Report On Next Fashion Retail: Overview, PESTEL And SWOT Analysis, Strategies And Tactics

Structure for the report Introduction to retail. This is to demonstrate to the reader that you have an understanding of the basic concepts of retail and some basic information about fashion retail.

Introduction to the company. Clearly identify the chosen fashion retailer, the relevant size and position within the market. The retailer needs to have physical bricks and mortar stores (although they may have an online presence), the retailers are large and have multiple stores.

Key relevant changes within UK fashion retail. Identify the key relevant changes in the macro-environment. Conducting a PESTLE analysis would be a good place to star.

Relevant changes within the micro environment. Relevant changes within micro environment, for example competitors with specific examples, also need to be identified and discussed.

Suggest and discuss strategies and tactics that could be used. Using 2 to 4 key relevant changes (from macro environment analysis) that have been identified as the most relevant/ biggest influence on the chosen retailer are to be highlighted. Using theories/ ideas/ concepts etc. that have been covered in the module material and additional research, strategies and tactics that the retailer could employ are to be discussed and analyzed. Also, do the same, to a lesser extent, for 1 or 2 micro environmental challenges.

The report is a discussion on retail theory and practice of Next, the fashion retailer of United Kingdom UK (Next.co.uk 2018). Next represents the British multinational clothing, home product and footwear retailer with headquarters in Enderby, Leicestershire. The concept of retail explains the sale of the goods to the public in comparatively smaller quantities particularly for consumption or use instead of resale. The retailers are believed to satisfy their demands through the supply chain. Fashion retail on the other hand represents a kind of retailing that includes the sale of clothing, accessories and apparel. The report gives an overview of the fashion retailer Next in terms of position and size. There is also identification of the relevant changes in the macro environment through conducting a PESTEL analysis. The report also helps in identifying the microenvironment through a SWOT analysis. There is also discussion on the strategies and tactics adopted by the retailer for overcoming the biggest influence based on the macro and microanalysis. The report also puts forward recommendations on how the retailers could be meeting the challenges.

Next, is one of the largest fashion retailers of UK dealing with clothing, home products and footwear and has headquarters in Enderby, Leicestershire. There are 700 stores of Next, 500 of which find their location in United Kingdom and Ireland and around 200 stores are located in Europe, Asia and the Middle East (Nextplc.co.uk/about-next/at-a-glance 2018). Next has also overtaken Marks and Spencer in the early 2012 and 2014. The company also finds a listing on the London Stock Exchange (LSE) and is part of the Financial Times Stock Exchange (FTSE) 100 index. Next

Joseph Hepworth, who was a tailor, found the company in the year 1864 in the name Joseph Hepworth & Son. Initially, the company was a partnership with James Rhodes that dissolved in the year 1872 after which, the company was independently expanded by Joseph Hepworth who was one of the pioneer of development of the chain stores in UK (Nextplc.co.uk/about-next/our-history 2018). However, by the year 1884, the company had around 100 outlets. The company started by Hepworth mostly represented the ready to wear suit market which in the year 1963 brought in designer’s collection for revitalizing the ready mad suit collections.

Next operates via three main channels that include, Next Retail, Next Directory and Next International (Nextplc.co.uk/about-next/at-a-glance 2018). Next Retail represents a chain of close to 550 retail branches located in UK and Ireland. Next Directory represents a website and a catalogue for home shopping with close to three million active clients. Next International represents more than 180 international stores that also carry out sourcing for their own brands.

PESTEL Analysis for Identifying Changes in Next Fashion Retail

The framework for PESTEL analysis helps in analyzing the volatile and changing environment where Next operates by indentifying the forces that creates an impact on the performance of the fashion retailer.

Political

The indication on reduced spending and budget cuts by the government of UK during the harder economic times implied suppression of the overall spending by the consumers (McCormick et al. 2014). However, the constant supervision of the government on the public sector cuts constantly dampened consumer spending and had a direct impact on the UK fashion retail industry.

Economic

Increase in the cotton prices together with higher rate of global inflation resulted in a financial strain on the bottom line of Next. The economic factors not only had an impact on the sales but also the profit margins of the company (Déri 2013). The rising inflation predominantly on food and fuel towards the end of 2011 resulted in limited consumer spending. Moreover, the limited availability of credit due to the recent hike in the mortgage rates affected both the businesses and the consumers. Consumer spending also reduced due to prevalence of unemployment in UK during the year 2011. There has also been a lower growth rate in wages that has also contributed to the lower consumer demand.

