Japan Apparel Industry
How does the vertically disintegrated/fragmented distribution system in Japan co-ordinate along the value chain?
Japanese apparel industry is an industry where enormous number and variety of firms contract across markets to produce and sell the merchandise collectively. The spinning firms procure raw materials from importers and act like the principal fabric maker, coordinating production among the many participants. Thread brokers buy the thread from the spinning firms and send it to firms that finish or sometimes dye the thread. Once finished, the thread is sent to either a weaving or a knitting firm, which in turn sends it a fabric wholesaler after producing the fabric. The wholesaler might send the fabric…show more content… We now contrast this forward integration strategy, which seems so prevalent in the Apparel industry, with those brands that chose not to integrate but follow a more fragmented distribution strategy. As the authors point out ‘The best wholesalers are not always the best retailers, and vice versa’. Therefore, it doesn't always make sense for apparel manufacturers to integrate forward into retailing unlike Five Foxes and Aoki. Firms have to do a Cost-Benefit Analysis between directly dealing with the market or inter-firms along the value chain of the apparel. The cost for obtaining market information via integration usually exceeds the benefits in industries such as Men’s dress shirts, socks and children’s clothes.
San’yo Shokai is an example of a wholesaler with an array of apparel ranging from men's clothing to women’s and children's. It is a large organisation with sales of 136 Billion yen as of 1999. Instead of integrating forward, it brought about economies of scope by building a distribution network with both, large department stores and other forms of retailers. Catering to both genders and all age groups helped it achieve further economies of scope which ultimately led to economies of scale. It was a value proposition to its retail partners as it could offer a complete product line for different types of consumers who patronised the retail stores. This allowed it to garner higher business