Retail Theory and Practice Report on a Major Clothing Retailer Operating in UK

This report discusses the primary external factors affecting the British retail industry and the micro environmental factors present in the UK fashion retail environment. It also provides strategies and tactics that can be adopted by UK-based fashion retailer River Island. The report includes a company overview, primary applicable changes in the UK fashion retail sector, micro environmental changes in the UK fashion retail market, and recommendations.

Retail theory and
practice
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Contents
INTRODUCTION...........................................................................................................................3
Company overview.................................................................................................................3
MAIN BODY...................................................................................................................................4
Primary applicable changes in UK fashion retail sector........................................................4
Micro environmental changes in UK fashion retail market...................................................6
Discussion and suggestions of strategies which can be used by River Island........................7
Recommendations..................................................................................................................8
CONCUSION................................................................................................................................10
REFRENCES.................................................................................................................................11
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INTRODUCTION
The term retail refers to the market which includes activities which assist in sale of goods
and services by a company straight to the desired target consumer base which sells product
typically for personal or family usage. Fixed location retail, supermarkets, discount stores,
temporary shops and vending machines are five distinct activities of the vast retail sector.
Fashion retailers refers to group of business firms which are part of the fashion industry supply
chain who offer fashion goods and services after purchasing them from manufacturer to the
consumer (Brooks, 2019). Fashion retail industry has flourished globally and expanded in digital
spaces with online fashion retail marketplaces developing in various countries. The present
report provides information about main external factors affecting British retail industry. In
addition to this, primary micro environmental factors present in UK fashion retail environment
are uncovered in this report. This information is used to discuss strategies and tactics which can
be adopted by UK based fashion retailer river Island.
Company overview
River Island has more than 70 years of experience in the fashion retailing industry as the
company was founded in the year 194 in Lewis Separate’s. The company is currently
headquartered in and is one of the leading high street fashion retailers in UK with more than 300
stores in country and 6 websites (About Us, 20201). The company offers affordable fashion for
men, women and children. The firm is a large size company Russia, Poland, Ireland and
countries in the Middle East are the main regions in which the firm operates internationally. The
online fashion retail company Zalora has helped the firm access South East Asian markets since
2013. The overall revebue of the company lowered between the years 2019 and 2020. The
revenue collected by River Island for the year 2020 is 880 million GBP while the revenue gained
by the company in first quarter of 2021 equalled to 863 million GBP (River Island, 2021). The
company faces tough competition from other digital and physical fashion retailers in the United
Kingdom which include Whistles, Topshop, New Look and Next. The total number of
employees which are part of the global workforce of the firm are 10,994.
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MAIN BODY
Primary applicable changes in UK fashion retail sector
PEST analysis can be used to identify primary forces in British retail sector which
impacts the company. PEST analysis of River Island is provided below:
Political Factors
 Brexit: This is the main political factor relevant to River Island as it directly affects
domestic as well as international operations of the company. Implementation of Brexit
affects fashion retailing is that it will disrupt complex supply chain used by UK based
fashion brands to smoothly operate on an international Scale (Choi and Shen, 2017). In
addition to this Brexit has also limited access to high skilled affordable labour by
introduction of strict laws which decrease access to EU labourers. This impacts retailers
as retail firms require skilled affordable labour to handle consumer facing operations in
their stores.
 Emiratisation: This refers to the legislation which is implemented by UAE which states
that foreign brands operating in the country have to employee certain number of UAE
citizens in order to remain their business in the country. This is relevant political factor
for River Isaland as the company operates in UAE. International fashion retailers have to
adhere to various legislations in different countries in order to gain success. Emiratisation
affects the ability of retailers to conduct merit based recruitment and selections of
business firms as they have to employee certain percentage of workfare on the basis of
their nationality rather than capabilities.
Positive Impact: The positive impact of Brexit on River Island is that it provides the company
opportunity to reduce reliance on UK business cycle by expanding on an international scale.
Negative Impact: Emeritisation has negative impact on River Island as it hinders the ability of
the company to build talented workforce in the country.
Economical Factors
 Economic Downturn: COVID-19 has had drastic impact on global economic conditions
as the pandemic has slowed economic progress in various regions (Pantano, Pizzi and
Rogers, 2020). This impacts business firms as the profitability of the company is
dependent on disposable income of the consumer and economic environment of the
country.
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 Labour Costs: Low labour costs in Asian countries enable fashion retailers to increase
profitability by decreasing overall costs of the company. This is because retailers gain the
capabilities to construct lower costs supply chain by setting production plants in regions
with cheap labour and lower taxation laws (Henninger and et. al., 2017).
Positive Impact: River Island has the opportunity to lower the overall costs and increase
profitability by accessing lower labour costs in Asian Regions.
