Unit 10
PESTLE Political, Environmental, Social, Technological, Legal & Economical A PESTLE is used within a business to establish what influences may affect it now or at another point in time. If these are thoroughly approached then the business will be prepared for any changes that it may face; more so than their competitors. It is an opportunity for threats to be minimised and opportunities to be maximised in the form of a SWOT analysis. From this, trends can be established. Political Political issues impact the economy and therefore the buying environment. These businesses need to react accordingly to legislations and be able to effectively work around them, these may include tax policy, employment laws, foreign trade policy, environmental issues, trade restrictions and tariffs. Environmental In comparison to other parts of the PESTLE, environmental issues are far more recent. In recent times businesses are becomingly increasingly aware of their impact on the environment. Factors such as Carbon footprint and global warming are such an issue that the government has now set limits on them for businesses. Other environmental issues include sustainability, ethics, pollution and Fairtrade. Social Social issues are carefully considered by businesses as they are what impacts consumer buying, these include customer attitudes to health, careers, etc., rate of population and cultures.
Technological Technology is advancing so rapidly and this impacts on the marketing of products. These technological factors impact on the production and distribution of goods and the communication methods used with consumers, i.e. social media. Legal Changes to legalisation may effect the way a business trades. If a business is global it has to deal with each country having different regulations. These may be regarding employment, health and safety, equal opportunities, consumer rights, etc. Economic Economic factors include economic growth/ decline, interest rates, exchange rates, inflation rate, wage rates, minimum wage, working hours, unemployment (local and national), credit availability, cost of living etc. These can then be categorised as either macro-economical (management of demand) or micro-economical (how consumers spend their income). Academy, P. (2016). Marketing Theories - PESTEL Analysis. [online] Professionalacademy.com. Available at: http://www.professionalacademy.com/blogs-andadvice/marketing-theories---pestel-analysis [Accessed 15 Jan. 2016].
Political Matilda
Many political factors can affect a retail business, such as tax policies, employment laws, and the political stability of a country. All organisations must obey the law, and companies must try and predict how future legislation might affect business. Organisations are also restricted by the rules and regulations of both the country in which they operate and also any countries with which they trade. Other policies that have no direct effect on organisations can still have an indirect effect via their effect on the consumers themselves. The Bedroom Tax The bedroom tax was introduced in 2012 and reduces the amount of housing benefit a person receives if they are deemed to have more bedrooms than necessary in their household. If a person has one spare bedroom in their house their benefit is reduced by 14%, and if a person has two or more spare rooms it is reduced by 25%. More than half a million claimants have been affected by this tax, with many people being forced to move home. Others have claimed that they have been unable to afford food, electricity or heating due to the rise in the amount they have to pay (Larsson, 2015). This obviously means that there is an affect on the retail business. Matalan, for instance, is a shop specifically aimed at families on a budget. If thousands of Matalan’s customers are affected by the bedroom tax to such an extent that they struggle to get by, then this has an effect on the company’s sales. As a result Matalan will have had to account for this decline in sales, either through buying in less stock or sourcing and selling at a cheaper price in the hopes of still bringing in the customers. Employment Laws Employment laws are put in place by the government to ensure that workers have access to certain rights in the workplace. These directly affect companies such as Matalan as all companies have to adhere to these laws. Factors such as the national minimum wage, holiday leave and the workplace pension scheme all mean that companies are obliged to pay a certain amount, and the rise in national minimum wage and the introduction of the workplace pension scheme mean that this amount continues to grow. While these factors mean better rights for workers, they tend to mean bigger costs for companies, and this often results in businesses making redundancies in order to cover this cost. High street stores such as Matalan also have a habit of hiring younger staff, as they are able to pay them less, although unlike other stores they steer clear of using zero hours contracts, as these are seen as exploitative to workers. Tariffs A tariff is a tax imposed on imports and exports, known as VAT (value added tax). In England this tax is 20% standard rate since 2011. The standard rate used to be 17.5%, and in 2008 it was lowered to 15% in order to help stem the decline in consumer confidence during the recession. It was returned to the original rate in 2010 but was then raised to 20% in 2011 in an attempt to lower the UK’s deficit. The tax a company charges on their goods and services is their output tax, whereas the tax the company pays their suppliers for purchases and expenses is their input tax. Matalan will not only pay tax on the clothes they order to sell, but also on the raw materials they use, business equipment, business phone calls and professional services such as accountants’ fees. Political Stability A lack of political stability in a country can affect businesses not only in that country but also worldwide. Factors such as the price of oil can affect a companies ability to move products, and the political stability of a country can also have an effect on workers’ rights, which may lead to extremely cheap labour in some countries. The collapse of the Rana Plaza factory highlighted the dire conditions in which people work in these poorer countries. Since this collapse Matalan have actually invested in a number of initiatives to help families living in Bangladesh. They worked in partnership with BRAC to support the families involved in the incident, providing medical insurance and also contributing to a Monthly Reserve Fund in order to ensure a regular income for the families. However, the store have been accused of not doing enough, and paying only a derisory amount into the fund set up for the victims (Murphy & McGovern, 2014).
Larsson, N. (2015). 'We've had to go without food' – personal stories of the bedroom tax. [online] the Guardian. Available at: http://www.theguardian.com/housing-network/2015/oct/14/bedroomtax-social-housing-tenants-my-spare-room [Accessed 22 Oct. 2015]. Murphy, J. & McGovern, A. (2014). Matalan hav e b o w e d to p re s s ure o v e r Rana Plaz a, b ut the c amp aig n g o e s o n . [online] Available at: http://www.newstatesman.com/politics/2014/07/matalan-have-bowed-pressure-over-rana-plaza-campaign-goes [Accessed 22 Oct. 2015].
