Question
Case Study #1-Read the scenario and answer the questions below. You're 20 years old and you work as an assistant manager at the store Forever 21 . You've just learned that your location is closing soon. The large store has the very best location at the mall so you're more confused than angry. Your thinking about getting a job at a different department store but you decide to research the fashion retail market first. You came across two different articles that are helping you figure out what's going on in this market. USA Today - "Forever 21 filed for bankruptcy protection in late September after being hobbled by expensive leases, declining mall traffic , digital competition, and fashion choices that fell flat" The New York Times - "Forever 21 said that it would file for bankruptcy, a sign of the eroding power of shopping malls and the shifting tastes of young consumers __ underperforming stores were likely located in lower-quality malls and those that had lost other bankrupt retailers, like Sears." 1. Is the fashion retail market perfectly competitive , monopolistically competitive, or an oligopoly? How can you tell? 2. What happened in the retail apparel market that lead to the decline of Forever 21? 3. How could having the very best location in the mall have actually hurt your store? 4. Your friend said that now is the best time to open your own retail store now that Forever 21 is closing. Would it be relatively easy or relatively hard to enter the a pparel retailer market? Why? 5. If you did open your own store what would you do differently than Forever 21? Why? 6. The stores in the mall that sell smartphones are always busy.Is the smartphone market
Answer
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Quintessa
Expert · Tutor for 3 years
Answer
The fashion retail market is Monopolistically competitive.2. 【Explanation】: The decline of Forever 21 was likely due to a mixture of factors based on the articles, including expensive leases, a drop in mall visitation series count(reduced mall traffic), the rise of digital competitors (online shopping platforms), and ineffective fashion choices. In addition, the issues were exacerbated in lower-quality malls and those that had lost other bankrupt retailers. 【Answer】: The reasons were expensive leases,declining mall traffic,digital competition, fashion choices that fell flat and the situation of being located in lower-quality malls.3. 【Explanation】: The best locations in a mall are also the most expensive. Paying for these top spots could lead to high overhead costs for Forever 21which, combined with decreased traffic in shopping malls and increased competition from online sellers, may have depleted the store's profits, making it more susceptible to failure. 【Answer】: High overhead cost due to expensive rental location in mall could affect store's profits.4. 【Explanation】: It would be difficult to enter the retail apparel market due to any restrictive barriers such as access to supply chains, strong competing brands, requirement for substantial initial finance, online competition, and ever-changing consumer tastes. 【Answer】: It would be error_relativelyhard to enter the retail apparel market due to restrictive conditions described.5. 【Explanation】: If opening own store, it would need strategies to tackle whatever issues facing Forever 21. That might mean selecting favorable location with cheaper leases, diversifying onto online platforms to increase accessibility and sale, and regularly updating fashion designs based on trending demands. 【Answer】: If opening my store, will focus on beneficial location, online platform presence, keep updated with new trends based on customers' demand could effectively navigated.6. 【Explanation】: The smartphone market is an example of an oligopoly -- a market that's controlled by a few firms. Therefore power concentrated with firms who can influence the price, unlike Perfectly or monopolistically competitive market where there are very many sellers. 【Answer】: The smartphone market is an oligopoly.
Explanation
The fashion retail market is typically considered monopolistically competitive. Monopolistic competition happens when there are many providers selling similar, but not identical products. Firms have some of the powers of a monopoly as they can influence prices, unlike in perfect competition, by creating a differentiated product. There are numerous fashion retailers, each attempting to negotiate prices based enough on its unique style, customer service, and branding rather than only market forces, showing they are not price takers like in a perfectly competitive market.