Retail Theory and Practice Summative Assessment: Next plc Case Study

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Retail Theory and Practice
Summative Assessment
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Executive Summary
The retail industry has been introduced along with the introduction of Next plc, a retail company.
The factors that can affect the business on micro and macro environment have been identified.
The analysis has been done on the factors that have been identified in both micro and macro
environment. Recommendations have been presented that the company can utilise to face the
challenges of the macro as well as micro factors of environment. Strategies have been explained
that can help the business in increasing sales and in making profit. Conclusion has been provided
to summarise the important points of the report.
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Table of Contents
Introduction to retail........................................................................................................................4
Introduction to the company............................................................................................................5
Key relevant changes within the UK fashion retail.........................................................................6
Relevant changes within the microenvironment..............................................................................8
Suggest and discuss strategies and tactics that could be used.........................................................9
Recommendations..........................................................................................................................11
Conclusion.....................................................................................................................................12
Reference List................................................................................................................................13
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Introduction to retail
Retail comprises of trading the commodities to the consumers in a direct way as well as in small
number. The retailers buy the goods in large quantity from the producers and sell them in small
number at stores. Fashion retail includes the companies that produce merchandises to the
customers that are fast changing in the modern scenario. This includes clothing, footwear, and
other fashionable things. The changes in the fashion can depend on the season, budget or any
other factor. Retail industry trades apparels, accessories, and like. In the United Kingdom, the
fashion retail industry has a market share of 7%, and the value it holds is 66 billion pounds. The
fashion industry employs around 555, 000 people of the native country (fashionunited.uk, 2019).
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Introduction to the company
Next plc is a public limited company that has been formed by Joseph Hepworth in 1864. This
organisation has been known formerly as J Hepworth & Son. Next plc falls in the retail sector
that trades footwear, clothing as well as home products. It is headquartered in Leicestershire,
United Kingdom. The physical stores are around 500 in the UK, as reported in the year 2018
(nextplc.co.uk, 2019). It has operations in thirty-five countries. The employees’ size of the firm
is 43, 970 (nextplc.co.uk, 2019). It is the largest retailer of apparels in the UK as per the data
generated in 2014 (Ruddick, 2014). The annual revenue that the corporation has generated in the
year 2018 was 4,055.5 million (nextplc.co.uk, 2019). At present, Simon Wolfson is the CEO, and
Michael Roney is the chairperson of the business (next.co.uk, 2019). The organisation has an
online presence as it also sells commodities from online method that is from an online website.
In Europe, it has around 200 brick and mortar stores. The channels through which the firm
generated income is divided into three that are Next retail, Next Directory, a catalogue of home
shopping and website in which it has above 3 million consumers. Next International has more
than 180 stores in foreign countries. Lipsy is another business of the firm that designs and trades
the fashionable products for women through channels of retail, website, and wholesale. The
online stores are available in more than seventy countries. The organisation has incorporated
CSR activities as well as produces its brand products. The LABEL products that are products of
other brands are sold by the company as well as the own branded products sale has generated
350 million in the year 2018/19 through online selling method in the overseas regions
(nextplc.co.uk, 2019).
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Key relevant changes within the UK fashion retail
Political factors
Brexit has affected the business’ profit of the country in a negative way. It has reduced the sales
of the retailers by diminishing the growth rate of retail sales by 0.5% in the month of February
2019 (Partington, 2019). The sales rate of high street stores has been fallen by 0.4% that would
influence negatively the profit growth of the retailer industry.
Trade regulations made by UK Government such as ‘Consumer Protection from Unfair Trading
Regulations 2008” protect customers from unscrupulous traders (hants.gov.uk, 2019). As per this
regulation, the traders should not use unfair practice in marketing the commodities to mislead the
consumers. Even the “Price Marking Order 2004” provides the right to the customers to know
the price of the goods before making a purchase. The retailers should follow the rules to avoid
penalty. Therefore, this factor can affect the retail sector by controlling its functions.
Economic factors
The economic rate of the United Kingdom has been raised from 0.2% in March to 0.5% in June
2019 (tradingeconomics.com, 2019). This will positively affect the fashion industry, as the
purchasing power of the buyers will be enhanced with the enhancement in the economic
condition.