ENVIRONMENTAL
Alice
The environmental factor of a PESTLE is important as it is the effect that industry can have on the environment and the effect the environment can have on the industry and a company. Now a days companies are being more environmentally aware of the effect there business may have on the environment. The carbon foot print is something that is bought to companies attention as it is produced through everything from transport, electricity and manufacturing. One of the main producers of carbon dioxide into the atmosphere is travel. So companies will have to ask them selves, which form of travel is best? Whilst it might be cheaper to send products by boat and larger quantities being able to be shipped at once, it takes a longer time and might cause more harm than a plane. An old article from the Guardian newspaper asks weather cruising is any greener than flying.
Looking at some of the facts from the article, it turns out that travelling by boat produces more carbon emissions than flying. Along with the carbon emissions also come the effect that the boat has on the ocean.
Deciding on which form of transport to take is something that a company should be more considerate of. Not only does their decision affect the environment from the ocean to its inhabitants, along with affecting the atmosphere from planes, but they could also face back lash if something was to go wrong. For example if the boat transporting goods was to have a fuel leak, it could lead to negative reports and raise questions like, why were they using that form of transport? This could then affect any future sales and business plans. Other major environmental factors that companies should take into considerations, especially in the fashion industry, is the way in which they dye their materials. the Guardian, (2006). Is cruising any greener than flying?. [online] Available at: http://www.theguardian.com/travel/2006/dec/20/cruises.green [Accessed 15 Jan. 2016].
Alice
One of the largest problems the fashion and textiles industry has, is in the way that fabric is dyed and the effect that it has on the environment. The textile industry causes a large amount of water pollution. According to this article by Fathima Quaraishi, the textiles industry is responsible for up 20% of global industrial water pollution. An article in the guardian talks about this issue and how it can be combated. There is a way of dying fabric that uses less water. It also uses less chemicals. This new eco friendly way of dying is by using air to disperse the dye and is called dry dye.
https://prezi.com/rvvpesph3k5g/the-textile-industry-and-its-impact-on-the-environment/
Leading sporting brand Adidas has jumped on board with dry dye, which uses less chemicals, less energy and less water. Other ways in which Adidas are working forward to produce environmentally friendly clothing is by avoiding oil based plastics and using thinner or lighter materials which produces less wastes and a lower carbon emissions.
Kaye, L. (2013). Clothing to dye for: the textile sector must confront water risks. [online] the Guardian. Available at: http://www.theguardian.com/sustainable-business/dyeing-textile-sector-water-risks-adidas [Accessed 15 Jan. 2016].
Social Issues: Matalan
Abi
Cost inflation There is an increase in British companies outsourcing manufacturing, and selling it cheaper in the store because of this, however the increased costs of transporting the products from overseas and the importing and exporting of those materials during pre-production, has caused greater costs. Corporate Social Responsibility Stakeholders in retail companies are more aware that the public, their consumers, want transparency. They want their money to be involved in ethical business practices; responsible sourcing, understand the environmental risks of importing and exporting materials across the globe. Buying Behaviours What do consumers want? Do they prefer value shopping, high end products? This will affect the cost of the materials and how high the price margin will be when we sell them. They have to appeal to a customer where their spending habits aren’t consistent. Human Resources Not only do they have to be aware of environmental factors, but also sociology factors; pension schemes, bonuses, rewards for boardroom staff etc. They have to appeal to their workers by paying them a decent wage, and give them a decent retirement fund, but they also have to provide value for their customer. Taxes VAT increases, can this affect a value retailer? If you want to provide on trend products cheaper than your competitors, then you have to take into account any increase in VAT. In 2011, the government increased VAT from 17.5% to 20%. This affected the lower income families more than anyone. Matalan.co.uk, (2015). About Matalan - Matalan. [online] Available at: http://www.matalan.co.uk/corporate/about-matalan [Accessed 21 Oct. 2015]. BBC News, (2015). VAT rate rises from 17.5% to 20% - BBC News. [online] Available at: http://www.bbc.co.uk/news/business-12099638 [Accessed 21 Oct. 2015].
Matalan is a value retailer. Their slogan ‘Made for Modern Families’ is used in cross-promotion on television, and newspapers. They appeal to working class families, and young families. They keep on trend, and have a constant range of basic essentials like vest tops, blouses, and work wear. They also are affiliated with local job centres across the country, and provide a ‘New Deal’ for job seekers who can’t afford to buy an outfit for an interview or a job. They frequently have sales, and send out vouchers in ‘mailers’ every season, encouraging shoppers to buy into their new designs with 20% vouchers as part of their free ‘Reward Card’ that rewards customers for shopping with them. You can also recoup the VAT off the clothes you buy if you are a tourist. Matalan was involved in the Bangladesh factory collapse, and have since partnered up with the Hope Foundation, and have built a School of Hope that provides education to children in Bangladesh. They were not involved with the Ranza factory collapse, they had only used it to create a small amount of samples. However, they knew that any affiliation would be bad, and they decided to release a statement conveying their distress and how they would offer financial help, and charity, to the families involved.
