Magister Commercii - MCom / Over the 1ast eight years up to 1989, a new business phenomenon has manifested itself in South Africa. During this period, the so-ca 11ed "factory shop" concept has developed into one of the fastest growing industries in both the manufacturing and commercial sectors. In South Africa, factory shops have initially established in the Cape Peninsula.4,5. The nature of these shops is such that their creation may be attributed to the clothing industry itself ;" This trend originated in about 1980 at a few clothing manufacturers in Cape Town, inter alia, Desiree, Readywear, Atlantic Knitting Mills. Originally these factory shops were open for limited hours, I usually over lunch-time and on only one Saturday per month. They were strictly limited to and for the sole benefit of I the staff of those firms. Gradually, however, family and later friends and acquaintances of these staff members became aware of the so-called bargain prices at these stores. Both supply and demand played important roles in the development of factory shops. For example, increasing pressure on management to supply larger quantities of these merchandise items at bargain prices, as well as the fact that clothing factories had excess stock which was difficult to clear through the normal distribution channels. Factory owners recognized and seized this opportunity to reduce stock at little additional cost. From their inception, factory shops have had a significant influence on the turnover and profitability of the retail clothing industry. This trend is documented in reports by the organ i zed trade, 7 ,B where reference has been made to the influence of these factory shops and where independent clothing retailers have been calling for a plan of action for protect i on against the encroachment by these factory shops on their (the clothing retailers') markets. However, up to that stage, no in-depth study or formal research was done to justify such action for protection. The ref 0reitwa s felt that" An empirical stud y of the development of factory shops in the clothing industry in the Cape Peninsula" was needed to acquire an objective view of the state of affairs.