Strategic Analysis Of The Apparel Market In UK: Essay On Trends, Opportunities, And Challenges.

Take an industry or a sector of your choice and carry out a strategic analysis of that industry or sector:

• Critically analyse industry attractiveness.
  
  
• What are the main features of the industry that influence competition and profitability? Discuss.
  
  
• Critically analyse competition and customer requirements in order to identify opportunities for competitive advantage within this industry/sector.
  
  
• Are there any changes that would significantly affect bases of competition in the industry, discuss? ·Make recommendations for companies planning to invest in that industry/sector. What kind of difficulties and risks are normally involved in choosing the strategies you recommend, discuss?

Market Overview: Value and Growth Projections

The apparel market in the UK is the third most lucrative after beauty and cosmetics and the food and beverage sectors. With a current value of £60 billion, the industry accounts for 6% of UK's market. The export in the apparel sector is worth £6 billion, a major budding business opportunity for both startups and established companies in the industry (Statista 2018).

Though women are the biggest consumers of the latest trends in clothes, men and children are projected to grow faster at 21.2% compared to 16.8% for the women (British Broadcasting Corporation [BBC] 2017).

According to Euromonitor (2018) online apparel sales have grown by 56% giving entrepreneurs easy access to a ready market without necessarily bearing the costs of establishing multiple stores. Offline market is however projected to grow to over 70% by 2022 as market research shows that many shoppers still prefer dealing with brick and mortar stores. To cap it, there is huge potential for the growth of the luxury segment as the UK is experiencing steady growth of high net-worth individuals from 448,000 in 2008 to 545,000 individuals in 2018. Besides that, the plus size segment has shown remarkable potential with a market value of £18.8 million.

The porters five model can be used to critically analyze the sector.

Figure 1. Porters five forces model. Adapted from Porter (2008)

The apparel market is very competitive. As aforementioned, there are over 3855 enterprises in the market. There are 16 dominant companies in the sector. Out of these, 9 companies have emerged the market leaders (Coresight Research 2017).

The rapid growth of e-commerce is such that the cost of entry and exit to the market are extremely low (Porter 2008). This has fueled fierce competition among the UK bred companies and a bevy of non-UK companies such as Zara, Amazon, Starbucks, H&M, and PVH to mention a few.

Due to the high number of competing apparel entities, UK customers are more than ever before spoilt for choice. This has led to fierce price wars. Zara, the Spanish multinational has opted to rapid manufacturing strategy to keep customers interested in new fashion. Primark has embarked on product development strategy with a focus on quality to lock on the customers.

As a result of the Brexit vote in 2016, leaving the Euro Zone will undoubtedly lead to trade tariffs and quotas on products from companies outside the UK block. This will discourage new entrants in the brick and mortar store business (Roberts 2017).

But because the online market is virtual, companies do not need to have a physical presence in the UK. This implies that they can set up e-commerce sites and establish unparalleled distribution networks to reach the market relatively easily (British Fashion Council [BFC] 2017).

Suppliers harness bargaining power when they are few and supply to many entities. As it happens, the UK apparel industry is awash with many suppliers in garments. Currently, there are over 3000 companies that are willing to handle outsourced manufacturing (Statista 2018).

Consumer Behavior: Women, Men, and Children

More to the point, apparel companies in the UK have integrated backward to the garment and manufacturing industries (Porter 2008). Companies like Primark, Marks & Spencer, PVH, H&M and Zara have garment production strategic business units especially in Asia-Pacific where production cost is low (Percival 2017).

The substitute products to apparel are literally nonexistent. Other than few art galleries that push for brief exhibitions in contemporary artifacts and ancient cultural art, there is no replacement for the clothing industry.

Figure 2. PESTLE analysis model. Adapted from Perera (2017)

The UK is a capitalist democracy which is among the most stable governments anywhere. This has encouraged growth in the apparel industry as well as other sectors. The government has also reduced the corporation tax from 20% to 17% with effect from the year 2020. Moreover, the government reduced interest rates to 0.5 to encourage growth after the recession which encouraged investment in the apparel market (World Bank 2018).

The apparel industry is projected to grow by over 16% in the UK which will provide more market. The GDP has grown to over £2 trillion spiraling an increase in per capita income of £30,453. This provides the purchasing parity in the apparel market (World Bank 2018).

Young people between ages 15-24 are spending more on fashionable apparel with 58% of this group purchasing apparel every month. The number of obese cases has risen up with 7 out of 10 males and 6 out of 10 females being classified as obese. This has led to an increase in plus size apparel market by over £8 million. The number of women purchasing apparel is growing at 16% while that of men is growing at 21% (BFC 2017).

Many apparel companies are using e-commerce sites to lure customers. Currently, over 56% of all apparel purchases are done online (Statista 2018). Moreover, the growth in smartphone and tablet market has increased uptake of e-commerce applications hence more apparel purchases.