Technological Matilda
Technology plays a huge role in the retail business nowadays. With the rise of social media society today is saturated with advertisements, and advances in technology over the last few years have meant that it is now possible to access the retail environment and make purchases anywhere and everywhere with considerable ease. Things such as video blogs, Instagram and Twitter are now a part of every day life for many people and can have a massive impact, either positive or negative, on the retail sector. Even aspects such as payment are now becoming even more technological, with contactless cards and mobile payments becoming increasingly popular. All these aspects, however much they appear to ease the experience of buying and selling, seem to also make it a less personal experience. Technology seems to speed everything up these days so that people are living faster, busier lives each day while reducing social contact to a minimum. Social Media Social media’s role in retail sales is growing, through aspects such as embedded ‘buy’ buttons on posts that drive direct sales, or through referring traffic to retailers’ websites. Matalan have effectively utilised social media to drive sales in campaigns such as the Alphabet Scarf, whereby all the proceeds from the sale of these scarves went to Alder Hey Children’s Hospital, and various celebrities posted photos of themselves wearing the scarves on social media sites to promote the campaign (Kent, 2014). Abbey Clancy also promoted her collaboration range with Matalan on Instagram, another example of how social media has aided the retail sector. Social media is beginning to play such a big role within the retail sector that Matalan, like many other stores, now have dedicated employees working with social media sites such as ‘PR & Social Media Manager’. Online Shopping Online shopping is now a massive part of the retail industry, with many online only retailers now on the scene. Matalan have taken full advantage of the popularity of online shopping, offering home delivery, free click and collect and easy returns either by post or in store. All this aims to make the online shopping experience as easy as possible. Revenue from online sales means that more money is coming in where no money is needed for rent or utility bills, and this means that shops are often able to branch out into areas that their high street stores usually restrict. Matalan, for example, now offer Matalan Direct, which is online only and stocks a wide range of homeware such as household furniture and decorative items such as rugs and curtains. This also drives online sales because consumers find themselves on their website as they are unable to browse these products on the high street. Chief executive of Matalan Direct, Shane Quigley, said “The ultimate goal for Matalan Direct is to be able to offer everything you need to complete your home with just the click of a button” (Wilmore, 2015). Reward Card App Matalan now offer an app that, for many customers, replaces the need for a plastic reward card. This means that customers can access discounts and excusive offers on the go, without the need to remember to bring any paper vouchers from home. It also reduces the level of clutter a customer might have in his or her purse, which will ultimately mean the customer is happier. This maximises sales for the company as it is easier for customers to take advantage of the offers available.
Kent, David. (2014). Wayne Ro o ne y w e ars alp hab e t s c arv e s in aid o f Alde r He y Ho s p ital. [online] Available at: http://www.dailymail.co.uk/sport/article-2811186/WayneRooney-Brendan-Rodgers-Britney-Spears-wear-alphabet-scarves-aid-Alder-HeyChildren-s-Hospital.html [Accessed 22 Oct. 2015]. Wilmore, J. (2015). Matalan Dire c t unv e ils b e ds and b e dro o m furniture rang e s . [online] Retail-week.com. Available at: http://www.retail-week.com/sectors/generalmerchandise/matalan-direct-unveils-beds-and-bedroom-furnitureranges/5079166.article?blocktitle=Matalan:-Latest-news-and-
insight&contentID=9569 [Accessed 22 Oct. 2015].
Daniella
Matalan Group PESTLE - Legal This article describes a legal battle between Matalan and Primark over copyright issues. Primark claims that their range of childrenswear called ‘Rebel’ has been replicated by Matalan who have brought out a range of merchandise with the slogan ‘Rebel Attitude’ on them. Primark claim that they have rights over the term and consequently want Matalan to destroy the slogan-bearing merchandise. It does seem like a small thing to be taking Matalan to court for but on the other hand Primark does have rights over the term and obviously doesn’t want one of their main competitors taking customers from them. If Matalan did have to destroy the merchandise then it would be a loss for them meaning they would need to make up this lost money by selling other successful merchandise. This would mean that it would be the Buyer’s job to produce merchandise that would sell fast and make the maximum amount of profit. Retailhumanresources.com, (2016). Primark and Matalan in legal battle | Latest Retail News | Retail Human Resources. [online] Available at: http://www.retailhumanresources.com/retail-news/latest-retailnews/detail/1628/primark-and-matalan-in-legal-battle [Accessed 15 Jan. 2016].
Matalan, along with River Island have signed a deal known as The Bangladesh Accord to say that they will independently safety check their factories. This comes after the Rana Plaza building in Bangladesh collapsing which has been blamed on the greed of Westerners wanting cheaper clothes meaning bad working conditions and low wages for factory workers. High-street retailers are showing their support for this disaster by signing deals such as this one and donating money because they don’t want consumers to see them in a bad light resulting in a profit loss. This would then lead to the Buyer not having as much of a budget for the next range. Alternatively, the businesses may well have had a wake-up call from the disaster and have realised the error of their ways as far as unsafe working environments are concerned. A business strategy which could be used here would be regulations put in place by the business to ensure the well-being of their employees and the safety of the environment in which they work in. Usdaw.org.uk, (2016). USDAW - Usdaw urges more retailers to get on board as Matalan and River Island sign the Bangladesh Accord. [online] Available at: http://www.usdaw.org.uk/About-Us/News/2013/October/Usdaw-urges-moreretailers-to-get-on-board-as-Mata [Accessed 15 Jan. 2016].
Daniella
Economic Issues: Matalan
Unemployment Rate Retailers find it difficult during uncertain times, because they need customers to buy their products. After the recession in 2008, when unemployment rates where high, a lot of establish retailers were swallowed up, e.g. Woolworths. It is important for retailers that people have jobs, and have money to spend.
