Challenges and Strategies in the UK Fashion Retail Industry

This report discusses the challenges faced by the UK fashion retail industry and explores strategies to overcome them. It focuses on ASOS, a leading online fashion retail brand, and analyzes the impact of macro and micro environment factors on its operations. The report provides recommendations for ASOS to stay competitive in the market.

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Retail Theory and
Practise
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Table of Contents
Introduction......................................................................................................................................3
Company background......................................................................................................................3
Relevant changes in UK fashion retail:...........................................................................................3
Suggested strategies:........................................................................................................................8
Recommendations:...........................................................................................................................9
Conclusion.....................................................................................................................................10
REFERENCES..............................................................................................................................11
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Introduction
The Retail Industry is changing very fast and affected by the dynamic environment that
consists of various factors that are imposing threats and opportunities in long run for the different
brands that are part of this industry. There is a requirement to understand the internal and
external forces in order to form strategies to survive in long run and have a competitive
advantage for such retail brands (Balaji and Roy, 2017). Present report is based on the way
Retail Industry is dealing with challenges of macro and micro environment with the help of
models like Pest analysis and SWOT analysis. Further there is recommendation that is provided
based on the understanding that has been developed and there is conclusion based on all the
analysis that has been made throughout the report. All this information is very helpful for Retail
Industry in understanding the economic scenario of the country in which they are dealing with
along with the relevant changes that are taking place in the fashion retail industry.
Company background
ASOS is a British online cosmetic and fashion retail brand it was founded in the year 2000
in London and has their target segment of customers as young that is the millennial generation.
This is a website that is 850 brands and they are also having their personal range of accessories
and clothing further this fashion retail brand is having their presence across 196 countries as they
are stepping from their online website and they have the fulfilment centres that are present in US
UK and EU (Coey, Larsen. and Platt, 2016). This brand is having their headquarters in Greater
London house and their additional offices are also present in world in New York Paris and
Brihiminghm. They have a exclusive tag line that says that "Buy what you see on film and TV"
as they are having exclusively limitations of clothing materials from these mediums of films and
television. They are having their subsidiary brands as ASOS.com limited.
Relevant changes in UK fashion retail:
There are some factors that are part of the Macro environment and these are having
impact on the way organisations are functioning. For the purpose of developing a detailed
understanding of these factors there is use of pest analysis for retail fashion brand:
Political:
Taxation: Government of UK has a text scenario of 20% on garments and clothing and this tax
rate has a direct impact on the prices of products. In case of height increase in taxation there is a
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direct impact on the profit margins that my decline as it is not always feasible to raise the prices
without the scenario of losing customers.
High exchange rates: The exchange rate is also very high especially from the European
countries where ASOS is having presence. Variations in exchange rate than it can lead to
organisation paying board for same product and payment has to be done in the regional currency
of the supplier Nation (Ehgartner, 2018).
Economic:
Disposable income: There are certain economic factors like disposable income that is
very low in UK. There has been very low growth in the overall sales figures as there has been
decreasing percentage of the disposable income of consumer and there has affected the revenue
of Retail fashion brands like ASOS.
Rent rates: The situation of annual rent in UK is going very high in the present scenario and is
likely to increase in the future prospective because of the prevailing situation of covid-19 virus.
It might lead to affecting the physical stores of ASOS there will be a direct impact on the
revenue.
Socio cultural:
The UK population consists of more age and elder People and this might lead to a situation
where young target consumers are being targeted and ASOS possess a limited population for
their target market situation (Ganning,and Miller, 2020).
Diverse choices: The population in UK is becoming very multicultural and diverse this has
affected the level of competition as many brands are coming with new Strategies and 82% of the
market in UK is using the strategy of word-of-mouth to enhance their brand awareness.
Technological:
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E-Commerce development: There are certain technological factors that has affected the growth
of online retail industries in recent years. Such as the online retail stores have been increasing
apart from the brick and Mortar stores (Kotni and Karumuri, 2018). This is creating a situation of
high demand and more options for customers who are having preferences for online shopping.
ASOS is a brand that is having now more focus on The E-Commerce development websites and
they are launching their latest collections on this website for this is leading to Limited
availability of options for people who are having preferences for physical stores and their needs
and expectations from the ASOS brand is not properly catered.
Digital media: There is a situation of social media applications that are being used for staying
connected by many glands and are also used as a medium of promotion and marketing of their
brand. ASOS is not much into using these mediums and this might create the long-term impact
on the functioning of land as people are getting attracted towards fashion bloggers and instance
freelancers who are using this potential marketing tool as a medium to earn money and market
the brands that are approaching them (Pantano and Gandini, 2018). It is a situation of
technological destruction if brands are accepting, then they are moving along with the
technology and their sales are not getting affected.
