Retail Theory and Practice

This report provides an overview of the UK fashion retail industry, focusing on the key changes and trends in the microenvironment. It analyzes the impact of political, economic, social, technological, legal, and environmental factors on the industry. The report also discusses strategies and tactics that can be used to deal with these changes and challenges, with a case study on Zara Plc.

Retail Theory
and
Practice

Table of Contents
Introduction to retail.............................................................................................................................3
Introduction to the company.................................................................................................................3
Key relevant changes within the UK fashion retail................................................................................3
Relevant changes within the micro environment..................................................................................5
Porter five forces ..............................................................................................................................5
Suggest and discuss strategies and tactics that could be used..............................................................6
Recommendation .................................................................................................................................7
CONCLUSION.........................................................................................................................................8
REFERENCES..........................................................................................................................................9

Introduction to retail
The process of selling consumer goods and services through various channels of
distribution, to the consumers, in order to earn profit is termed as retail. The demand of the
customers is fulfilled by the retailers through their supply chain process. The same thing
comes under fashion retailing industry that includes buying clothes from manufacturer and
selling them further to customers. UK has always been a place for big business of clothing
and apparels. Currently UK fashion industry comprises the worth of £26 billion and
employees around 800,000 jobs to the economy. Textile as well as fashion exports are
estimated around the total worth of £6.5 billion. This report will include the overview and the
study of UK Fashion retail industry along with the relevant changes and trends in the
microenvironment of this industry. The report will also include different strategies that can be
used for dealing with the changes and challenges of the micro and macro environmental
factors of the industry.
Introduction to the company
The organization being chosen to study the UK retail fashion market is Zara Plc. It is
a Spain multinational brand retailer consisting its headquarters in Arteixo, Spain. Zara Plc
was founded in 1975 by Amancio Ortega and Rosalia a vison of dealing in high quality
clothing products. Currently the company has 10, 000 stores across the world and is he
leading fashion retail brand in UK. The company has placed its product segment of high-class
fashion for upper class people with premium clothing quality. It also has its presence and
existence over online market, consisting of its own brand website and placing its products on
various shopping sites such as amazon etc.
Key relevant changes within the UK fashion retail
In order to understand the relevant changes in the company, PESTLE analysis of
company will be conducted to analyse what are external factors that is affecting the retail
industry.
Political Factors- Zara Plc brand has been widespread in several countries the brand operates
in 1300+ stores across the world. Zara Plc have benefits of utilizing the larger European
Union market where its products have higher chances to travel freely in various countries
without any restrictions and complications of taxes and tariffs. On the other hand, different
countries have their own pricing regulations for the brand for its products and services. The
company believes that it is important to be in touch with the government and working with

them in order to protect the organization’s legitimate interests. It quickly responds to the
queries of the government that is available on their site. The company also has the stronger
support from the government as it has rich historic values as well as the fair means of trade
practices in their operations. But on the other hand there are two main factors affecting the
company that are political stability and the taxes, as the government increases the taxes on the
products it automatically impacts the product prices of Zara Plc and further impacts on its
sales volume as well.
Economic Factors- The most affecting economic factor includes the rise in the inflation of a
particular economy that further affects the working as well as the operating profit and the
prices of products and services of the company. Economic factors include inflation rates,
interest rates, foreign exchange rates, economic growth of the country etc. However there is
no such threat to the company from the economic factors as UK is one of the largest economy
in the world and also the financial and monetary policies of the country are properly managed
by the government, as it has the strong financial support which has led to successfully
maintaining a low rate of inflation. The company has adopted a strategy of providing the
quality products to the customers. But later, the financial crisis may lead to decline in the
demand for high quality products of Zara Plc due to low disposable income in the hands of
customers and also the lesser ability to spend on luxury clothing as well. The company has
been affected by the crisis and had to make a job cuts of around 2% of its staffs of 70000
employees. The recession has also affected the company’s ability to give discounts on
occasions like Christmas.
Social Factors – Social factors also have their major implications on the business operations
of the company. In 2006, CEO of Zara Plc, Stuart Rose wanted to expand the brand name of
the company in order to deal with the changing trends in the market. Consumer purchases are
mainly influenced by the cultural, social, personal and psychological changes in the market.
However, over the years the cheap clothing industry has been affected with various changes
and trends in the market as they provide less expensive clothing products. The clothing line
basically depends upon the locality and demographic as well. There was a rise in trade more
than 10% after credit card came into existence in the market. Zara Plc took this advantage
and allowed their customers to pay through the credit cards that led to further increase its
sales volume.
Technological Factors- Zara Plc has announced Technology Transformation Programme
that would enable the company to be the first digital business and deliver a variety of
diversified customer experience. The main motive of its design was to create an agile, faster