Abi
E-Commerce With retailers like Matalan, who have been around for thirty years, there is an increase in online shopping. In 2011, Matalan hired a new head of online, to expand their ranges that are available on their online store. Online shopping is a lot easier for consumers, and they can purchase items at anytime of the day, not within set store hours. Retailers have to open longer, and earlier, to accommodate the new behaviour of consumers. Data Tracking A lot of stores now have apps that can be downloaded in store, and the consumer can order something the store doesn’t have with the touch of a button. In Matalan, they encourage shoppers to download the reward app in store, to get an instant 10% code to scan that day at the till. Getting data about their customer to analyse, helps them track the buying habits and lifestyle habits of their customer. Family Values No matter what the economic weather, Matalan and other value retailers have to keep their prices low, and therefore they must keep their costs low. This could mean hiring more young workers on zero hour contracts; they can hire a 16 year old on £3.87 an hour, as opposed to an adult at £6.70 an hour (as of October 2015). They can keep their costs down doing this, however customer services, and reliability of the workforce can decrease. Insightdiy.co.uk, (2015). Matalan anno unc e s ne w hire to max imis e e c o m me rc e re v e nue . [online] Available at: http://www.insightdiy.co.uk/news/matalan-announces-new-hire-to-maximiseecommerce-revenue/1242.htm [Accessed 21 Oct. 2015]. Gov.uk, (2015). Ne w Natio nal Minimum Wag e rate s anno unc e d - Pre s s re le as e s - GO V.UK. [online] Available at: https://www.gov.uk/government/news/new-national-minimum-wage-rates-announced [Accessed 21 Oct. 2015]. Baker, L. (2000). Matalan aims to maintain unriv alle d g ro w th. [online] The Independent. Available at: http://www.independent.co.uk/news/business/news/matalan-aims-to-maintain-unrivalled-growth623589.html [Accessed 21 Oct. 2015].
Matalan is the most highly rated company in the retail sector; In 2011, they had a 60% increase in growth, and it is still growing as of 2015. Matalan is the sixth most valuable retail company in the UK, their clothing sales make up for over 80% in group profits. They’ve gained market shared from retail giants like Marks and Spencer. Matalan continue to increase the stores they open, and in 2012 opened their first ever high street store in Liverpool Williamson Square. This levelled their competitors, and has increased interest in investment outside the UK. They also opened a store on Oxford Street, London, in 2014. Growing online, and using technology, is where they are focusing their efforts currently. They are boosting the British economy by hiring more staff, and developing new products. They recently opened an second online site that specialises in bathroom and bedroom furniture at low prices.
Group PESTLE Conclusion
A PESTLE must be carried out to enable a SWOT analysis to be created. This enables strengths and weaknesses, threats and opportunities to be found and utilised. External factors have a huge impact on a business and they can be so unpredictable. Legal and political issues such as employee rights, VAT, and cost inflation can effect how likely it is for them to make a profit. The customer also has a big impact on the way that a business is ran. With technology such as social media being such an important part of people’s lives these days, any negative press towards a business can have a real effect. The Rana Plaza collapse showed the lack of ethics for workers that Matalan and other high street businesses showed. To try and hold onto customers, they decided to donate money to a cause but they have received a backlash from people claiming that they are not paying anywhere near enough. This could potentially mean customers could start shopping elsewhere at one of Matalan’s competitors, e.g. Primark. To regain their consumers they would either have to buy in less stock or sell it for a cheaper price then their competitors. On the other hand, Matalan should take advantage of its opportunities regarding social media and online shopping. Good press will bring in more customers and an increase in online sales could mean less of a need for so many staff in store. Another unpredictable factor of Matalan’s success is consumer buying behaviour. This social factor links in with social media which has the greatest impact on behaviours. Finally, environmental issues such as Matalan’s carbon footprint are becoming increasingly important to customers, many of whom don’t just want to shop somewhere that sells cheap clothes. Consumers no have a real sense of what they want from their purchased goods and the effect that it may have on the planet. UKEssays, (2016). Next PESTLE Analysis. [online] Available at: http://www.ukessays.com/services/example-essays/business/next-pestleanalysis.php [Accessed 15 Jan. 2016].
M&S & Primark PESTLES
Primary Research Photos for M&S & Primark
M&S Primary Research Facts Provided by the Manager of Beauty/Lingerie
• Their store cards are the hardest to get on the high-street, credit checks are required and pensioners with a high income are thoroughly checked. • The Liverpool branch has 25 managers and 23 sales assistants. • M&S are on Facebook and Twitter and they also have their own Facebook-style website for staff. • iPads are used on the sales floor and within the lingerie department, staff use them to store bra measurements after a fitting, these are then available online for the customer to view. • They are big on Fairtrade (which focuses on better working conditions and pay for their farmers and workers) and advertise it a lot. They use this as a global business strategy to keep the attention away from negative press in the public eye as this makes the business appear to be caring and fair. • Products have been recalled twice for Health & Safety reasons. • Staff regularly stay up-to-date with technology. • A living wage used to be available.
Political
Political M&S’s Head of Sustainable Business who was part of the company’s Plan A project has criticised the coalition and stated that businesses trying to improve their environmental policies faced two years of uncertainty. This comes after the 2008 Climate Change Act which provided long-term goals for businesses. He also encouraged the government to bring in a 5p carrier bag charge with profits going to charity. Rather than businesses being rewarded for being more environmentally-friendly, the are being taxed as of 2010. M&S were suggested as the leader of the government’s ‘energy efficiency scheme’ where householders have a loan in which repayments are offset by the energy savings made. However for the time being, the future of this scheme is uncertain. The Buyer would possibly be impacted with a reduced budget to further decrease the business’s environmental impact so they could create a business strategy to use less CO2 emissions. Impact: None Time Frame: 2 years Impact on Buyer: Negative Vaughan, A. (2012). Marks & Spencer green chief attacks government's 'uncertain' policy. [online] the Guardian. Available at: http://www.theguardian.com/environment/2012/nov/11/marks-and-spencergreen-government [Accessed 15 Jan. 2016].