Summary:
From the above discussed pest analysis it can be said as said that taxes are a compulsory
payment that has to be made by government on the retail brands but this is affecting the
disposable income of average citizen of UK. The situation of brexit has affected all the industries
in a negative manner because of new taxation policies and High transportation schemes that have
been formed with the change in time period. So There comes a requirement for all the retail
brands including ASOS to increase their sources of Marketing by attracting people with the help
of digital media sources and innovative tools so that they are able to influence people according
to the competitive strategy and attain a differentiation advantage to survive in the market apart
from the high macro environment threats are affecting their revenue in a negative manner.
Porter's five forces: For the purpose of understanding the position of a retail brand and various
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factors that are affecting the industry attractiveness there is use of porter's five forces model that
is shaping the industry:
Threat of new entrants:
There is always a high threat of new entrants that can enter retail industries and affect the
competitive position of an existing brand. In case of ASOS it can be tackled by use of certain
strategies like making continuous innovations in their product using the Economics of scale so
that the fixed cost per unit can be lowered down (Paul Sankaranarayanan and Mekoth, 2016).
There can be also focus on using the research and development strategies to understand the
dynamic industries and significant changes that can help in earning of Extraordinary profit by
discouraging the new entrants of the industry.
Bargaining power of suppliers:
All brands of retail Industries purchase the raw material from large number of suppliers
and suppliers have a dominant position that can affect the position of high margin of such retail
brands. There is a need of ASOS PLC to build up an efficient supply chain with large number of
suppliers and experiment new product designs by application of different materials so that if
prices are going up of one supplier then there is possibility to shift to another who is offering
more reasonable prices.
Threat of substitute:
There a large number of layers that are part of the retail brands and this have lead to
higher threat of substitution this threat can be reduced by using a service oriented approach and
understanding the core requirements of customers. ASOS can also make the switching cost
higher and prevent the customers from switching to any other brand (Piovani, Molinero and
Wilson, 2017).
Competitive rivalry:
This factor is related with the competition that is present between the existing players of a
industry. In case of the fashion retail brand Industries there is high option because of many
brands like Zara, marks and Spencer who are present and affecting the competitive position of a
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ASOS. This high threat can be tackled by using the criteria of Sustainable differentiation
advantage. So that there can be better surviving in the situations of high competition.
Bargaining power of customers:
Buyers are often very demanding because of large number of options that are available
in the Retail Industry. ASOS can deal with the situation of high bargaining power of customers
by using Rapid innovation in their products and building up large base of loyal customers.
SWOT analysis:
SWOT Analysis is a criterion used for the purpose of understanding the internal forces
that can possess an impact on the functioning of retail brands:
Strength:
1) ASOS is having a high brand image as it is not using any for the purpose of manipulate their
customers. Corporate social responsibility approach that has been adopted by this brand has
helped them in established in a positive brand image (Yeo, Mohamedand Muda, 2016).
2) Continuous innovation in their designs and they have more than 30 sizes with high
commitment of offering all sizes at same prices (ASOS SWOT and Finance Analysis, 2019).
Weakness:
1) There is a need of making necessary investments in innovation Technology so that there can
be improvement of customer experience.
2) ASOS a criteria of free shipping but this soon started hitting the profitability margins and
long-term impact on the revenue of this brand.
Opportunities:
1) ASOS has the opportunity to deal with the changing consumer behaviour the 40% of their
current offerings are not older than a period of three months (Swot Analysis of ASOS, 2019). The
changing and increasing Trends can help them in having around 2500 new products every week.
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2) There has to be more focus on enhancing marketing efforts by leveraging of traffic from the
sites of their competitors. They can launch various TV advertising campaigns in countries like
France so that they are able to highlight the Billboard advertising efforts. There is also a need to
use the social media Strategies bloggers and freelancers to drive their marketing campaigns and
the pricing decisions have to be taken in order to improve the present customer place.
Threats:
1) Competition: There is a threat of positioning of ASOS that is because of the brands like Bohol
that have added hundred new styles everyday by providing large number of options to similar
target segment of customers (Wang, Tsai and Lin, 2016). They are also offering policies like 28
days easy returns and they have found partnership with Amazon that has affected the significant
share of Asos in the present market situations.
2) Economic factors: The World Trade organisations are governing all the rules of trade and
have helped much business to follow their agreement. This trade war & Brexit might affect the
price of products and this has led to movement of kilo per that is affecting the work force
competence level in ASOS.
Suggested strategies:
Macro environment strategy:
ASOS has to deal with various macros environment factors and according to it they have to form
strategies. There can be use of technological innovation and more diversification in new product
ranges that can help as source in having a higher of options for their target segment of customers
who are young adults (Sulehri. and Ahmed, 2017). This generation is always looking for
something new and innovative at the same time and this option can be provided by ASOS.