The unemployment rate of the UK has been reduced from 3.9% in April to 3.8% in July
(tradingeconomics.com, 2019). This would influence positively the fashion retail industry, as
there would be adequate human resources to perform the various operations of the industry.
Social factors
The structure of the class of the native people is diverse in different parts of the country. Their
buying behaviour depends on the social class in which they belong. This would have a negative
influence on the real business, as it would be difficult to predict the sales based on a specific
group of people.
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The social convention of the country can influence the sales of the retail business. The variations
in the custom would make it tricky for the business to fulfil the demand of customers of a
different culture.
Technological factors
The use of technology in online selling is a factor that affirmatively influences the companies of
UK (Fan et al., 2015). It would help the retail organisations in inducing sales through trading the
products with the online method.
The latest technologies are used for marketing purpose by various industries to promote
merchandises (Chaffey and Ellis-Chadwick, 2019). The retail business will be influenced by the
use of technology in attracting customers from different regions of the world.
Legal factors
As per the “National Minimum Wage Regulations 2015”, the companies of the country should
provide sufficient wages to the employees based on their position in the firm
(uk.practicallaw.thomsonreuters.com, 2019). The retail business will be affected by this, as it has
to adhere by this rule for the sustenance of the organisation.
According to the “Health and Safety at Work Act 1974”, the employers of the UK should
protect the health of the workers at the workplace by providing them safety from hazards
(worksmart.org.uk, 2019). The retail industry would be affected by this legislation, as it has to
ensure the welfare of the employees by providing them with safe place and equipment to work.
Environmental factors
According to the “Control of Pollution Act 1974”, the organisations in the country should
control the amount of waste (legislation.gov.uk, 2019). The retail business should follow the
rules to avoid penalty and dispose of the waste after proper treatment to reduce the harmful effect
on the environment.
People are becoming conscious about the environment, and they have a negative perception
about the companies that do not preserve the natural environment or overusing natural resources.
The retail business can be affected by this by losing its image among people.
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Relevant changes within the microenvironment
The micro factors of the environment of the company can be assessed by using Porter’s model of
forces.
Bargaining Power of suppliers
The power of suppliers to Next Plc Company is moderate. The organisation has an effective
supply chain in different regions. It has helped the firm to increase revenue by providing required
products to the consumers at the right time. However, other firms in the retail industry can attract
the suppliers to themselves by providing more values to them. The company, in order to have an
effective flow of resources for trading, should have a good association with the suppliers (Porter
and Kramer, 2015).
Bargaining Power of customers
The power of customers to Next plc is high. This is for the reason that there are many fashion
retail companies in the UK. For instance, New Look and many others can influence the buying
decision of the consumers (Eisenberg, 2019). The firm to attract the consumers should develop
strategies of marketing such as enhancing facilities in the online service and providing discount
offers to make more sales.
Competitors’ Rivalry
The power of competitors to Next plc is high because there are many organisations in the retail
industry of the UK that provide fashionable gods to the customers. Some of the rival companies
of Next plc are Marks and Spencer, House of Fraser, and others that provide trendy apparels to
the fashion loving customers. They can reduce the sales of the Next plc by diverting its
customers towards themselves. Next plc to face the challenges of the competitors should improve
the features of the merchandises and reduce the price range (Thomas and McLarney, 2017). This
would enable it to make an effective influence on the customers’ shopping decision. Next plc can
improve the marketing function by introducing celebrities to promote the products. Next plc can
also enhance the online shopping experience of the customers by enhancing the features of the
website. These methods would gain the company advantage over competitors.
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Suggest and discuss strategies and tactics that could be used
It can be suggested that Next plc should develop strategies to face the macro and micro factors of
the environment. It can incorporate the use of technology in marketing purpose to have a good
influence over the customers. Technology can be used for engaging the customers in
communication with the customer service of the firm. This would enable the firm to use their
feedback for enhancing the features and qualities of the product. The use of social media is a
tactic that would reduce the cost of the company in the advertisement (Sajid, 2016). It can use
social media to connect with the customers so that they would know about the latest offers of
the company and to have easy access to their locations. This would generate views of the
company that would be helpful for its image. Its presence in the internet world would help it to
research about the latest trend. An effective management system such as transformational
theory would be helpful to make creative designs and features of fashionable garments. It
should promote the use of innovation in the company so that the employees’ participation will
increase.
