(Quick MBA, 2010). The tendency in retail is not to specialize in one good or service, but to deal in a wide range of products and services. Moreover, in supermarket industry, it is about having substitutes for different products that customers can switch to. So, Aldi is facing a moderate threat of substitutes. So, the threat of new entrants is not a significant force in the fashion retail industry. Threat of substitutes (from Porter’s five forces analysis) occurs when companies within one industry are forced to compete with industries producing substitute products or services.. But, it should be noted that there can never be a complete alternative for superstores because of the diverse range of products that they offer. 4.Threat of substitute products. Force 3: The Threat of Substitutes Threat of Substitutes Threat of substitutes is low because there are not many substitutes that offer low prices and convenience to consumers. A porter clearly explains in his model that the threat occurs usually due to the competition in price. Barriers to entry ; Bargaining power of buyers This means that what one store offers you will likely find at another store. This threat is arises when the product demand is effected by the change in price of the substitute product. Threat of substitution in the case of the fashion industry, talk about brands substitution rather than substitutes, since we are not discussing a particular product, but the full range of a brand. In the 50s, the US discount industry was characterized by high price and advertising competitiveness, with little buyer loyalty. The threat of substitute products has increased in the banking industry, as companies outside the industry have begun to … Tesco Porter’s five forces attempts to analyze five separate forces that determine the extent of overall competition in the grocery retail industry. Retailers offering products that are unique have a distinct or absolute advantage over their competitors. 9. Due to its characteristics, some products are more subject to the substitution of others. A threat of substitutes is the potential that customers will replace your product or service with something completely different outside your market. To summarize, there were many obstacles for new entrants in the discount retail industry. The goal of retailers it provide a wide variety of products at one location and in many cases create a one stop shopping location which leaves little room for alternatives. Food & Healthcare In the long run, healthy food can be a substitute for healthcare. The others are. Key Points 'Threat of substitutes' means the availability of a product that the consumer can purchase instead of the industry's product. Since the competition is intense, no brand can stay assured that it will keep selling and remains celebrity without focusing on customers. Threat of substitutes is one of the five forces that determine the intensity of competition in an industry. The Threat of Substitute Products . These forces are represented in Figure 1 below: Figure 1 Tesco Porter’s Five Forces Threat of substitute products or services for Tesco is irrelevant. The threat of substitute can be related as the products that exist outside the industry. IV. For example, if a nation began to consume less sugar demand for diabetes treatments may drop. V. Threat of New Competitors Threat of substitutes: The threat of substitutes comes from inside the industry. The availability of close substitute products can make an industry more competitive and decrease profit potential for the firms in the industry. Customers can switch to will keep selling and remains celebrity without focusing customers. 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