Many customers are purchasing apparel from environmentally conscious companies that employ green manufacturing. Furthermore, companies that use recyclable packaging have witnessed more customer loyalty and lower production cost hence profitability (Kumar 2015).

The Brexit vote in 2016 is likely to stifle new competition from companies outside the UK since it is anticipated there will be trade tariffs. The Minimum wage law of £7 for an hour is spurring disposable incomes hence more apparel purchases (Coresight Research 2017).

The apparel market is currently worth £60billion. It is projected to grow at over 16% and will be worth over £70 billion in 2025 (Statista 2018). The export market has also grown to over £6 billion and is expected to grow steadily in the coming years. This lucrative industry has attracted over 3855 enterprises doing direct or outsourced production. However, there are 9 distinctive market leaders that include; Primark, Asda-George, NEXT, Marks & Spencer, New Look, Zara, H&M, and Matalan among a host of other apparel enterprises (Coresight Research 2017).

Figure 3. Competing Apparel companies in the UK. Source: Coresight Research (2017)

Competition: Market Leaders and New Entrants

The Apparel companies have employed various strategies to remain competitive. Zara, for instance, has employed rapid manufacturing of trendy apparel. Mark & Spencer, on the other hand, has employed a product development strategy focusing on quality finished products. Primark has embarked on product diversification strategy. This targets customers in various segments with price ranges for the high-end, mid-range and low-end segments (Johnson 2014).

Since over 60% of customers in the 60-65 age bracket and an average of 56% of other UK customers prefer to shop online (BFC 2017), many companies such as Asda-George, M&S, Amazon, Starbucks, and Boohoo, have employed online marketing and e-commerce strategy.

The plus-size market segment prefer to shop online due to stigma and also because brick and mortar stores have largely shunned these customers. For this reason, companies like Zara are customizing the client orders and manufacturing rapidly to deliver personalized orders (Euromonitor 2018).

Opportunities for competitive advantage include investment in research and development to produce innovative products. Investment in logistics and networks would increase competitive advantage since it is expected that 70% of customers will embark on offline shopping in future. Other opportunities include cost leadership strategies as customers demand quality products at low cost. Product differentiation strategy would help apparel companies to rope the current 545,000 high net worth individuals in the UK who prefer specific premium brands (BBC 2017).

Legal changes have the capacity to disrupt the competition. If the UK changes the current employment laws specifically the minimum wage laws, manufacturing in the UK would be expensive giving firms with production units in Asia-Pacific undue advantage (Yolles 2009; Ireland, Hoskisson & Hitt 2012).

Political changes especially the imminent Brexit will Lead to trade tariffs and barriers that will affect how companies bred in the UK and those outside the UK will do business. This is more so if no deal is reached in Brexit (Grant 2013).

Changes in technology may give online companies an edge particularly because they incur less cost in warehousing and storage. Other changes include economic changes such has tax regimes which may affect the competitiveness of apparel companies (Hawker & Edmonds 2014).

Conclusion

This report critically examines the UK apparel market and analysis its attractiveness. It inquires into the market size of the industry and the growth potential of the market. The report also looks at the competition and the factors influencing the same. It analyzes the market share of the competitors and the prevailing key success factors that influence the market. Finally, the report recommends strategies that new entrants must adopt.

For the simple reason that e-commerce is saving companies storage cost associated with brick and mortar stores as well as increased purchases from both the youths and aging population, it is recommended that apparel companies seeking to venture the UK market should adopt online marketing strategy. However, this strategy may be costly to establish and difficult differentiate the company because of the many companies that have adopted the same.

It is also recommended that apparel companies venturing the UK market should adopt a product differentiation strategy due to a crowded market. It may take a long time to bear fruits and may be costly. There is also the risk of failing to grasp the market as there are many established companies commanding significant customer loyalty.

Finally, it is recommended that apparel companies venturing into the market should engage in aggressive advertisements and promotion strategies to build brand loyalty among the customers particularly the young generation of whom 58% shop for apparel every month. However, promotion is expensive and not always a guarantee for success.

References

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British Fashion Council. (2017). London Fashion Week September 2017 Facts and Figures. [Online]. Available at: https://www.britishfashioncouncil.com/pressreleases/London-Fashion-Week-September-2017-Facts-and-Figures [Accessed 21 October 2018].

Coresight Research. (2017). Deep Dive: UK Value Clothing Market—Pure Plays Drive Market Growth. Coresight Research. [Online]. Available at: https://www.fungglobalretailtech.com/research/deep-dive-uk-value-clothing-market-pure-plays-drive-market-growth/ [Accessed 21 October 2018].

Euromonitor. (2018). Apparel and Footwear in the United Kingdom. [Online]. Available at: https://www.euromonitor.com/apparel-and-footwear-in-the-united-kingdom/report [Accessed 22 October 2018].

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Statista. (2018a). Apparel market in the United Kingdom (UK) - Statistics & Facts. [Online]. Available at: https://www.statista.com/topics/3348/apparel-market-in-the-uk/ [Accessed 22 October 2018].

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