Impact of Brexit on Fashion Retail

This assignment examines the impact of Brexit on the UK fashion retail industry. It focuses on how the economic conditions resulting from Brexit, including increased inflation, have negatively affected consumer spending power and consequently led to a decline in sales and profits for fashion retailers. The analysis delves into the challenges faced by businesses in this sector due to Brexit's influence.

Retail Theory and Practice

Contents
Introduction to retail...........................................................................................................................5
Introduction to company.....................................................................................................................5
Key relevant changes in United Kingdom fashion retail..................................................................6
Relevant changes in micro environment............................................................................................8
Tactics and strategies that could be used...........................................................................................9
Conclusion..........................................................................................................................................10
REFERENCES..................................................................................................................................11
Introduction to retail
The Retail Industry of United Kingdom is an ever changing landscape. It is an rapidly
changing industry and has large impact on Economy of the country. This sector is alone
generated revenue of around 42.5 billion Pounds and provides employment to approximately
409,201 people. The market has been growing steadily in last 7 years. Gradual increase is
also seen in annual expenditure on clothing on the basis of sales volume as it reaches 57.8
billion pounds in year 2017 (Stewart and Shamdasani, 2014). In United Kingdom market,
various leading brands are hold value involving High Street retailers like Next, Primark and

New Look etc. In fashion and clothing industry, annual investment is around 4.8 billion Euro
and turnover of the industry is around 171 billion Euro. The market size of fashion retail
Industry is 372.3 billion euro and its market share is 5%. The growth of fashion Retail
Industry has also been supported by increase of niche market like plus size clothing. It was
garnered around 18.7 million pounds in year 2016 alone.
Introduction to company
Next plc is one of the British multinational clothing retailer whose headquarters are
located in Enderby, Leicestershire, United Kingdom. The company has around 700 stores
among which approximately 509 in UK and 200 across Middle east, Europe and Asia. By
sales, Next plc is one of the largest clothing retailer having overtaken Marks & Spencer in
year 2012 and 2014. The company is established around 154 years ago, in year 1864 by
Joseph Hepworth. Key people of the firm includes Michael Roney and Simon Wolfson. The
operating income of company is around £827.7 million and net income is around £635.3
million. Approximately 49,000 employees are working a within firm for running its
operations (Joskow, 2014). The company is continue to invest heavily in online business
and aims to maximise investment by 25%. In year 2017, the retail sales and profits of
company and fell down. Its sales are declined by 7.9 % and profits by 24%. Whereas, its
online profits were increased by 7.4 % and sales by 9.2 %. The company plans to going to
digital system that enables retailer to target clients in better way and deliver more effective
shopping experience from home pages and personalized promotions.
Key relevant changes in United Kingdom fashion retail
For retail fashion industry, 2016 proved to be a difficult due to various disruptive
events such as Brexit, terrorism attacks and volatility in stock market of China. Yet, all the
causes that kept disturbing retail fashion sector are not external, there were a some internal
sources too. Still, it is expected that industry make strong comeback in year 2017. During the
past some years, it is one of the fastest growing sector (PESTLE Analysis of the Fashion
retail industry, 2017). It I grown at the rate of 5.5% in year. Technology is playing a vital role
in influencing taste of customers. A faster growth has seen in fast fusion segment of sector
and is mainly due to luxury affordable brands of segment. PESTLE analysis helps in
evaluating various factors that impacts the fashion industry. It includes political, economic,
technological, legal, environmental and socio-cultural factors which are defined as follows:

Political factor: In fashion industry, political variables can be the biggest uncertainty
source. Terrorism, geopolitical instability, stalled trade deals and Brexit may increase
pervasive uncertainty sense in global economy. Wide range of political factors are there that
affect fashion Retail Industry of United Kingdom. In addition to terrorism, there are some
other kind of political tensions that increases the uncertainty level and kept affecting the
world before the fashion sector (Vernimmen and et. al., 2014). The tax levied by UK
Government impacts fashion Retail Industry of the respective country. It affects the bottom
line of organisations in the form of Corporation tax and also impacts on customers ability to
spend on clothing. In United Kingdom, the corporation tax level have been lowered for
attempting to stimulate economic activity. Interest rates is the another political factor that
impacts on fashion industry of United Kingdom. The interest rate is less in UK which is seen
as the positive factor organisations as they unable to borrow money in large amount with the
aim of capital expansion.
Economic factor: The factors that may impact on fashion Retail Industry of United
Kingdom includes existing state of economic environment. The businesses that use premium
best differentiation strategy Instead of Cost leader, has ability to influence the fortunes of
firm to great extent than those firms which are operating budget and necessity sector uh of
market. economic condition of country has impact on businesses that deals in fashion retail
sector. It directly impacts on strategies of company as well as the spending ability of
customers. The competition level in industry has also Influence individual brands as well as
their sales and profits (Blázquez, 2014).
Social factors: The growth of fashion retail sector highly depend on socio cultural
factors. In past 10 years, major social changes have been seen that impacts on demand for
fashion products. For fashion marketers, the millennial generation is the main target as there
preferences are distinct from previous generations. Any change in socio cultural level have
impact on buying decision of customers. During the recent decade, demography of population
has changed. Due to these changes, business opportunities and challenges are faced by
fashion Retail Industry. Now, firms catering different needs not just by pushing sales, but
also by attracting and engaging customers. Fashion brands such as Next plc have offer good
quality fashion clothes to customers at affordable prices.
Technological factors: Technology is also one of the crucial factor that affect on
growth of fashion industry (Ashworth, 2012). The truth story of clothing industry can be