Social

The social factor affecting the UK retail industry represents labor and social mobility, changes in demographics and changes in lifestyle or fashion. Social changes affect the fashion industry by either creating opportunities or threats for Next (Sun et al. 2017).  Extreme criticism faced by Next on not being able to keep up with the latest generation of Shoppers have led to the creation of  Lipsy, a brand dealing with fashion products for the younger women in the age group of 18 to 25 years of age. Online fashion giant ASOS also proved to be challenging for Next as it rapidly captured the younger generation of the consumers. To keep up with the trends, Next also launched an online catague that offered clothing, accessories and shoes for men, women and children.

Technological

Newer developments and innovations along with the changes in the information technology are some of the technological factors that had an impact on the performance of the company. The last couple of years have remained proof of how the social networks, smart mobile phone technology and the internet have represented newer avenues of marketing and sales acquisition for the younger consumers (Fernie, Fernie and Moore 2015). To keep pace with such technological advancements Next have adopted online means of sales through various websites. However, online sales represented the biggest growth for the company.

SWOT Analysis for Identifying Changes within Micro Environment

Environmental

The sales of Next have reduced in recognizing with the current trends of the government and consumers in reducing the carbon footprints (Lea-Greenwood 2013) The Company in keeping with the trend is focusing on more environment friendly products. The company has thus undertaken recycling of waste and lowering the transport emissions and using environment friendly packaging for the products.

Legal

The  increase in the value added tax from 17.5 percent to 20 percent by the UK government have effected Next in terms of higher product pricing thereby leading to higher cost of operation (Frynas and Mellahi 2015). Moreover, the hike in the minimum rates for the labors in UK and other countries also increased the cost of the company thereby reducing sales.

Identifying the Strength and Opportunities

The power of adaptability of Next is identified as one of its key strengths and is a vital aspect for existence in an ever changing market (Cortez et al. 2014). This can be explained by the steps taken by Next in the home shopping networks and its immediate delivery service. The increasing demand for the online purchasing has also been identified by the company. The company has also implemented newer business initiatives centered on the key themes like the quality customer service through the next day delivery for the orders which are placed before 9.00 pm. Such actions have helped the company in creation of a trustworthy atmosphere with the online services. In the long run this will help the company in ensuring further sales and customer loyalty.

The creative and responsive approach of Next in fashion retailing determines its ambitious future. The financial statements of the company for the last nine years have shown an increase in turnover. Thus, the economic performance, which is an important for the fashion retailers, determines a brighter future for Next. In addition to the approaches of purchases in brick and mortar stores and via online means, Next adoption of corporate social responsibility also receives credit since the company puts forward reports that outline environmental, social and ethical performance with priority set on the reduction of 4 percent energy (Vikram and Mittal 2013). Although there have been beliefs that the recession had a negative impact on the company’s ethical culture, Next proved it wrong by enhancing the reputation of the company for not only employees but also the general public. The attitude of the company towards creating an environment where the employees are not only respected and supported not only helps in motivating the work force but also ensures better results.

Identifying the Strength and Opportunities

Identifying Weakness and Threats

Although Next has been quite successful in the business of fashion retail, its biggest threat has been the highly competitive market. The existence of discounted clothing brands particularly eats away portion of the sales of the standard market for clothing. The recession factor in UK has made people more selective about spending their disposable income. Due to recession around 70 percent of the people had either a pay freeze or a pay cut. Thus, the luxury products offered by Next faces a threat of the substitute products and are one of the key threats to the competitive advantage of the company. Next faces a potential threat as its standardized products are replicated by its competitors like River Island and Topman (Thompson and McLarney 2017). Thus, with the availability of low priced manufacturers of clothing, the issue faced by Next is of making the products unique for ensuring future sales. It is to be noted that the fashion retail market for clothing depends on competition of prices. The dependence of Next on the prices of competitors showed a scenario represented by a kinked demand curve and has been problematic for the companies since due to the reduced control over their profit margins. As the company could not control the demand or price of their products, it possessed little power in changing their own profits. Moreover, the retail clothing industry has an uncertain market due to the fact that only disposable income group spend on such sectors and the impact of the seasonal cyclical implications.

The strategies and tactics used by Next can be analyzed in 4 Ps which is product, price, place and promotion.