Environmental During our visit to M&S we learnt that they are a very environmentally-friendly company, for example M&S created a business strategy where they have recycled their carrier bags before to create a coat! However, two of their stores were found to contain asbestos and received a fine. This would result in a negative image to the customer and less of a budget for the business.
Environmental This article explains how M&S lost one of its environmental awards by the Environmental Investigation Agency due to Hydrofluorocarbon (HFC) emissions from refrigerators. They were up against other leading supermarkets such as Tesco, Waitrose and the Co-operative in the NGO’s Chilling Facts report. Instead of opting for HFC-free refrigerators, M&S have decided to use hybrid HFC/CO2 ones and considering that HFC is a greenhouse gas this won’t put M&S in a positive light with consumers. In the past two years the number of supermarkets in Europe that are using HFC-free products has more than doubled. The suggestion for M&S for an energy saving of around 33% is doors on the refrigerators which M&S have said they will try. However, M&S state that they are still extremely successful with being as environmentally-friendly as possible and claim that their emissions are down 73% in comparison to in 2007. The effect this will have on M&S’s Buyers is that the focus will be on keeping emissions as low as possible meaning less of a budget. This would include trips abroad to source fabrics which would have to be minimised by having more meetings online than in person.
Impact: Medium Time Frame: On-going Impact on Buyer: Negative
Vaughan, A. (2014). M&S downgraded in green ranking over refrigeration emissions. [online] the Guardian. Available at: http://www.theguardian.com/environment/2014/oct/14/ms-downgraded-in-green-ranking-over-refrigeration-emissions [Accessed 15 Jan. 2016].
Social
Social M&S reportedly used an x-rated advertisement for their bakery and social media made a lot of jokes out of it. The advert was meant to get across the good source of vitamin D that their bread now has. Either it was a genuine error (which seems unlikely) or the company cleverly came up with an advert that would get the public talking. The affect on the Buyer would be minimal. This would be a short-lived talking-point that would only last as long as the advert was used for.
Impact: Low Time Frame: As long as advert is used Impact on Buyer: Negative
Horton, H. (2015). Marks and Spencer mocked on social media over 'x-rated' advert. [online] Telegraph.co.uk. Available at: http://www.telegraph.co.uk/news/uknews/11809329/m-and-s-putting-d-in-bread-advert.html [Accessed 15 Jan. 2016].
Technology The Liverpool store contained a touchscreen gadget to allow customers to order products online which saves the business money that would be used on paying staff. However, older customers might struggle to use it. This gadget is a global online business strategy that M&S used.
Technology An internal fault led to M&S customers being able to see other customer’s details online. When customers were logged onto their accounts they could see other’s personal information such as name, date of birth and contact details along with previous orders. This led to lots of worried customers calling in before the website was shut down – an hour later! The amount of customer’s details that were viewed is unclear but M&S state that the issue has now been resolved. The impact on the Buyer would be negative because customers would be wary of shopping online so online sales would potentially be down. Impact: High Time Frame: 3 hours (1 hour before the website was taken down and 2 hours before the issue was resolved online) Impact on Buyer: Negative BBC News, (2016). Marks and Spencer website leaks customers' details - BBC News. [online] Available at: http://www.bbc.co.uk/news/technology-34656818 [Accessed 15 Jan. 2016].
Legal
Legally they have been caught up in copyright issues with designs being said to have been copied from other brands.
Legal M&S has been found to have asked Google to suggest their flowers whenever ‘Interflora’ is searched for which has led to Interflora taking their rivals to court. It has been suggested that this is to allow customers to see an alternative option which may lead away from Interflora’s business. This comes after Google had a lawsuit against them but it has been said that Interflora haven’t made legal proceedings against Google. M&S are being sued for buying keywords from Google to allow for the promotion of their business. Google has declined to comment as they are not part of the legal proceedings. The impact on the Buyer here is negative because it doesn’t put the business in a good light when they will be seen to have been taking another company’s business. A useful business strategy would be to reduce the prices of some of their merchandise to encourage customers to keep purchasing from the business.
Impact: Low Time Frame: As long as the legal proceedings take place Impact on Buyer: Negative
BBC News, (2016). Interflora sues Marks & Spencer over Google ad links - BBC News. [online] Available at: http://www.bbc.co.uk/news/business-11531677 [Accessed 15 Jan. 2016].
Ethical
Ethical M&S has been made one of the 2014 Ethisphere's World's Most Ethical Companies. The panel, made up of some of the most prestigious people in New York, score businesses based on 25% ethics and compliance, 25% corporate citizenship and responsibility, 20% reputation, leadership and innovation and 10% governance. This would have a very positive impact on the Buyer because it would mean that more customers would shop at M&S because of its positive limelight. This would potentially increase the Buyer’s budget in order to ensure that the products they are using are as environmentally-friendly as possible.
Impact: High Time Frame: Annual Impact on Buyer: Positive
Fashion.telegraph.co.uk, (2016). H&M, Gap and Marks & Spencer named world's most ethical clothing companies - Telegraph. [online] Available at: http://fashion.telegraph.co.uk/news-features/TMG10724470/HandM-Gap-and-Marks-andSpencer-named-worlds-most-ethical-clothing-companies.html [Accessed 15 Jan. 2016].