attributed to development in technology that have occurred in this era. Internet, information
technology, globalisation and increased utilisation of mobile phones for shopping affects
marketing, sales and customer choices. Apart from improve supply chain and production,
Technology has disrupted various things. It brings greater effectiveness to marketing and
sales of fashion products. In terms of overseas expansion, Technology provides create benefit
to fashion brand. Electronic Commerce has assist them to go past borders and sell its product
to large customer segment.
Environmental factors: Like any other industry, environment and sustainability are
crucial for fashion Retail Industry. They are more concerned about environment and market
themselves as eco friendly brands by reducing carbon footprint. They are investing in
sustainability and environment and using eco friendly raw materials, operations and
packaging. Fashion retail Industry transforms its manufacturing process and product design in
order to protect environment. More than 65% of customers in emerging markets are seeking
the sustainable fashion actively. Today, sustainability has become the great influencer of
purchasing decision of customers (Choi and Cheng, 2015). Several large fashion companies
like Next plc, Marks and Spencer etc. Have design sustainability goals and work effectively
towards attaining those. They are working for minimising carbon footprint and maximizing
productivity (Varley, 2014).
Legal factors: The fashion Retail Industry are also bonded by legal challenges. ethics
and compliance are crucial areas on which brands are focusing and working actively towards
it. Employment laws, environmental laws etc. Are the legislations that needs to be followed
by every organisation that deals in fashion industry. Other regulations related to international
trade are also required to be he followed by firms. Yet, ethical image and legal compliance
can be beneficial for fashion retail business.
Relevant changes in micro environment
There are various micro environment factors that impacts on operations and activities
of company in both negative and positive manner. Various factors that impacts on
functioning of Next plc are defined below:
Customers: Factors like cultures, Lifestyle, population changes, norms and
demographics Olympics and buying behaviour of customers (Kant Hvass, 2014). These
factors affect sales of Next plc in effective way. The sales of company is continue to decline
due to changing needs of customers and existence of various competitive within market.

Existence of competitors highly impact sales and profit ratios of company. People are now
prefer more to buy high quality clothes at reasonable price and they are more attracted
towards online shopping so the retail sales of company are declining continuously. Around 15
main line stores of the former closed as their leases are end. Brexit also impacts on
purchasing power of customers which adversely impact sales of company. In present, buying
power of millennins is high and firm focusing on older customers which could be the reason
for declining sales of firm.
Competitors: Presence of more number of competitors in market of United Kingdom
highly impacts on profitability of Next plc. In United Kingdom, high rivalry is exist in market
due to which customers are attracting towards substitutes. With regards to quality, price and
service, customers are looking towards best offers. In the situation, it is very difficult for
company to increase its market share (Ritch and Schröder, 2012). So, here firm needs to cut
prices in order to sell their products more in market. This leads to declining margins and less
competitors. Availability of large number of customers in fashion retail market could be one
of the cause behind declining profits of company.
Employees: Employees play crucial role in success and growth of company. So, it is
very essential to hire skilled and competent workers within firm. If skilled employees is not
available within firm, the operations can not be performed effectively within firm. Due to
this, firm face high difficulties in market and is not enable to survive in competitive market
for longer term. Availability of less skilled employees could also be one of the reason of
fallen sales of firm (Neupane, 2015).
Tactics and strategies that could be used
Brexit is one of the factor that highly impacts on activities and operations of
company. In order to gain high competitive advantage in market, Next plc could use some
strategies that helps in overcoming various difficulties that firm face in market.
Pricing strategy: For gaining high sales in market, Next plc could use competitive
pricing strategy and set prices of their products as per the prices of competitor’s products.
This would assist firm in gaining high competitive advantage in market which ultimately
results in higher sales. Due to high inflation rates, spending powers of customers are less, so
firm can set such prices of products at which customers can easily buy it and the product is
affordable for them. This will assists Next plc in increasing its market share.

