Impact of Sustainable Fashion and Online Retail on the Fashion Retail Industry

This report analyzes the impact of sustainable fashion and online retail on the fashion retail industry, including trends, market analysis frameworks, and primary research findings.

Inquiry Based
Learning

Table of Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY .................................................................................................................................3
Background ............................................................................................................................3
Application of market analysis frameworks ..........................................................................5
Primary Research....................................................................................................................8
CONCLUSION ............................................................................................................................10
REFRENCES ................................................................................................................................11

INTRODUCTION
The fashion retail industry is one of the fastest growing industry and the market trends of
the industry faces constant changes. The company selected for this report is the Swedish fashion
retail firm H&M. The company is one of the leading members of the global fashion retail
industry with strong presence in 74 international markets and effective structure for online
retailing. Current market trends of the fashion retail industry are analysed in this report which
impact daily operations of the respective company. In addition to this analysis of H&M is
conducted in this report with the usage of suitable market analysis models such as PESTEL
analysis, Porter's Five forces and SWOT analysis.
MAIN BODY
Background
Sustainable Fashion
Greenhouse gas emission of the global fashion industry contribute to 10% of the global
emulsions. Mass consumption of fashion products which is propelled by fast fashion houses
which produce low quality products that are meant to be consumed in short time period. This
trend of the fashion retail industry focuses on creating and distributing fashion retail goods such
as shoes, accessories and clothing in ways which minimise environmental harm by reducing
greenhouse emission of the retail. Both socio-economic and environmental aspects of the
product are considered in order to maximise sustainability of the products. This aim of
organisation who follow this trend is to create clothing which is not disposable and can be
sustained for a long time period. Consumers in British retail sector are willing to pay more for
sustainable pieces of clothing because of increasing concern about environmental impact of
fashion purchase. This has forced the fashion retail industry to adopt sustainable practices as it
affects the overall sales of the company. Increasing circular thinking which revolves around
utilisation of recycled material is step taken by H&M (7 Major Sustainable Fashion Trends To
Propel The Industry Forward In 2021, 2021). The company is collaborating with Green Machine
to recycle cotton and polyester blends on a global scale to meet their circular targets and attain
sustainability. Stella McCartney which is a British luxury fashion brand has continuously
advocated for sustainable fashion. The firm focuses on developing new materials which reduce

environmental harm such as fur free fur and using innovative processes that do not exploit
natural resources which increases their sustainability.
Impact of Online retailers on fashion retail industry
The online fashion retail industry consist of organisations which sell fashion products
through the internet and capture online fashion retail market. Online retail fashion organisations
provide the benefit of home shopping and wide range of products at low prices which is one of
the main reason that consumers are shifting from traditional brick and mortar stores to purchase
their fashion items from online retail sites such as Boohoo and Amazon apparel. Online fashion
retail organisation Amazon Apparel which is part of the US based firm Amazon has disrupted
the online fashion industry. Chief features which set online retail organisations apart from brands
which mainly rely on physical stores for overall sales are unparalleled personalisation and
reliable services. These features are able to attract consumers to online retail sites in comparison
to purchasing products from official website of particular retail brand (Kautish and Sharma,
2018). The main impact of online retail organisation entering the retail industry is that retail
brands are forced to offer their products at flexible prices as fashion brands change the price of
their goods on the basis of demand. Amazon utilises this impact to price more competitively.
This negatively affects overall profit margins of fashion retail organisation. In addition to this
rising dominance of online retail business firms have resulted in the retail brands which sell their
clothes primarily through physical stores to utilise uniform pricing which reduces the
profitability of the company.
Effect of Brexit on fashion retail industry
The main effect of Brexit on retail industry is increase in tariffs of 12% on apparel
imports to the EU. The British government is also aiming to increase import tariffs from fashion
products of the EU which will increase the overall price of fashion goods in UK. The ease of
doing business for European fashion brands will decrease as a result of Brexit. Another major
affect of Brexit is decrease in labour available staff of the fashion industry which includes
garment workers, designers, warehouse staff and other employees recruited by the fashion retail
industry (Esparza, 2018). Decreasing talent pool available for the British fashion retail industry
has an inflammatory impact on wages of the company. Brexit deal has a disruptive effect on the
fashion industry. In addition to this the uncertainty related to Brexit has given negative results in
relation to the fashion retail industry which depends on advance planning for various business

