Making the Cut?
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identified in the clothing value chain (see figure 2.9; Gereffi 1999; Gereffi and Frederick 2010): retailers, branded marketers, and branded manufacturers. Within the retailer category there is a distinction between general retailers who sell a broad variety of products and specialty clothing retailers that only sell clothing products. General retailers can further be differentiated between department stores and discounters and include firms such as Wal-Mart, Kmart, Target, Sears, Macy’s, and J.C. Penney in the United States and Asda, Tesco, Primark, Marks & Spencer, Debenhams, Galeries Lafaye e, Carrefour, Karstadt, and Kau of in the EU. Specialty clothing retailers include firms such as Gap, Limited, American Eagle, and Abercrombie & Fitch in the United States and H&M, C&A, Bene on, Mango, New Look, Next, Arcadia, and Inditex (Zara) in the EU12 (Gereffi and Frederick 2010). Retailers sell products of branded manufacturers and marketers but increasingly (and in particular specialty clothing retailers) have also developed their own private labels. The share of retailers’ sales in total clothing sales has become more important and within their sales private label sales have increased. Furthermore, retailers have generally developed greater specialization by product (such as the rise of specialty clothing retailers) and price (such as the growth of high-volume, low-cost discount chains). Branded marketers are primarily involved in designing, marketing and branding clothing products and are the prime example of buyer-driven value chains and the pioneers of global sourcing. Examples of branded marketers are Nike, Polo and Liz Claiborne in the United States and Hugo Boss, Diesel and Gucci in the EU. In contrast to retailers and branded marketers, branded manufacturers initially had large in-house manufacturing capacities and only started to outsource manufacturing activities in the 1980s (Bair 2006). Branded manufacturers used to concentrate on regional sourcing but have recently increased their sourcing activities on a global scale. Examples of branded manufacturers are Phillips-Van Heusen Corporation, Sara Lee, Levi Strauss, and Fruit of the Loom in the United States and Giorgio Armani, Adidas, Puma and, to a certain extent, Inditex (Zara)13 in the EU. Although branded marketers and manufacturers generally did not own the retail channels through which their products were sold, this has changed and today both have increasingly established their own stores (that is, concept stores) besides of selling their brands through external retail outlets. Hence, today all three types of lead firms have increasingly become ‘organizational buyers’ and have structured their business around the same core activities such as design, branding, marketing, research and development (R&D), and retailing (Gereffi and Memedovic 2003) (figure 2.9). Related to that, all lead firms have been increasingly involved in global sourcing. An important difference arises from the type of end markets buyers primarily target. Discounters generally sell to the low-market segment where price is the key competitiveness criteria; department stores are generally found in the mid-market segment where quality becomes more important. Specialty clothing retailers target different market segments but generally focus on fashion products; some, such as H&M and Inditex (Zara), focus on fast fashion. Branded marketers and manufacturers can be found in different market segments; some, such as Hugo Boss and Gucci, specialize in high fashion and target the up-market segment where quality and fashion is central. Hence, in these different market segments the weight of sourcing criteria, including price, quality, fashion content, lead time, and flexibility differs, which is reflected in the respective sourcing policies of these buyers.