INDUSTRY FIVE FORCES
SUPPLIER POWER
Supplier power in the women’s luxury shoe market is medium. The industry requires key, high quality inputs and expert craftsmanship. These individual suppliers are not able to dominate the industry. However, a major concern is the role of highly skilled labor, and exotic skins. In regards to the former, some luxury shoe brands, including Manolo Blahnik, handcraft their end product. This requires them to produce with high skilled shoe artisans, effectively limiting production to countries such as Italy, Spain, and Turkey. This reliance on a few selected producers raises supplier power. Finally, the increasing use of exotics skins such as alligator and crocodile may increase supplier power in the long run.
BUYER POWER
Buyer power in the industry is medium. The luxury consumer market is targeted at a select few, while buyer power is not concentrated. However, distribution is a key concern for luxury brands. In the luxury shoe industry many companies do not have their own retail distribution networks. Brands in the industry use several key distributors to reach their consumers, such as department stores, and retailers. In the United States and Japan several luxury stores carry several different brands of luxury shoes, among other luxury products. Even when brands with the stature of Manolo Blahnik open independent stores, they are often operated by outside companies such as Kurt Geiger. The industry as a whole is dependent on third party distribution channels, increasing the power of buyers.
THREAT OF SUBSTITUTES
Threat of substitute products is low. Consumers are not buying luxury shoes for their function, but for their brand and social value. In several markets the substitute of concern is counterfeit products. Regarding the industry at large, it is unlikely that we will encounter a substitute for all luxury women’s shoes with a new type of product. Moreover, new trends intrinsically carry the threat of outdating existing styles.
THREAT OF NEW ENTRANTS
The internal threat of new entrants is low in the industry but high in our market – Developing countries. Extremely high levels of competition effectively raise barriers for firms entering the market, making unlikely that major new competitors will enter the market. Developing markets carry a much greater risk of new entrants. China in particular displays this risk, due to large growth in the luxury goods market and cheap domestic production centers. Many of the top 10 most popular luxury shoe brands are not directly sold in China. An increasingly frequent number of competitors will enter the market as it gradually matures.
“The Top 10 Luxury Shoe Brands.” TheRichest The Worlds Most Entertaining Site. TheRichest.com, 01 Aug. 2013. Web. 18 Nov. 2014. <http://www.therichest.com/rich-list/most-popular/the-top-10-luxury-shoe-brands/>
INDUSTRY COMPETITION
Competition in the luxury fashion industry is high. The industry can effectively be broken two main clusters – firms that exclusively focus on one product, and firms that produce several products across their fashion line.
Manolo Blahnik are the former. Brands in this section see their revenues dominated by the sales of one exclusive good - luxury women's shoes. We have identified Christian Louboutin (France), and Jimmy Choo (United Kingdom) as our primary competitors because they have successfully adopted the same approach in their China entry.
Miu Miu (Italy), and Prada (Italy) are examples of the latter group, where no single product dominates their revenue stream. In these companies value is created through the brand’s entire line, while women's shoes represent a portion of their income.
In depth information on our competitors in the Chinese market can be found on the Competitors (opens in a new window) page of this website.
