Discuss the bargaining power of buyers (within the topic below) in the U.S. foot

Question

Discuss the bargaining power of buyers (within the topic below) in the U.S. footwear manufacturing industry where the buyers are the wholesalers and distributors? Give support and concise examples.

Price sensitivity: Are buyers price sensitive? This deals with elasticity of demand. Is the industry able to pass cost increases on to the buyer, or must they absorb them? If buyers are not price sensitive, this gives the industry power and makes it attractive.

Price to total purchases Do the buyers’ purchases of this industry’s product/service represent a significant percentage of their total purchases? If so, this would give the industry power over the buyers. They would be dependent on a constant supply of goods or services for their survival.

Explanation / Answer

The US Footwear industry is a supplier concentrated industry. The wholesalers and distributors have a buying power due to supplier concentration. The buyers are price sensitive, and have bargaining power as there are multiple alternate providers/substitutes. The demand for footwear has increased, which gives wholesalers and distributors an opportunity to capitalize the growth. Other factors, like economic growth, rise in per capita income have added to the bargaining power. The volumes and economies of scale also plays an important part. The differentiation available by manufacturers is low, hence wholesalers and distributors have leverage. There are a lot of incentives involved for buyers, particularly during the seasonal sales offered by brands and stores.

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