Negative Impact: The global economic downturn has negative impact on overall expenditure of
consumers on high street fashion items which negatively impacts the profitability of River
Island.
Social Factors:
 Social Media Trends: High influence of social media trends in fashion cycles and
fashion expectations of consumer is the main social factor associated with River Island.
In the current digital environment fashion trends are decided by social media popularity
of clothing item. In addition to this social media narrative bout specific clothing items or
fashion aesthetic can influence the overall sale of products related to specific aesthetic
and fashion items (Juga and Juntunen, 2018).
 Ethical Trading: The concept of ethical trading involves developing sustainably and
ethical supply chain which has positive impact on surrounding communities. There has
been an increase in demand of consumers for ethical trading which impacts supply chain
management of international fashion retailers.
Positive Impact: River Island can analyse social media fashion trends to launch successful
product lines and influence social media polarity to increase profitability of specific products.
Negative Impact: The negative impact of ethical trading is that the overall costs of River Island
will increase by adopting ethical and sustainable supply chain. This will further decrease
profitability of the company.
Technological Factors
 Online retail: COVID-19 restrictions have increased the usage of online channels to
purchase fashion products. In addition to this competition from online fashion retailers
has increased because of rising usage of digital channels by consumers (Kotni and
Karumuri, 2018). Second hand digital clothing marketplaces are also becoming popular
among consumers which affects the sale of fashion retailers.
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 Big data usage: The current digital age has enabled business firms to utilize large
amount of consumer data generated on various online spaces to gain consumer insights.
This can help business firms develop products which exceed consumer expectations and
target consumers with personalized communications to increase sale of their products
(Ryding, Henninger and Cano, 2018).
Positive Impact: The positive impact of technological factors present in retail industry on River
Island is that the company can use Big data to offer excellent products and services to consumers
and gain industry leadership in the UK retail industry.
Negative Impact: The growing online retail market has increased the competition from
international and domestic fashion Brands. In addition to this the development of second hand
marketplaces alo reduce the profitability of the company as consumers are selecting to purchase
seconed hand clothing instead of new fashion items from retailers.
Micro environmental changes in UK fashion retail market
Porter’s five forces analysis Bargaining power of the suppliers: This element of the analysis focuses on the level of
power suppliers have to impact profitability of the company and influence costs of
purchasing raw materials from their decisions (Sobande, 2019). In case of River Island
the bargaining power of suppliers is low. The primary reason which lowers the
negotiating power of the supplier is high presence of many suppliers in the fashion retail
industry who provide similar quality inputs to retailers. This decreases the influence of
suppliers in controlling cots of a product by decreasing or increasing supplier costs. Bargaining power of consumers: The ability of the consumers to influence the prices of
the products offered by the firm and their impact on profitability of the company is
measured by this element of the analysis. The bargaining power of consumers in relation
to River Island is high. This is because economic downturn has increased price
sensitivity of consumers. Consumers can shift their brand loyalty to purchase from small
business owner to international retail brand because of slight changes in prices. Intensity of rivalry: The level of competition in a specific industry can be determined
with this element of the Porter’s five forces analysis. River Island faces high level of
competition from domestic and international business firms. This is because large number
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of domestic small business firms as well as international retailers are competing with
each other to gain largest market share. Threat off substitute: A substitute product is defined as the products or services which
fulfil the same requirements of the consumers and can be purchased by the consumers to
replace the services or products offered by the company (Zellweger, 2017). The threat of
substitute in context of River Island is moderate. The factor which has increased the
level of threat of substituted for River Island to moderate level is the presence of second
hand online market places which act as a substitute for high street fashion firms.
Consumers purchase useful second hand fashion products at cheap prices from such
marketplaces. Depop, Vinted, Etsy eBay and thrift.plus are examples of online second
hand clothing sites which act as substitute for newly made fashion goods sold by River
Island. Rise in demand of sustainability has also increased purchase of second hand item
of clothing instead of newly purchased products which increases threat of substitute for
River Island. Threat of new entrants: The ability of new business firms to establish themselves easily
in the market and gain the market share of already popular brands is determined in this
section of the Porter’s five forces analysis (Heller and et. al., 2019). River Island faces
low threat of new entrants. This is because distributing clothing products over large
region through physical or digital channels requires high investment. In addition to this
new entrants need to take time to build a brand image in order to attract consumers from
already established business firms. With more than 70 years of presence in UK market,
brand image of River Island cannot be competed by new entrants.
