The test is whether the small manufacturer can get its products on the shelves of the same retailers as its much larger rivals. In some segments within the household consumer-products industry, this may not be the case since a small manufacturer could develop a superior product, such as a detergent, and compete with Procter & Gamble. Given the amount of capital investment needed to enter certain segments in household consumer products, such as manufacturing deodorants, we suspect the threat of new entrants is fairly low in the industry. Nevertheless, bargaining power for both the firms and their suppliers is probably limited.
On the other hand, suppliers that do a large amount of business with these companies-supplying Kimberly-Clark with raw materials for its diapers, for instance-also are somewhat beholden to their customers, like Kimberly-Clark. More than likely, consumer-products companies face some amount of supplier power simply because of the costs they incur when switching suppliers. Verdict: Strong buyer power from retailers. Retailers like Wal-Mart WMT and Target TGT are able to negotiate for pricing with companies like Clorox because they purchase and sell so much of Clorox's products. But if we consider the buyers of consumer products to be retailers rather than individuals, then these firms face very strong buyer power. Consumer-products companies face weak buyer power because customers are fragmented and have little influence on price or product. (Porter's work is nothing short of excellent, but it is a heavy read.) Let's briefly examine the household consumer-products industry by considering rival firms Clorox CLX, Kimberly-Clark KMB, Colgate-Palmolive CL, and Procter & Gamble PG in terms of Porter's five forces:Ä«uyer Power. Historically in South Africa, the conduct where your incumbent supermarkets, your powerful supermarkets that have been around for a really long time, history the conduct is that they enter into leases with property developers or property owners, and these leases contain exclusive clauses, and these clauses which specifically stipulate that new entrants cannot locate in the same shopping mall or the same shopping centre for a given amount of time.The five forces concept is perhaps best explained through example. Reena das Nair, Senior Researcher at the CCRED, says that newer businesses such as Fruit & Veg have shown the value a new entrant can have in the country's retail industry for both suppliers and consumers, but still face obstacles which appear to be to the benefit of bigger retail chains. If you look at the experiences of new entrants such as Fruit & Veg City, the entry of these triggers brings about huge benefits for suppliers into the supermarket value chain, as well as for consumers Reena das Nair, Senior Researcher at the Centre for Competition, Regulation and Economic Development at the University of Johannesburg (UJ) This is according to a study by the Centre for Competition, Regulation and Economic Development (CCRED) at the University of Johannesburg, which finds that the country's big and long-established retail chains hold over 70% of the country's retail market share. Multiple barriers to entry need to be looked at to make it easier for new entrants to break into South Africa's retail industry. Reena das Nair describes the challenges of new entrants to break into South Africa's retail sector.