The company should try to make expansion in different countries to increase the profit through
foreign exchanges. It should adhere to the trade regulations so that there would not be problem
in sustaining the business in the UK. This would also maintain the trust of the customers
towards the company and visibility of price would make the customers make the decision of
buying the products traded by the firm. Next plc should try to take advantage of the economic
growth of the country. It should include the sales of expensive commodities along with the
moderate range of goods to add to the profit of the corporation. During good employment
growth, it can employ talented and experienced candidates to reduce the cost of training. The
skilled employees would be able to deal with the customers in a more efficient manner than the
inexperienced ones. It should follow the trend to design the products as per the demand of the
customers (Keiser et al., 2017). The firm can conduct market research to predict the sales by
trading commodities that are preferred by the consumers.
Next plc can provide the customers with goods in discount during festive seasons and other
special occasions to increase the sales and to meet the company’s short-term goals. It should
follow the regulations and legislation of the United Kingdom to avoid clashes with the
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government. This will keep the functions of the company so that it would be required to meet the
standard. It should control the waste through proper treating and management of disposing of
the waste. The sustainable method should be incorporated into the firm to reduce the cost of the
corporation. This would be beneficial for the firm in enhancing the perception of the firm among
the native citizen. Next plc should provide a healthy and safe environment to the workforce to
ensure that they carry out the operations in an effective manner. This would enhance the
participation of the personnel that is required for maintaining a good working culture. It can also
incorporate the use of CSR activities to enhance the service of the personnel towards consumers
(Kim et al., 2016). This will be beneficial in improving the image of the firm and boosting the
profit.
Next plc should provide satisfactory wages to the labour force so that they would be motivated
in performing their tasks efficiently. This would save the company from facing issues by the law
of the country. There would also be an enhancement in their performance quality that would
have a positive influence on the growth of the profit of the business through an increase in
productivity. Proper supply chain management should be carried out by Next plc to avoid
shortage of goods in providing effective services to the consumers. This would ensure
availability of merchandises to the customers in both brick and mortar outlets as well as in online
stores. There should be an enhancement in the physical stores’ infrastructure so that there
would be sufficient space for the movements of the customers. However, there should not be free
spaces more than the requirement that would create a bad impression on the customers, as they
would perceive insufficient goods in the outlets. Inventory management should be incorporated
to avoid wastage as well as to simplify the tasks of the workers. The company should track the
strategies of competitors to be able to avoid loss in the competition in the retail industry.
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Recommendations
It can be recommended from the challenges provided above in the micro and macro environment
that Next plc should develop some strategies to solve the problems. The corporation to reduce
the efforts of employees in managing a supply chain can use block chain technology. The firm,
as well as other technologies to gain access to the data of the customers, can use sensor data. The
organisation to improve the experience of the customers while shopping online should use
Artificial Intelligence. The company should reduce carbon footprints by using renewable energy
sources (Huisingh et al., 2015). This would reduce the cost of the firm as well. It can use
renewable energy for creating electricity in the physical stores to reduce the cost and influence
the perception of the company among the consumers. It should provide the products at a
reasonable price and include shopping vouchers to increase sales.
Campaigns would be useful for the company in marketing. The use of broadband channels will
be efficient in making advertisement for the commodities that are in demand (Bogart, 2017).
Next plc can use CSR activities to control the amount of wastage and enhance the service of the
employees towards the consumers. The firm to assess the need of the customers concerning
fashionable commodities should do market research. The organisation should maintain a good
relationship with the suppliers by providing them with branded products at a discounted range. It
should manage the supply channels for quick delivery of the products to the consumers.
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Conclusion
It can be deduced from the report presented above that; the retail business involves the trading of
products directly to the customers. The fashion retail industry has been introduced along with the
discussion on the external as well as internal factors of environment that can influence the
chosen company in either affirmative or negative manner. The external factors such as
technology, economic rate, legislation of UK’s government and many others have been
evaluated. The internal factors such as bargaining power of suppliers, customers, and rivalry of
competitors have been assessed as well to analyse its impact on the corporation. Some strategies
have been recommended that the company should use to combat the issues of the factors as well
as to gain success effectively.
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