operations. The profit margin of fashion retail organisation in UK has decreased due to increase
in tariffs. Brexit has created an uncertain environment in relation to the fashion retail sector.
Application of market analysis frameworks
SWOT analysis
This is framework used for assessing the strengths, weaknesses, opportunities and threats
faced by the company in their current business environment. The data gained from this analysis
helps the company minimise risks, understand their area which require immediate improvement
and construct a path towards success. SWOT analysis of the Swedish retail company H&M is
given below:
Strengths Weaknesses
 H&M has high brand value which has
helped the company easily expand in
various international regions (Fernie
and Grant, 2019).
 The delivery time of the firm is low as
it only takes 12 week for the product to
reach the retail stage from the
designing stage.
 The cloths of the company are easy to
counterfeit which reduces profitability
of the firm.
 The firm is facing allegations of racist
clothing and cultural appropriation
which has decreased their reputation.
Threats Opportunities
 The company faces threat from online
retail organisations which continue to
grow and take market share of the firm.
 Rise in labour costs in China, India and
Bangladesh are a thereat to the
company as it will increase the costs of
the organisation.
 The company has the opportunity to
expand their global presence by
entering new markets.
 The company has the opportunity to
increase their reach by constructing an
effective online structure and
connecting with consumers from every
part of the globe (de Jorge Moreno and
Carrasco, 2016).
PESTEL analysis

This is a framework used by marketers to analyse various external environmental factors
which affect the company. This analysis is helpful in conducting a detailed market analysis.
Application of PESTEL analysis in relation to Swedish retail organisation H&M is provided
below:
 Political factors: The main political factor affecting the company is Brexit which has
changed various taxation laws and reduced the firm's profitability in Britain. Increased
tariffs is the main aspect of Brexit deal impacting the business of the organisation in UK
(Pantano and Vannucci, 2019).
Positive Impact: The company has the opportunity to expand their business in other
countries due to the damaging effect of Brexit.
Negative Impact: Increase in tariff due to Brexit has reduced the profitability of the firm
as most of British clothing industry imports products from EU.
 Economical Factors: The main economical factor affecting the company is rising labour
costs in India and China as the company sources it's manufacturing activities to these
countries. Increasing consumer spending on clothing is the another economical factor
affecting the respective organisation.
Positive Impact: Increase in consumer spending has a positive impact on the company as
it allows the company to generate high amount of profits.
Negative Impact: The main negative impact on the firm is increasing labour costs in
India and China. This factor increases overall expenditure of the firm and reduces their
profitability.
 Social Factors: Increasing importance of social media in fashion retail as consumers
take decisions related to clothing purchase on the basis of social media trends is the main
social factor which has an impact on the firm (Kamath 2016).
Positive Impact: The positive impact of consumer social media usage to take their
clothing purchase decisions is that the respective establishment can understand consumer
requirements effectively.
Negative Impact: The primary negative impact of this trend is that consumer
requirements are constantly changing due to changing social media trends.
 Technological factors: Increasing usage of online retail sites by consumers to purchase
fashion product is the main technological factor affecting the company.

