New Look Fashion Retailer Report
A Report for New Look Fashion Retailer
Fashion retailers are companies that vend wear and associated products to the final users. Most of the retailers obtain the merchandise from wholesalers and industrialists. Some manufacturers, though, sell their wear products to the consumers directly. Based on the recent data published by IBISWorld (2020), the fashion retail industry in the UK comprises approximately 24,000 firms and has employed over 398,000 people. The performances of the firms in the UK fashion retail industry have been influenced by various factors in the macro-and micro-environments. One of the key players in the industry is New look Retailers Limited. A remarkable aspect of New Look is that its performance over the last decade has been poor (New Look Retailer Limited, 2019, p. 2). Thus, this report explores the factors in the macro-and micro-environments and changes that have influenced New Look’s performance. The report also gives suggestions to the strategies and tactics that New Look can adopt to improve its future performance. Last, the report recommends the most strategies that can help New Look to overcome the existing and expected challenges to achieve and maintain a competitive edge in its industry in the long-run.
2.0 New Look Retailers Limited
Tom Singh established New Look in 1969 at Taunton in Somerset, England. After its establishment, the organization had consistent growth for over 30 years. The company opened numerous branches in the UK and foreign markets during the expansion period (New Look Retailers Limited, 2020). By 2003, it had around 500 stores in various markets. However, most of the branches were located in the local market and Ireland. The company had around 300 stores in the two markets in 2003 (New Look Retailers Limited, 2020). New look continued opening more stores in the two markets, reaching around 500 in 2013. Apart from the UK and Ireland, the other foreign markets where the company opened stores included Belgium, China, Germany, Russia, France, Romania, Poland, Bahrain, Saudi Arabia, Netherlands, South Korea, and Malta.
New Look started experiencing problems at the beginning of the 20th century, when it accumulated many debts. Among other issues, debt accumulation led the company to be delisted from the London Stock Exchange in 2004 (New Look Retailers Limited, 2020). Before delisting, three private investors, namely Permira, Quillian Investments, and Apax Partners, purchased a significant portion of its shares. Afterwards, in 2015, around 90 per cent of the remaining shares for the company were purchased by Brait SA. Between 2011 and 2018, New Look performed poorly consistently, hence prompting many stores’ closure, especially in the foreign markets. In 2018, for instance, the company made a loss of £552.7, an increase from £38.0 million in 2011. Despite the poor performance, New Look has maintained its market shares in England and Ireland. The company had around 520 stores in the two countries in 2019. Also, it has maintained leadership in the sale of womenswear targeted for people aged amid 17 and 35 years in the UK. In 2019, it was ranked first in the sale of womenswear designed for that age group. During the same year, the company had a market share of 2.4 per cent in the UK fashion retailing industry. The company started engaging in e-commerce. Currently, New Looks sells its products online to consumers in over 60 nations and then ships them.
3.0 Influential Factors in the UK Retailing Industry
3.1 PEST Analysis
3.1.1 Economic Factors
A notable strength of the UK, which is the main market for New Look, is that it is ranked among the largest economies globally. At the same time, the UK has experienced positive and strong economic growth for a long time. Such factors have positive impacts on spending rates among consumers. However, the UK’s economy has experienced negative growth recently, as indicated in figure 1.0 in the appendix (Trading Economics, 2020). One of the causal factors of negative growth is the impact of the Covid-19 disease (Hantzsche, Kara & Young, 2019, p. 8). At the same time, there are uncertainties with negative impacts after Brexit since the government is revising many policies, some of which are expected to have significant impacts on businesses (Islam, 2020). Thus, the economy is currently characterized by volatility. Such issues are expected to have adverse impacts on the performance of New Look and other firms in its industry.
3.1.2 Political Factors
Political stability in the UK is a key factor that has facilitated a conducive environment for business firms in all industries. Also, the UK government has a reputation for creating policies that support businesses. However, Brexit has led to several uncertainties regarding the possible impacts on businesses in the future. For instance, it is not clear whether trade restrictions between the UK and other European countries will increase. If the trade restrictions increase, firms such as New Look will experience more obstacles when exporting or selling their products in other European countries. If trade limitations increase, New Look and other organizations in the fashion retailing trade are likely to emphasis more on the home-grown market, culminating to an increase in rivalry.
