New research shows that the fashion and media industries have been significantly reduced • The reasons: Greater exposure to online commerce due to the corona plague - and regulation designed to increase market competition
Online commerce has increased competition in the fashion industry
Photography:
Joshua Joseph
Increased competition moderates the rise in prices, according to a new study published by the Bank of Israel.
Based on the results obtained from the two competition indices, it appears that in recent years there has been a consistent increase in the level of competition with a decrease in the industry inflation rate.
Also, according to the results, the negative relationship between the increase in competition and the inflation rate is particularly noticeable in the clothing industry.
In the years 2017-2014, the inflation rate in Israel fell sharply beyond the inflation target and was even in the negative range.
Increased competition, which is affected by greater exposure abroad also through e-commerce, together with the effects of social protest in 2011, seems to make it difficult for firms to raise prices and maintain profit margins.
A study conducted by Shulamit Nir of the Research Division of the Bank of Israel examined the hypothesis that competition in the economy affects the rate of inflation.
The examination was conducted through an empirical examination and modeling of the development of the inflation rate between the years 2002 and 2018, in five different industries in the Israeli economy, while trying to identify the effect of changes in competition.
These changes were measured using data from public companies that publish financial reports on the stock exchange. The study focused on two of the five industries surveyed by the Bank of Israel: the clothing industry and the communications industry.
In the apparel industry competition has been intensified by competitors in the online market offering cheaper prices.
Their entry into the market has forced the local players in the industry to step up their marketing efforts and lower prices, in order to maintain their market share.
Local marketers have introduced improvements in the service and availability of their wares.
Among other things, they had to enter the online sale themselves and compete in the new market that opened up in front of them.
The communications industry is a different case in which competition has been intensified through regulation specifically designed for this purpose.
Thus, from the end of 2011 and during 2012 new players who joined the industry started offering preferential products, like unlimited calls at a reduced price.
As a result, existing players have suffered erosion in profitability.