Micro environment strategy:
There can be for the use of digital media sources for the purpose of expansion to others new
locations so that the brand can be promoted with cost effective technique. This is a technique that
can be used for the purpose of establishing social media network so that there can be
diversification of operations like promotional Advertising and Marketing activities that help in
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data collection and also for the purpose of shaping the purchasing behaviour of customers. It is
going to create more revenue by way of using fashion bloggers for the purpose of approaching
and marketing the clothing and accessory segment of this brand.
Recommendations:
There are several recommendations that have been drawn from the above discussion of various
Frameworks that are affecting the Retail Industry and in direct terms having a impact on the
policy formulation and strategy formulation of ASOS:
1) ASOS must always have a continuous monitoring on the strategies that have been adopted by
their competitors so that their customers are not able to make switching to other brands very
easily as they possess Hero switching cost.
2) They have to start using social media platforms as the purpose for promotion of the brand and
they have to use fashion bloggers as young generation are mostly influenced by the way they are
portraying the users that they are making of product.
3) Situation of covid-19 has affected all different countries in a very significant manner so in
order to deal with its impact there is a requirement that retail brand has to focus on their E-
commerce website as people will not have preferences to visit me there physical stores for a long
period of time and there will be more focus on using the online availability of products.
4) ASOS can make use of the social segment of approach that is 49% of approximately women
customers are having preferences of e-commerce sites and this is 25% that is ranging to 75% in
the year 2015. This figure is very similar as compared to
5) There is a situation of changing economic policies that has affected the disposable income of
people so it might result in to lowering down of the revenue curve for a few period of time in the
coming future there has to be more focus on the using of price penetration as a strategy for the
purpose of attracting customer as now there will be preferences for price reasonable products but
with high quality.
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Conclusion
From above discussed methods it can be said that Retail Industry is assuming a very fast
growth and crucial changes in last 5 years and there is going to be impact the present situations
for the next 10 years in the way of lot of changes that are assuming In the E-Commerce sector of
such retail sector. There is a need to maintain the overall competent workforce and minimise the
operating cost as well as the fixed cost that are assume by these retail brands so that they are able
to assume the benefits of Economics of cost and be part of globalisation to expand their business
to different parts of the world. There are many developed frameworks like porter's five forces
analysis and sport analysis that can be used for the purpose of developing a detailed
understanding of the overall competitive position of a brand in the Macro environment and
according to that there must be future formulation of strategies to deal with the threats and avail
opportunities.
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REFERENCES
Books & Journal
Balaji, M.S. and Roy, S.K., 2017. Value co-creation with Internet of things technology in the
retail industry. Journal of Marketing Management, 33(1-2), pp.7-31.
Coey, D., Larsen, B. and Platt, B., 2016. A theory of discounts and deadlines in retail search.
Technical Report, Working paper, Stanford University.
Ehgartner, U., 2018. Discourses of the food retail industry: Changing understandings of ‘the
consumer’and strategies for sustainability. Sustainable Production and Consumption, 16,
pp.154-161.
Ganning, J. and Miller, M.M., 2020. Transit oriented development and retail: Is variation in
success explained by a gap between theory and practice?. Transportation Research Part
D: Transport and Environment, 85, p.102357.
Kotni, V.D.P. and Karumuri, V., 2018. Application of Herzberg two-factor theory model for
motivating retail salesforce. IUP Journal of Organizational Behavior, 17(1), pp.24-42.
Pantano, E. and Gandini, A., 2018. Shopping as a “networked experience”: an emerging
framework in the retail industry. International Journal of Retail & Distribution
Management.
Paul, J., Sankaranarayanan, K.G. and Mekoth, N., 2016. Consumer satisfaction in retail stores:
Theory and implications. International Journal of Consumer Studies, 40(6), pp.635-642.
Piovani, D., Molinero, C. and Wilson, A., 2017. Urban retail location: insights from percolation
theory and spatial interaction modeling. Plos one, 12(10), p.e0185787.
Sulehri, N.A. and Ahmed, M., 2017. Theory of reasoned action and retail agglomerations buying
behavior for urban consumers. The Business & Management Review, 9(2), pp.263-266.
Wang, J., Tsai, C.H. and Lin, P.C., 2016. Applying spatial-temporal analysis and retail location
theory to public bikes site selection in Taipei. Transportation Research Part A: Policy
and Practice, 94, pp.45-61.
Yeo, B.L., Mohamed, R.H.N. and Muda, M., 2016. A study of Malaysian customers purchase
motivation of halal cosmetics retail products: Examining theory of consumption value
and customer satisfaction. Procedia Economics and Finance, 37(16), pp.176-182.
Online
ASOS SWOT and Finance Analysis, 2019 [online]. Available
through<https://www.ukessays.com/essays/business/asos-swot-and-finance-analysis.php>
Swot Analysis of ASOS, 2019[online]. Available through<https://www.marketing91.com/swot-
analysis-of-asos/#:~:text=Weaknesses%20SWOT%20analysis%20of%20ASOS,-1)%20R
%26D&text=It%20has%20not%20been%20able,and%20working%20in%20the%20market.>
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