3.1.3 Sociocultural Factors
Demographic alteration is one of the communal factors with impacts on UK firms. In 2019, the UK had a population of approximately 66.65 million people (Office for National Statistics, 2020). However, it has had a slow population growth rate, as shown in figure 2.0 in the appendix. As such, the UK is expected to have a large proportion of the aged population in the future. Thus, firms in the fashion retailing industry should consider increasing their focus on ageing population segments. Most people in the UK have average to high disposable incomes relative to other advanced economies (Office for National Statistics, 2020). However, the prices of most consumer products have been increasing at a higher rate than the incomes during recent years. Even though the UK consumers’ spending rate has been high, it is expected to decline to the increases in prices (Eco-Age, 2020). At the same time, most consumers are likely to prefer products that are not highly-priced increasingly. Thus, firms in the UK fashion industry should strive to cope with such changes in social factors
3.1.4 Technological Factors
The UK ranks high in terms of technological advancement and adoption. The speedy evolution of internet technology over the last two decades is one of the key changes with a notable impact on the fashion retailing industry (Tuman, 2020). Internet technology offers fashion retailers an opportunity to engage in e-commerce through easily reaching and selling products to consumers in the local and foreign markets (Tuman, 2020). Some of the internet components like the social media provides the businesses in the fashion retailing industry with opportunities to market their products and develop close relationships with consumers in different markets.
4.0Factors in the Micro Environment
4.1 New Look’s SWOT Analysis
4.2 Porter’s Forces
4.2.1 Buyers’ Bargaining Power
Buyers’ bargaining power is the level of influence that consumers have on the practices and decisions. A remarkable aspect of the fashion retailing industry is that buyers’ bargaining power is very high. The main reason is that the fashion retailers usually sell similar or closely related products. Many retailers source products from the same manufacturers (De Marco, 2017). Thus, most of the products that New Look sells are also in the stores of the competitors. In this regard, consumers can switch easily from one retailer to another and get the same products. The high buyers’ bargaining power affects the firms in the industry negatively since they can lose customers easily due to issues such as relatively higher prices and poor services. New Look was compelled to reduce prices for some of its clothing products in 2018 due to such issues (Hoggan, 2018). Thus, New Look and other retailers need to consider the high power the consumers have when making decisions and plans.
4.2.2 Competitive Rivalry
The UK fashion retailing industry is characterized by very high competition. The industry is many well-established firms with numerous stores in the UK and foreign markets. Examples of the major competitors for New Look in the UK market are Next, PLC, Mark, and Spencer, Arcadia, George, Primark, and H&M (Merry, 2019). The industry also has numerous small retailers spread throughout the UK. At the same time, there is stiff competition in the online market. The competitors of New Look online include missguided.co.uk, prettylittlething.com, boohoo.com and Debenhams.co.uk (Merry, 2019). Thus, the competitive rivalry in New Look’s industry is high.
5.0 Suggested Strategies and Tactics for New Look
5.1 Macroeconomic Factors
The analysis of the macro environments for New Look indicates that high, competition is one of the major challenges the firms in the fashion retailing industry are facing. If limitations to exportation to other European countries will increase, the competition is likely to become stiffer. The economic theory suggests that a higher supply of services or products than demand leads to a reduction in prices (Richardson, 2013, p. 121). Thus, high competition will lead to an oversupply of fashion products in the UK market, leading to a reduction in prices. Such a situation can be disadvantageous to firms since the selling price may not adequately cover all expenses and costs, leading to a high possibility of making losses. Thus, one of the suggestions for New Look is to continue focusing on investment opportunities in the foreign markets, especially in the countries where the UK government is going to create close trade relationships. As suggested by the Gravity model, trade relationships between countries are highly influenced by the distance (Poon & Rigby, 2017, p. 38). Despite moving out of the EU, the UK is likely to form close bilateral relationships with some of the neighbouring countries characterized by the elimination of restrictions. Thus, New Look should take advantage of any new trade relationships between the UK and other countries through exporting products or opening branches in foreign markets and striving to sell fashion products that are as unique as possible.
