible for many aspects of production – from sewing and sometimes cutting to the delivery of goods.May produce designs for merchandise that carries a store’s label, or private label.
11Product Development Teams Teams that;DesignMerchandiseOutsource work to contractors in the United States or outside of the country.
12Tertiary Market Also known as the retail industry Retailing – the selling of products to customers.Retail operations distribute directly to the consumers who buy and/ or use the products. (link between consumer and manufacturer).Direct their purchasing and marketing efforts to their target customers’ needs and desires.
14Support IndustriesBusinesses do not always have their own in-house advertising departments, accounting departmentsMay help lower operations costs and allow fashion companies to focus on fashion.
15Types of Fashion Business Three types of business organizations:Sole proprietorshipPartnershipcorporation
16Sole Proprietorship The most common form of business A business owned and operated by one personOne of the oldest forms of business ownershipNot controlled by federal government regulations; the business does not exist apart from the owner.
17Sole ProprietorshipRisks – owner takes responsibility for all assets owned. Personally liable for the company.Taxes – business profit is taxed as personal income tax at a rate less than the rate imposed on corporations.Pros and Cons – the freedom to operate.
18PartnershipA business created through a legal agreement between two or more people who are jointly responsibility for success or failure of the business.Taxes – has fewer regulations than a corporation and each partner is taxed separately on individual tax returns.Personal liability – each partner is personally liable for debts of the partnership.
19CorporationA business that is chartered by a state and legally operates apart from the owner or owners. Charter – a legal document that grants certain rights and privileges to the company by the state.The number one retail corporation in the world?
20CorporationStocks and Shareholders – a corporation has the right to issue stock. Prospective shareholders transfer money, property, or both, for the corporation's capital stock.Taxes – profit is taxed to both the corporation and to the shareholders when the profit is distributed as dividends.Death?
21Fashion RisksRisk – the possibility that a loss can occur as the result of a business decision or activity.Risk management – a strategy to offset business risks; a systematic process of managing an organization’s risk exposure to safety, environmental factors, and the law.Marketing information?
22Types of Risks Three types of risks: Economic Risks – risks that occur from changes in overall business conditions.Human risks – risks caused by human mistakes as well as by the unpredictability of customers, employees, or the work environment.Natural risks – risks that result from natural causes such as the weather.
23A – 48% Employee TheftB – 32%ShopliftingC – 15%Administrative and paper errorD – 5% Vendor FraudDCAB
24Other RisksPure risks – risks that occur when there is a possibility of a loss, but no chance to gain from the event.Speculative – risks that occur when gains or losses are possible.Controllable – risks that can be prevented or reduced in frequencyUncontrollable risks – events that a fashion business cannot prevent from occurring, such as weather.
25Other risksInsurable risk – pure risks that could exist for a large number of businesses, including those for which the probability and amount of loss is predictable.Uninsurable risks – risks that occur when the chances of risk cannot be predicted or when the amount of loss cannot be estimated.
26Managing Potential Risk Purchasing insurancePrevention – employee trainingRetailers and product warrantiesRisk is one important factor affecting the overall economies of all types of fashion business.