Discussion and suggestions of strategies which can be used by River Island
The PESTEL analysis of the company depicts that UK retail industry is affected by
increasing digital purchase by consumers. Increasing presence on digital channels to gain
consumer insights, market products and build consumer base is an effective strategy for River
Island. As the British high street fashion retailor target consumer base is family and youth,
developing social media brand image which caters to these target consumer segment will be
highly beneficial for the company. The primary threat related to this progress strategy can be
understood with the help of retail life-cycle theory. Retail life-cycle theory states that retail
institutions pass through a specific cycle with four stages. This includes innovation, accelerated
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development maturity and decline. Digital presence of retail institutions is currently in the stage
of accelerated growth as business firms from all over the globe are introducing their own digital
channels in order to reach large number of consumers. As stated in the retail life-cycle theory
accelerated growth leads to the stage of development maturity which ends in decline. It is
important for River Island to understand ways of developing future prospects before reaching the
decline stage in the retail lifecycle in order to decrease reliance on digital channels. This will
help the respective company enjoy the benefits of high digital presence in accelerated growth and
maturity stage while reduce the negative impact of consequences in the decline stage.
As per the Porter’s five forces analysis of River Island the primary competitive force
which affects business firms is high intensity of competition and high consumer power. This
leads to easy loss of market share as disloyal consumers shift towards rival business firms if the
prices of the company increase. The company caters to small group of high income family and
youth consumers by offering their products at premium pricing. Elevation in pricing strategy of
the company influences consumers from middle income backgrounds to settle for more
affordable fashion retailers. This decreases thee profitability of River Island and stops the
company from becoming market leader in the retail fashion sector. In order to face the intense
competition, the company needs to adopt competitive pricing strategy for selective clothing lines
which enable the company attain profitability and gain market share from competitors by
attracting middle income consumers to the company. The selection of clothing used by the
company needs to be small and updated regularly in order to offer social media fashion trends
which change quickly. River Island will be able to attract large number of middle income
consumers with the help of this tactic which requires limited investment. This tactic will help the
company face economic downturn and enable the firm to attain higher market share and
profitability while also ensuring that high income clients of the company are not alienated.
Recommendations
 The company needs to focus on market penetration in UK in order to emerge as leading
fashion retailer in the country. The tactic recommended for this is to develop sustainable
consumer loyalty scheme which enables regular consumers to exchange their useful second
hand clothing item for discount on other products of the company. These second hand
products can be recycled by River Island to offer sustainable products. This will help the
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company develop a sustainable brand image and compete with second hand marketplaces
which act as product substitution for the company.
 The company needs to also focus on new product development which helps the company
internationalize quickly and build loyal consumer base in foreign firms. The tactic
recommended for this is to collaborate with local fashion designer in foreign markets to
build loyal consumer. This will help the company reduce reliance on UK economy and
business cycle and establish international name for continuous growth.
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CONCUSION
From the above report it is determined that the retailing environment is shaped by various
forces. PEST analysis is an effective tool in order to evaluate external environment forces; it
helps determine the impact of political, economic, social and technological factors present in an
industry. In addition to this, internal environmental forces affecting a retail firm can be
determined with the help of Porter’s fiver forces analysis. This analytical tool helps business
firms understand the level of five competitive forces present in the industry which includes
bargaining power of the supplier, bargaining power of consumer, intensity of rivalry, threat of
substitutes and threat of new entrants. These analytical tool help understand current position and
future opportunities for retail firms which can be used to inform business decisions. The concept
of retail life-cycle can also be used to develop tactics to ensure future progress of retail firms.
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REFRENCES
Books and Journals
Brooks, A., 2019. Clothing poverty: The hidden world of fast fashion and second-hand clothes.
Zed Books Ltd..
Choi, T. M. and Shen, B., 2017. Luxury fashion retail management. Springer.
Heller and et. al., 2019. Let me imagine that for you: Transforming the retail frontline through
augmenting customer mental imagery ability. Journal of Retailing, 95(2). pp.94-114.
Henninger and et. al., 2017. Sustainability in fashion: A cradle to upcycle approach. Springer.
Juga, J. and Juntunen, J., 2018. Antecedents of retail patronage in cooperative retail
context. Journal of Co-operative Organization and Management, 6(2). pp.94-99.
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., Pizzi, G. and Rogers, A., 2020. Who is interested in retail education? The (mis)
match between the leading universities’ offerings and job demand in the
UK. International Journal of Retail & Distribution Management.
Ryding, D., Henninger, C. E. and Cano, M. B. eds., 2018. Vintage Luxury Fashion: Exploring
the Rise of the Secondhand Clothing Trade. Springer.
Sobande, F., 2019. Femvertising and fast fashion: Feminist advertising or fauxminist marketing
messages?. International Journal of Fashion Studies, 6(1). pp.104-113.
Zellweger, T., 2017. Managing the family business: Theory and practice. Edward Elgar
Publishing.
Online
About Us, 20201. [Online] Available through <https://www.riverisland.com/about-us>
River Island, 2021. [Online] Available through <https://www.zoominfo.com/c/river-island-
clothing-co-limited/32948477>
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