Product: The product offered by Next is fashionable clothing targeted to the middle glass men and women in the age group of 25 to 24 years. The company focuses on ensuring higher quality and fashionable designs to the customers (Peck et al. 2013). The focus of the company in ensuring quality is a key factor in determining the brand establishment and their growth.

Price: This represents the pricing strategy employed by the company based on quality perception, customer expectations, intended targets and branding. Therefore, the pricing strategy adopted by Next occupies a neutral zone and ensures portraying quality design and image at a particular price for the targeted customers (Magrath and McCormick 2013). The pricing strategy adopted by Next offers familiarity and continuity to the existing customer base since the customers knows their expectation and their perception of quality. The neutral pricing strategy of Next also ensured flexibility in the pricing for seasonal and promotional purposes and allowed the company in remaining competitive across various sales channels.

Place: Next has a clear multi channel strategy for retailing with avenues for the customers for purchasing and browsing products. The company has around 500 brick and mortar stores throughout Ireland and United Kingdom that allows them to increase the convenience of buying for the customers through touching and feeling (Caro and Martínez-de-Albéniz 2015). The other channels of Next that includes various online channels like the website, social media and mobile app has a catalogue or directory that allows the customers to order or receive their purchase through post. These channels help the company to not only sell the products but also maintain the communication with the customers.

Promotion: This implies the methods that the company has employed for making people aware of their products. Next, the clothing fashion retail has focused more on undertaking smaller campaigns compared to advertising on a larger scale (Pookulangara and Shephard 2013). Presently, with changing times, the Next have shifted its focus on online medium for advertising, communication and display of promotional offers.

The recommendations that will help the UK retail fashion brand, Next to overcome the present challenges are as follows:

1. With the rise of the online shopping, Next, should optimize and expand services that suits digital marketing which will open up bigger opportunities.
2. The Company can make use of the data gathered through the multiple channels and  the social media in optimizing the store spaces by displaying the most popular items and keeping the less popular items for the online  channels that have lower cost of running. This will help the company in optimizing the store space and use it more efficiently.
3. The company might also benefit from narrowing the target market which will allow them to produce appropriate products for specified customers that will not only enhance its profitability but also its efficiency.

Conclusion

The report ends by providing recommendations on how Next might overcome its challenges. However, it can be concluded from the report that the UK fashion retail brand holds a considerable strong position in the market and shows a steady growth. The company has a consistent marketing strategy and ensures delivery of fashionable and quality products at reasonable price.

References: 

Caro, F. and Martínez-de-Albéniz, V., 2015. Fast fashion: business model overview and research opportunities. In Retail supply chain management (pp. 237-264). Springer, Boston, MA.

Cortez, M.A., Tu, N.T., Van Anh, D., Ng, B.Z. and Vegafria, E., 2014. Fast fashion quadrangle: An analysis. Academy of Marketing Studies Journal, 18(1), p.1.

Déri, E., 2013. Challenges of Environmental and SocialResponsibility in the Fashion Industry.

Fernie, J., Fernie, S. and Moore, C., 2015. Principles of retailing. Routledge.

Frynas, J.G. and Mellahi, K., 2015. Global strategic management. Oxford University Press, USA.

Lea-Greenwood, G., 2013. Fashion marketing communications. John Wiley & Sons.

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Nextplc.co.uk/about-next/our-history2018.[online] Available at: https://www.nextplc.co.uk/about-next/our-history [Accessed 24 Feb. 2018].

Peck, H., Christopher, M., Clark, M. and Payne, A., 2013. Relationship marketing. Taylor & Francis.

Pookulangara, S. and Shephard, A., 2013. Slow fashion movement: Understanding consumer perceptions—An exploratory study. Journal of retailing and consumer services, 20(2), pp.200-206.

Sun, Y., Guo, P., Ma, Z., Li, T. and Dang, S., 2014, November. UK-based external business environment analysis of outdoor adventure clothing using the PESTEL tool and its future outlook. In Information Technology Systems and Innovation (ICITSI), 2014 International Conference on (pp. 306-309). IEEE.

Thompson, J. and McLarney, C., 2017. What effects will the strategy changes undertaken by next Plc have on themselves and their competition in the UK Clothing Retail Market?. Journal of Commerce and Management Thought, 8(2), p.234.

Vikram, S. and Mittal, M.P., 2013. FDI in Multi-Brand Retail Sector–A Study Regarding Indian Context. Asia Pacific Journal of Marketing & Management, 2(7), pp.121-131.