Marketing: Firm requires to emphasize more on its marketing strategy as it is one of
the way that is highly beneficial in attracting large group of customers. So, use of effective
marketing strategies and channels helps company in attracting more number of customers
conveying value and benefits of products to customers in an effective and efficient manner.
This will help company in increasing sales and profits in market (Nenni, Giustiniano and
Pirolo, 2013).
Focus to invest more on online selling: As people are more prefer to buy clothes
online, so firm requires to invest more on it. They can plan to increase their online investment
and engage completely to digital system as it enables Next plc to target customers in an
effective way and deliver more personalised experience of shopping. This will helps
company in attracting more number of customers and making online shopping easy for them.
By application of this strategy, firm can effectively improve its sales and profit ratios and
attain high market share.
Provide advance training to employees: For gaining high competitive advantage in
market, it is highly essential for firm to have skilled and competent workforce. So, Next plc
can provide advance training to its workforce as it help them in dealing with changes in an
effective way and performing their duties in better manner (Ryan, 2012).They must have an
effective marketing team which is able to determine current trends of market as it helps them
in offering products as per the needs and preferences of customers.
Moreover, as per the life cycle theory, Next plc must adopt portfolio for product
management and deliver for intelligible steadiness of expense, risk and prospect. Execution
of retail life cycle states that adequate return on investment must be seen as opportunity. It is
very necessary for Next plc to develop flexibility to resist any change that takes place in
future within firm. The company must focus on millennials group for selling its clothes
instead of older people so that high sales can be attain in market (Wigley, Nobbs and Larsen,
2013).
Recommendation
From the above discussion, it is recommended that firm should use artificial
intelligence in its business processes so that work can be done in more effective manner. This
will help company in determining customer behaviour and offering products according to
their needs and preferences which can further helps increasing its sales and profits. Apart

from this, it is also recommended to introduce innovation to its business foundation so that
high growth can be attain in market. By using high end technology and eliminating traditional
methods firm can make its brand more attractive which will assist in attracting more number
of customers towards brand. Moreover, firm can also change its stores modern and aspiring
outlets with better displays.
Conclusion
As per the above mentioned report, it has been concluded that in recent years, high
growth is seen in online selling of clothes. Despite this increasing Trend, various people still
prefer to purchase clothes in physical shops that impacts on retail business of company and
its sales starts to decline. Brexit highly impacts on economic condition of United Kingdom
and operations of organization that deals in fashion retail sector. Due to this, inflation rate is
increased within the country that ultimately impacts on spending power of customers. This
is the main reason behind declining sales and profits of firm.
REFERENCES
Books and Journals
Stewart, D. W. and Shamdasani, P. N., 2014. Focus groups: Theory and practice (Vol. 20).
Sage publications.
Joskow, P. L., 2014. Incentive regulation in theory and practice: electricity distribution and
transmission networks. In Economic Regulation and Its Reform: What Have We
Learned? (pp. 291-344). University of Chicago Press.
Vernimmen, P. and et. al., 2014. Corporate finance: theory and practice. John Wiley & Sons.
Blázquez, M., 2014. Fashion shopping in multichannel retail: The role of technology in
enhancing the customer experience. International Journal of Electronic Commerce.
18(4). pp.97-116.
Ashworth, C. J., 2012. Marketing and organisational development in e-SMEs: Understanding
survival and sustainability in growth-oriented and comfort-zone pure-play enterprises
in the fashion retail industry. International Entrepreneurship and Management
Journal. 8(2). pp.165-201.
Varley, R., 2014. Retail product management: buying and merchandising. Routledge.
Kant Hvass, K., 2014. Post-retail responsibility of garments–a fashion industry
perspective. Journal of Fashion Marketing and Management. 18(4). pp.413-430.
Ritch, E. L. and Schröder, M. J., 2012. Accessing and affording sustainability: The
experience of fashion consumption within young families. International journal of
consumer studies. 36(2). pp.203-210.

Neupane, R., 2015. The effects of brand image on customer satisfaction and loyalty intention
in retail super market chain UK. International Journal of Social Sciences and
Management. 2(1). pp.9-26.
Nenni, M. E., Giustiniano, L. and Pirolo, L., 2013. Demand forecasting in the fashion
industry: a review. International Journal of Engineering Business
Management. 5(Godište 2013). pp.5-36.
Ryan, P., 2012. Apprenticeship: between theory and practice, school and workplace. In The
future of Vocational Education and Training in a changing world (pp. 402-432). VS
Verlag für Sozialwissenschaften, Wiesbaden.
Wigley, S. M., Nobbs, K. and Larsen, E., 2013. Making the marque: Tangible branding in
fashion product and retail design. Fashion Practice. 5(2). pp.245-263.
Choi, T. M. and Cheng, T. E., 2015. Sustainable fashion supply chain management. Springer:
New York, NY, USA.
Online
PESTLE Analysis of the Fashion retail industry, 2017. [Online]. Available through:
<https://www.cheshnotes.com/2017/09/pestelpestle-analysis-of-the-fashion-retail-industry/>