A second trend noted in the analysis of the macro-environment is the aging of the UK’s population. As suggested by consumer theory, consumer preferences play a significant role in influencing services and products (Spotts, 2014, p. 124). At the same time, age influences preferences for some products, such as clothing. Usually, there are significant differences in the clothing preferences between the youth and the elderly. Considering the population trend in the UK, New Look should revise its segmentation strategy. Segmentation involves categorizing consumers into groups based on factors such as their needs or preferences (Spotts, 2014, p. 125). Afterwards, the products and services of a firm design to switch the needs and preferences of each group. In the past, New Look mainly been focusing on a consumer segment comprising of people aged between 17 and 35 years. Considering the demographic changes in the UK, New Look should increase its focus on selling products meant for older people, such as those aged between 35 and 60 years. Doing so expands the product selections for the clients, and create a higher opportunity for success.
5.2 Microeconomic Factors
The examination of the micro-environment for New Look indicates that the company has successfully invested in ecommerce. The investment in e-commerce led to an improvement in its financial performance in 2019, and there is an opportunity for further success. The e-commerce theory suggests that firms should be the product, profit, and customer-oriented (Wigand, 2007). The failure to focus on all three aspects increases the chances of failure. An analysis of New Look, however, indicates that the company has an issue with customer orientation. The customers have complained about its expensive delivery charges. Thus, New Look should improve its customer orientation by addressing the issue of expensive delivery charges, which can limit its ability for continuous expansion in the online business.
Another issue noted in the analysis of New Look’s microenvironment is its overreliance on the fashion retailing industry. Diversification theory suggests that overreliance on one line of products or related item increase the risk of failure or poor performance when issues emerge affecting a firm’s industry. Thus, as Wan et al. (2012, p. 1336) argues, investing in more than one industry is one strategy for hedging against the risk of failure. The overreliance of the fashion retailing industry is one of the key factors contributing to the consistently poor performance by New Look. Thus, the organization should diversify into other industries with better growth and success prospects.
6.0 Recommendations for New Look
The main challenge New Look has been the consistently poor performance over the last decade. One of the firm’s recommendations is to close the physical stores underperforming, leading to losses. Simultaneously, the organization should increase investment in e-commerce, which has been giving positive returns. One merit of e-commerce is that it does not involve most of the recurrent costs and expenses incurred in physical stores, such as paying rent and other bills. A reduction in costs and expenses will enhance the ability of New Look to sell its fashion products and competitive prices. Thus, an increase in the focus on e-commerce and the closure of underperforming physical stores is likely to enhance New Look’s ability to derive positive returns. Also, the firm will have a greater ability to achieve and maintain a competitive edge. However, New look should address its issues in e-commerce that can turn away the customers, such as the expensive delivery charges.
Second, New Look should use a combination of all the suggested tactics and strategies to address its challenges comprehensively. For instance, the organization should consider diversifying to services and products offered in other industries to hedge against the risk of failure. The firm should also increase consumer segments it focuses on, such as through adding fashion products for people aged between 36 and 60 years. To address the challenge of high competition in the UK fashion retailing industry, New Look should increase its focus on foreign markets with positive growth prospects and with good trade relationships with the UK.
New Look is among the renowned firms operating in the UK fashion retailing industry. The organization achieved consistent growth and success during the first three decades after its establishment. However, it has been performing poorly consistently, especially during the last decade. The analysis of the firm’s macroenvironment indicates that the recent political and economic changes are not favourable. However, the recent technological changes in the UK are favourable to the firm. The socio-cultural changes offer the firm opportunities that can lead to favourable outcomes if it utilizes them effectively. The microenvironment analysis indicates that the firm has several weaknesses that it needs to address. The firm should capitalize on available opportunities and its strengths to increase the ability to address the challenges it has been facing. The recommendations for New Look include increasing engagement in e-commerce and addressing existing issues in online business, diversification, closing underperforming physical stores, expanding to lucrative foreign markets, and adding consumer segments.
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Figure 1.0: GDP Trend of the UK GDP since 2010
Figure 2.0: Births, natural and deaths rate changes in the UK