Discount Retail Industry Essay

Even though there are only a few barriers for entering the discount retail industry, low switching cost of purchasing products at different stores for customers make the threat of new entrants seem fairly high. Yet, there is high capital needed in order to be comparative with current dominating companies in addition to the established customer relationships and customer shopping preferences in the current industry which ameliorate the high threat of new entrants.
With the high number of distributed store locations of small or big discount retail stores, customers incur low to no cost when deciding to change a shopping store because of the identicalness and similarities among discount retail stores’ products. As well as the intense price competition within the discount retailing industry all result in giving buyers a high purchasing power.
In order to make a profit, discount retail companies tend to keep their cost at the lowest, therefore leading them to seek the lowest priced suppliers. Moreover, dominating discount retail companies typically comprise a high percentage of suppliers’ revenue. In order to maintain the customer, it is necessary for suppliers to give up a large portion of bargaining power.
Due to an improving standard of living perhaps because of new preferences of millennials, buyers are putting more focus on the quality rather than cost of products they purchase. Higher quality and more fashionable retail products can be purchased at up-scale level department stores and healthier food or tastier prepared foods can be purchased at stores such as Whole Foods and other restaurants.
As indicated in the supplier bargaining power section, companies within the industry sell products of highly similar features and quality. In addition to the fact of not being able to differentiate much while keeping cost low, competition is fierce, especially in terms of