Primark PESTLE • Environmental: positive poster in Liverpool window with regards to garment factories, recycle cardboard to make paper bags, clothes can’t be recycled, 30% waste = clothes • Ethical: they buy from bankrupt companies to keep costs low, they pay employees 7p an hour in the sweatshops, bulk buying, child labour • Technology: staff app, no commercials, minimal websites – cannot buy online and not all products are on there • Legal: pay school children more than minimum wage, sales were up, concerned about increased exchange rates, copyright Matalan dress in 2004
Political
Political The finance director of Primark has stated that The National Living Wage paid to Primark’s employees will not have an affect on the pricing of their merchandise. This along with the increase in currency exchange rates will result in a loss of tens of millions of pounds for the business. Associated British Foods who owns Primark has claimed that Primark will have lower profit margins in 2016 due to multiple reasons including a soar in 2015 Summer profits because of the unexpected long period of warm weather. A useful global business strategy would be to buy in cheaper merchandise without making any cut-backs on cost price. Impact: Positive for employees and customers Time Frame: 12 months Impact on Buyer: Negative Butler, S. (2015). Primark owner says prices will not rise to pay for 'national living wage'. [online] the Guardian. Available at: http://www.theguardian.com/business/2015/nov/03/primark-national-livingwage-prices-profits-fall-2016-warning [Accessed 15 Jan. 2016].
Environmental
Environmental This article explains the progress that is being made following the Rana Plaza factory collapse. Primark have claimed they began by supporting the Bangladeshi employees following the incident by compensating them with three months worth of pay each which has since been increased to a further three months. In addition to this, a long-term compensation scheme is being discussed. Building surveys in Bangladesh are now carried out including fire safety checks. They want to reassure customers by emphasising their desire for ethical trade since the disaster. Impact: Positive Time Frame: On-going Impact on Buyer: Positive if the business can continue to encourage customers that they actually are an ethical company Siegle, L. (2013). Primark: How ethical are your clothes?. [online] the Guardian. Available at: http://www.theguardian.com/environment/2013/oct/06/ethical-high-street-clothes-primark [Accessed 15 Jan. 2016].
Social
Social Despite remaining to not spend a great deal on advertising and marketing, Primark has managed to climb fourteen place on eDigitalResearch’s Retail Social Media Benchmark following an increased interest on their social media presence. After an attempt to sell a selection of their products on ecommerce site Asos, Primark have since decided to focus on only selling products in-store due to high the high delivery costs associated with e-commerce shopping. Instead the business hopes to increase its popularity by getting its current customers talking about their merchandise and incredibly low costs. Impact: Positive Time Frame: Approximately 2 months Impact on Buyer: Positive Engage Customer, (2014). Primark now a social media hit too - Engage Customer. [online] Available at: http://engagecustomer.com/primark-now-a-social-media-hit-too/ [Accessed 15 Jan. 2016].
Technology
Technology Primark continues to keep its focus on increasing the number of stores available worldwide rather than investing in an e-commerce site in which consumers can purchase from. Their fear if they made the decision to sell online is that consumers wouldn’t be prepared to pay for delivery costs but research carried out insists this wouldn’t be an issue with e-commerce shopping being more popular then ever before. The hope is to increase the size of new stores, but this may not be enough to keep the business going. Fashion stores on the high street are increasingly giving way to e-commerce stores that don’t have the costs of maintaining each high street building. Impact: Negative for consumers who like the option of shopping online or are unable to have time to physically shop in store Time Frame: Ongoing Impact on Buyer: None unless the business decides to sell merchandise online, in which case the Buyer would more than likely need an increased profit for new collections to draw in new consumers Engage Customer, (2014). Primark now a social media hit too - Engage Customer. [online] Available at: http://engagecustomer.com/primark-now-a-social-media-hit-too/ [Accessed 15 Jan. 2016].
Legal
Legal A ‘fake’ Primark store has been opened in Dubai but it has been claimed the merchandise inside doesn’t look much like the real thing. After claiming he didn’t know about the brand, the owner of the Dubai store has said he would like to join forces with the real business to allow for the expansion of the brand into the Middle-Eastern fashion market. Primark are now considering whether to take legal action against the owner. Impact: Negative Time Frame: Ongoing until a settlement is agreed upon. Impact on Buyer: Negative as profits may be down if the customers do not feel that they can trust what is genuine Mail Online, (2012). Primark bosses seek legal action after fake store opens its doors to tourists in Dubai. [online] Available at: http://www.dailymail.co.uk/femail/article-2138321/Primark-bosses-seek-legalaction-fake-store-opens-doors-tourists-Dubai.html [Accessed 15 Jan. 2016].
Ethical
Ethical A note has been found by a woman who purchased a pair of Primark trousers three years ago but hadn’t worn them until now. The note wrapped in a prison identity card was found in the pocket of the trousers read "SOS! SOS! SOS! We are prisoners at Xiangnan jail in Hubei, China. For a long time, we have been producing clothing for export. We work for 15 hours each day. What we eat is even worse than food for pigs and dogs. The work we do is similar to (the hard work) that oxen and horses do. We urge the international community to denounce China for this inhumane act.� Nine inspection have been carried out since 2009 but issues have arisen. This issue follows the Rana Plaza collapse where Primark alone has since donated over seven million pounds to the victims and continues to make plans for compensation for both the victims and their families in the future. A business strategy to overcome this issue again in the future would be to ensure that safety regulations are in place in these factories so that regular checks can be carried out on both the workplace and the factory workers. Impact: Negative Time Frame: Ongoing Impact on Buyer: Negative because there may be a reduced budget if this issue means less consumers choose to shop at Primark BBC News, (2016). Primark investigates claim of 'cry for help' note in trousers - BBC News. [online] Available at: http://www.bbc.co.uk/news/uk-northern-ireland-28018137 [Accessed 15 Jan. 2016].