Positive Impact: The company has the opportunity to enhance online sales by developing
strong digital presence.
Negative Impact: Overall sales of the firm are decreased due to increasing competition
from online firms.
 Environmental Factors: Sustainable initiatives taken by the respective firm such as
utilisation of recycled materials due to rise in demand of sustainable fashion is the
environmental factor affecting the company (Overdiek, 2018).
Positive Impact: Sustainable initiatives of the firm have increased the bran value of th3e
company.
Negative Impact: Sustainable initiatives taken by the company to meet demand of
sustainable fashion have increased overall costs of their products making them unaffordable to
low income consumers.
 Legal Factors: The organisation has to follow EU legislation along with legislature of
various countries in which it operates. Some of the international markets in which the
country operate such as Kuwait, have laws which reduce profitability of the company.
Positive Impact: By following every law the company does not get into legal trouble
which damage reputation and require huge investment.
Negative Impact: Kuwait law according to which the company has to collaborate with
partner firms reduces the profitability of the company.
Porter Five forces Analysis
This frame work is a tool used to analyse forces which have an effect on competition of
the company. This analysis helps the company understand various competitive aspects of the
industry and is an appropriate framework to conduct a profound market analysis. Porter's five
forces analysis of H&M is provided below:
 Rivalry within the industry: There is high industry rivalry in fashion retail industry.
H&M faces huge competition from various internation brands such as IZOD, Old Navy,
Calvin Klien, Zara, Van Huesan and many other fashion enterprises which give the
company tough competition to attain high market share. In addition to this, the respective
organisation faces threat from online fashion retail firms such as boohoo and Amazon
apparel which have bee able to attract a large number of consumers due to their
personalised and convenient services (Guo, Choi and Shen, 2020).

 Bargaining power of suppliers: H&M faces low bargaining power from their suppliers.
Presence of high number of supplier which offer standard quality products is the main
contributor to low bargaining power of the supplier. H&M sources most of their raw
materials from international market such as India Bangladesh and China , which allows
the company to gain good quality raw material at low price. Bargaining Power of consumers: The bargaining power of consumers in case of global
fashion retail firm is very high. The target consumer base consist of urban population of
young women which have various alternatives available and easily switch brands. This
has increased the consumer's power on the organisation (Da. and et. al., 2016) . Threat of new entrants: The threat of new entrants in relation to the fashion retail
industry is very high as there are low barriers to entry. Organisations can easily enter this
industry as it does not require much investment and the company faces competition from
local shops and regional fashion enterprises.
 Threat of substitutes: H&M does not face threat of substitute for their products which
are unique and differentiated with the help of creative design and sustainable fashion
products. Despite such practices the company faces high threat of substitute as retail
fashion firm from various online retail organisations which have taken a large amount of
market share from the company and continue to grow and expand at a fast rate (Moon
and et. al., 2017).
Primary Research
Question 1: Do you favour online shopping in comparison to going
to offline stores?
Frequency
a) Yes 8
b) No 7
Interpretation: From the above data it is determined that out of 15 respondents 8 prefer
online shopping over offline store while 7 prefer offline shopping.
Question 2: Do you purchase products on the basis of their
sustainability?
Frequency
a) Yes 10

b) No 5
Interpretation: From the above data it is concluded that out of 15 respondents 10 consider
sustainability as the main factor impacting their decision making process related to purchasing
clothes.
Question 3: What is the deciding factor impacting your retail
shopping?
a) Sustainability 8
b) Price 3
c) Style 4
Interpretation from the above information it is determined that out of 15 respondents 8
consider sustainability as the main factor impacting their business while according to 3 it is price
and 4 consider style deciding factor in their decision making.

CONCLUSION
From the above report it is concluded that the online retail industry is affected by various
trends which include sustainable fashion and impact of Brexit. Rise of online retail organisation
as one of the major factors impacting online fashion retail organisation. In addition to this the
market analysis of the fashion retail industry requires the usage of suitable frameworks such as
PESTEL, SWOT and Porter's five forces model. It is concluded that various external factors
affect the fashion retail sector such as sustainability, legitimisation of various countries, Brexit,
online retail sites and spending power of the consumers.

REFRENCES
7 Major Sustainable Fashion Trends To Propel The Industry Forward In 2021, 2021. [Online]
Available through <https://www.vogue.co.uk/fashion/article/sustainable-fashion-
trends>
online retail sector
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Esparza, R., 2018. En Vogue: The Risks of Brexit to the European Fashion Industry.
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Moon and et. al., 2017. Key drivers of an agile, collaborative fast fashion supply chain. Journal
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