and commercial technology function that would further lead to growth in business. The
company has also focused on the simplification and consolidation of Zara Plc technology
supplier base. Technological advancement is always helpful for a firm in its growth of
operations, production and sales across different locations as well as expansion of the
business.
Legal Factors- Legal factors and the legislations in various countries keeps on changing. In
order to cope up with the changes Zara Plc continuously conduct training sessions in different
areas such as health and keep themselves updated with the current laws and regulations. The
company brand came into eyes of people when it failed to protect its employees and its
workers from potential risks of exposure to asbestos. As one of it incident includes the Zara
Plc store being renovated in Broad Street where its ceiling tiles containing the cancer-causing
material fell down to the floor. However, the company failed to address the issue and turned
out to be the blind eye for this issue and this resulted to two charges on it out of one was the
Health and Safety at Work 1974, for the safety of workers and to take measures regarding
this issue. Both the offences were fined 500,000 pounds for each offence.
Environmental factors- Environmental factors include climate, raw material supply and the
contribution to the natural environment by the company. Zara Plc have established their own
Green Policy for creating the positive impact on the communities of the planet. They work
closely with the Better cotton Initiative, in order to develop practices that would support
different sustainable practices for the procurement and processing for cotton. The company
have systematically acted as facilitators for bringing up the change through its contribution
by 75000 employees and 2000 suppliers in managing the environmental resources as well as
for the society.
Relevant changes within the micro environment
Porter five forces
Competition within industry
The biggest competitors of Zara are Gap, Benton and H&M as they are the most
fashionable and reasonable beats of Benton and Gap all of them are have equal standards
regarding the same pedestal but the supply chain of Zara is much more responsive. Other
retailers takes much more time to change their old collection and launch their latest collection
but Zara regularly change the fashion needs as well as puts forwards latest collection within
every two weeks.

Potential of new entrants
With the growing of fashion ,nowadays people look more forward to the products
that re more economical .Zara is the only firm that gives the reasonable rates of new
launching clothes with high quality but within the change of euro rates will regularly enhance
the selling price for the consumers and Firm loose the advantage of economical brand against
its rivalries. Thus because of this company faces the shortage of sales cycles. Therefore Zara
has to regain tis reputation that can easily attract the customers as instead of defining a
particular style they have to target a large number of audience.
Power of suppliers
Zara offers their suppliers with licensed contracts as firm has strong bargaining
power of the suppliers as well as the cost regarding switching is very high as well as brand
establish a relationship that is stable with a supplier that have full knowledge regarding
quality and safety thus suppliers also enjoys the price setting for needed material. Thus the
supplier’s power is strong.
Power of customers
Zara's customers are from middle class to upper class have the high potential
regarding buying power. In marketplace there are various other garment suppliers that can
distribute the products of same line to Zara. Thus it represents that they have low customer
loyalty regarding the goods. Thus Zara can introduces fashion trends more faster as well as
low prices that makes its stronger as compare to other brands.
Threats of substitute products
Firm can offers more affordable products as compare to other firms but also other firms copy
their style and provide same quality of products. Also online shopping is also consider as a
threat for Zara
Suggest and discuss strategies and tactics that could be used
There are several changes in the trends of the UK fashion industry and hence in order
to deal with them, various factors from macro environmental analysis have been identified in
order to deal with those change and trends-
Strong Political support- Zara Plc have better political support from its government in
relation to its business operations and fair trade practices. The company have been in regular
touch with the government norms and policies that has created its good reputation in the

country. This provides another advantage to Zara for establishing its business in different
countries and creating its good brand image through the political support in its home country.
This would also help the company in staying away from different legal obligations of
different government as UK is one of the largest economy in the world and its impression in
UK create a major impact of its brand image in several countries as well.
Environmental Contribution- The rising concern for the environmental related issues is the
upcoming threat in the clothing industries of the world. Government have been majorly
concerned regarding the environmental protection and various other natural resources. Zara
holds a strong position when it comes to environmental concern. Zara strongly contributes to
the environment by abandoning the use of plastics and uses recycled carry bags for its clothes
and other products. Thus this may create a better competitive strategy for the company to
contribute towards the nature as well as survive in the competitive market.
Recommendation
There are several recommendations that can be followed by company in order to gain
competitive advantage and sustain for long term in the market. the recommendations are
as follows :
 It should be recommended that instead of doing everything by their own Zara can
provide training to their employees within local stores so that quick decisions can be
taken and send various decisions to the Spain their headquarter and decides what is
best for their firm. So that they can easily spread the decision making procedure to
their local stores.
 Zara has many advantages in its vertical integration but at the same time it unable to
focuses on the quantities regarding small distributing as well as not receive any kind
of discount on the manufacturing quantities that are large.
 It should be recommended that Zara currently focuses on very small sections of
men's wear thus it has to focuses on the stylish and fashionable underwear as well as
pyjamas for both men and women.
 It is recommended that Zara can focuses on the smart dressing rooms and also
moving to the dressing rooms that are virtual where customers can try their clothes
without taking them off as it can easily saves the time of the consumers and enables
them toto try more clothes and try different sizes.
 As today's world the current trend that has influenced the fashion industry is becomes
more ware about health that leads to enhance the demand of the athletic wear. Thus

Zara can gives the active wear line to their consumers.
 Sustainability becomes the major concern as people are more ware towards
environment as the sustainability of Zara can directly targeted to audience. Such as
collecting clothes to the people and reuse them. Zara can meet the demands of their
customers by taking care the needs of the consumer more environmentally
CONCLUSION
From the above report it is concluded regarding the understanding of the retail
industry of clothing and fashion in UK economy. The report mentioned the various macro
environmental factors that impact on the company’s operations and sales. The report also
included the micro factors that consisted of competitive forces that company faces during its
existence in different country markets. Further the report included different factors that could
be used as strategies for dealing with the changes and trends in UK clothing industry. Lastly
the report ended up with certain recommendation regarding the changes that can be made in
its functioning and operations for attaining the market growth as well as expansion several
countries along with facing the upcoming challenges in the world economy.

REFERENCES
Books and Journals
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