Conclusion for Primark & M&S PESTLEs Both Primark and M&S have had a lot of bad press in the last couple of years. M&S’s PESTLE has mainly highlighted that the company encounters problems like any other business but despite this they remain to be a highly ethical and environmental company with a clear focus to improve their business. This has been proven in their win of one of Ethisphere's World's Most Ethical Companies for 2014, in addition to their Plan A scheme that ensures responsible sourcing and waste reduction. Overall M&S should focus on their global business strategies in help ensure that they do not have any more technical mishaps. By using a much more secure online system and training their employees to be vigilant whilst using it, the business has far less risk of customer details being leaked again. Another business strategy is to make their Buyers aware of copyright issues and therefore ensure they are rigorous before anything goes into production. On the other hand, Primark continue to claw back their reputation after multiple ethical issues including the Rana Plaza collapse where over a thousand people were killed and notes that were found in their merchandise claiming that factory workers are being forced to work in unspeakable conditions. In addition to this they remain to have little presence online meaning they are limiting their progression to in-store only. Despite this they are being positively discussed on their social media accounts and managed to climb fourteen places on eDigitalResearch’s Retail Social Media Benchmark. Moreover, their choice to pay a living wage to their employees despite the profit loss that the business will undoubtable take is very positive as far as public image. Even with a fake store being opened in Dubai, it proves that Primark is known globally and is likely to continue its success. To do so it must implement global business strategies that are focused around global expansion (e.g. ensuring their social media is shared in areas that do not currently have Primark in their region) and becoming a strong ethical business (e.g. becoming part of an ethical strategy as M&S have with Plan A).
An organisational chart shows the structure of a business and the positions and responsibilities within it. Head Shop Floor Office CEO/Director
Area Manager
Head of Buying
Head of Merchandising
Head of Marketing
Store Manager
Senior Buyer
Senior Merchandiser
Senior Marketer
Duty Manager
Buyer
Merchandiser
Marketer
Department Manager
Junior Buyer
Junior Merchandiser
Junior Marketer
Assistant Buyer
Assistant Merchandiser
Assistant Marketer
Trainee Buyer
Trainee Merchandiser
Trainee Marketer
Cleaners
Security
Womenswear
Menswear
Childrenswear
Customer Service
Full Time Staff
Supervisor
Stockroom
Tills
Visual Merchandiser
Part Time Staff
Intern
Intern
Intern
Deliveries
Work Experience
Buying Departments The Head Office and Shop Floor for a fashion business both have very important roles to play and one wouldn’t survive without the other. The Head Office is where the ideas are put forward and implemented by not only looking at current trends but also using trend and sales forecasting. Everything from sourcing materials, designing garments, planning quantities and financial budgets takes place here. On the other hand, the shop floor is where the merchandise is visually displayed and sold and customers are able to feel the fabrics and see the colours in real life as well as trying on products to see the fit of them (this is a disadvantage of e-commerce sites that do not have stores on the high street). It is also the place where staff interact with customers and can share information that they know about products which has been supplied by the Head Office. If Head Office didn’t exist then the ideas couldn’t be shared, garments wouldn’t be designed and therefore budgets wouldn’t be created. No communication would take place between the departments in Head Office. Moreover, without the existence of the Shop Floor, merchandise wouldn’t be displayed and sold and therefore the business wouldn’t make any profit. Furthermore, replenishment and sales figure reports wouldn’t be communicated to Head Office.
Head of Buying: The Head of Buying is responsible for delivering both commercial and strategic aims to the Buying department as well as managing the progression of the brand/s. They have full financial control over what the Buying department spends money on for each product range. Senior Buyer: The Senior Buyer has the final say on a product range. Whilst working closely with the Merchandising, Design and Technologist departments the Senior Buyer ensures budgets, allocation and prices are being met, the fabrics and colours are right for the target market and the fit of the garments is right. They manage the Buying team that calculates the best sellers and negotiates with suppliers. Buyer: Buyers must communicate with both Assistant and Trainee Buyers to agree on a product range using budgeting and margins provided by the Merchandising department. They travel to meet with suppliers several times per season. They then have the responsibility of producing the range to senior management to gain their feedback. All decisions regarding the range must be justified otherwise the range will not go into production. Assistant/Junior Buyer: Assistant and Junior Buying roles can often intertwine. The role is this position is to work with the Buyer to decide on a product range. They also work closely with the Assistant Merchandiser to review range performances. The Assistant Buyer is also responsible for delegating work to the Trainee Buyer to allow them to develop their own skills. Assistant Buyers may also visit trade fairs in Paris. Trainee Buyer: The first year of employment for someone beginning their career in fashion buying is unlikely to involve travel, instead a Trainee Buyer is focused on understanding how that particular Head Office runs whilst assisting the Assistant Buyer with their duties. Other duties include creating customer profiles and liaising with suppliers.
