Retail Theory and Practice: Analysis of Next Fashion Retail

This report provides an overview of retail theory and practice of Next, one of the largest fashion retailers in the UK. It includes a PESTEL analysis, SWOT analysis, strategies and tactics used, and recommendations for overcoming challenges.

Running head: RETAIL THEORY AND PRACTICE
Retail Theory and Practice
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Executive Summary:
The report gives an overview of retail theory and practice of one of United Kingdom (UK)’s
largest fashion retail brand, Next. The report commences with a brief description about the
company. There is also a PESTEL done that helps in identifying the changes in the retail fashion
industry. The report also gives an insight into the SWOT analysis that helps in identifying the
changes in the micro environment of the retail fashion industry. The report also discusses about
the strategies and tactics adopted by the company in overcoming the challenges. The report also
puts forward further recommendations for the company in overcoming the challenges.

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Table of Contents
Introduction......................................................................................................................................3
About the Company.........................................................................................................................3
PESTEL Analysis for Identifying Changes in Next Fashion Retail................................................4
SWOT Analysis for Identifying Changes within Micro Environment............................................6
Strategies and Tactics Used.............................................................................................................8
Recommendations..........................................................................................................................10
Conclusion.....................................................................................................................................10
References:....................................................................................................................................10

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Introduction
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.
About the Company
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

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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

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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

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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.
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.
SWOT Analysis for Identifying Changes within Micro Environment
Identifying the Strength and Opportunities

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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 Weakness and Threats

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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.
Strategies and Tactics Used
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

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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).

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Presently, with changing times, the Next have shifted its focus on online medium for advertising,
communication and display of promotional offers.
Recommendations
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

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consistent marketing strategy and ensures delivery of fashionable and quality products at
reasonable price.

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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.
Magrath, V. and McCormick, H., 2013. Marketing design elements of mobile fashion retail
apps. Journal of Fashion Marketing and Management: An International Journal, 17(1), pp.115-
134.
McCormick, H., Cartwright, J., Perry, P., Barnes, L., Lynch, S. and Ball, G., 2014. Fashion
retailing–past, present and future. Textile Progress, 46(3), pp.227-321.
Next.co.uk 2018. [online] Available at: http://www.next.co.uk/ [Accessed 24 Feb. 2018].
Nextplc.co.uk/about-next/at-a-glance2018.[online] Available at: http://www.nextplc.co.uk/about-
next/at-a-glance [Accessed 24 Feb. 2018].

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Nextplc.co.uk/about-next/our-history2018.[online] Available at: http://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 &
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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.