Meeting Suppliers
Trend Forecasting Sales Forecasting
Presenting Ranges Maintaining and Creating Relationships with Suppliers
Participating in Promotions
Buyer’s Responsibilities
Attending Trade Shows
Getting Customer Feedback
Liaising with other Head Office Departments and Shop Floor Staff
The Role of the Buyer
The role of the Fashion Buyer is to create a product range for a product area of the business to sell to a specific audience within a specific price bracket. All products bought need to be justified and the following must be considered: Customer demand – availability, price and quality Market trends – using forecasting to predict trends Store policy – focusing products to target customer Financial budget – how much can be spent per product and season Trend and sales forecasting, communicating with everyone from suppliers to other Head Office departments and attending trade shows are all in a day’s work for a Buyer. They are there through every part of a fashion range being brought out so it is important that they stay ahead of competitors throughout the process. They begin by looking at past trends, catwalks and attending trade shows to establish what is going to be ‘in’ for the season that they are working towards. Once the range has been put together it is then presented to senior staff to gain their feedback. When they have been given the go ahead with the finalised range they then need to source fabrics from suppliers, be that their existing ones or new ones that they may have met at a trade show. Certain countries are best known for their particular fabrics so are most likely to have the best quality, for example, India is known for their embellished fabrics. However, the issue with sourcing fabrics from other countries means there could be a language barrier risk in addition to the cost of travelling to and from these countries. At this point terms of contract are agreed on with suppliers. At this point the Buyer will liaise with other departments, i.e. merchandising to plan stock levels for each store as each one will have their own requirements. With the help of the marketing department, the range will be promoted to allow for maximum sales. The Buyer’s work doesn’t stop when the range reaches the stores. This is the point where performance levels and demand are reviewed and if any changes need to be made they are done. The role can be separated into three main areas:
Research Buyer’s trend forecast by researching what sold well last season and what is trending for the up coming season using WGSN, blogs, street style and most importantly, attending Fashion week and trade shows. This is an opportunity for the buyer to build relationships with suppliers and find out about new, up-and-coming designers. In addition they carry out both directional shops and comp. shops to find out the best sellers and consumer shopping habits. This allows for a competitive range of merchandise to be sold at an equally competitive price. However, this is an ongoing process and Buyers must be able to react quickly to customer demand. Sourcing Buyers must make sure that products are always competitive by reviewing existing merchandise and sourcing new ones. This includes sourcing fabrics at trade shows and negotiating the best price and delivery times. This involves considering the transport process including time and price. This usually involves travelling to source raw materials, establish the country of origin of garments, exchange rates, health and safety regulations of the factories establish whether garments are real (if they are branded), Communication It is important that Buyer’s communicate with other departments in Head Office as a variety of skills are required to get the job done. They must also keep communication channels open with suppliers. Once the supplier has suggested a cost price (taking into account the current exchange rate) for the volume of stock that has been requested, the Buyer has to calculate the retail selling price in order to make the required profit margin. If the supplier is from another country, the Buyer may face language barriers so this is something that must be discussed before the Buyer makes the trip to the supplier. Communicating through the telephone or email with suppliers may not always be possible because of the time difference and religious holidays of other countries. In addition, it is important to consider if the person the Buyer is communicating with has a physical disability, for example deaf or blind. The Buyer may also need to communicate with both store staff to ensure products are selling well and are being displayed correctly, and also they may need to talk to customers to get their feedback on the merchandise. Part of a Buyer’s job is talk with designers about their ideas before presenting new ranges to senior staff.
The Buying Cycle
Buying Cycle
Fast Fashion Review season performance: Find out financial figures every six week. Budget planning: Merchandisers are required to split the budget into a budget for each collection. There will be a lot more collections than designer fashion because the clothes are disposable and only tend to last for one season. Planning and buying schedules and trips: Due to the amount of collections being brought out, Buyers will be required to make regular visits to suppliers abroad. During these trips there may be language barriers so an interpreter may be required to allow for communication with the supplier. Range selection: As new products are available weekly, trend forecasting is so important and even more so is to keep ahead of the competition so comp. shops are also a requirement. Price negotiation and setting retail price: Products are bought in bulk to minimise the cost price. Meetings with suppliers are important to try and get the best possible deals. Order processing and confirmation: Regular updates from factories to confirm times and dates are essential to make sure everything is going to be delivered on time as any delays may mean that stock is out-dated by the time it arrives. Monitoring deliveries: Organising and pre-planning deliveries to ensure correct delivery dates can not anticipate weather or import tax issues. Retail selling period: Stock is usually on the sales floor for approximately 8-12 weeks or a shorter period for sales. Monitoring sales figures: This allows for bestsellers to be determined meaning they can be restocked due to high demand. It also means that the availability of products can be established and anything that needs to be reduced, can be.
Buying Cycle Designer Review season performance: Look at previous years sales figures. Budget planning: Budget is split into two parts (S/S and A/W) making everything much simpler. Sales forecast is looked at to establish best sellers. ‘Open to Buy’ is a spare budget for unexpected sales such as a celebrity being photographed in the brand’s dress. Planning and buying schedules and trips: A plan is made for the year ahead, collections are viewed and global supplier contacts are made during fashion week. It is also important to maintain relationships with current suppliers. Range selection: Trend forecasting from catwalk trends. Price negotiation and setting retail price: Prices are negotiated but import costs must be considered. Some designer stores will not have sales because they do not want to be associated with discount clothing. Order processing and confirmation: Regular updates from factories to confirm times and dates are essential to make sure everything is going to be delivered on time as any delays may mean that stock is out-dated by the time it arrives. Monitoring deliveries: Seasonal. Retail selling period: Stock is usually on the sales floor for approximately 8-12 weeks or a shorter period for sales. Monitoring sales figures: This allows for bestsellers to be determined meaning they can be restocked due to high demand. It also means that the availability of products can be established and anything that needs to be reduced, can be.
Buying Cycle Branded
Review season performance: Sales forecasting is key, celebrity influences will affect this. Budget planning: Budget is divided up and the number of designers to stock is decided, exclusive and limited edition collections will need to be accounted for. Planning and buying schedules and trips: Negotiation is important because many designers are being stocked. There is less concern with factories as it will be the individual designers that will deal with this. Branded trade shows, fashion weeks and trips to the UK play an important part of branded buying. Sales forecasts are looked at and best sellers are restocked. Range selection: Anything that is not selling well is swapped. Price negotiation and setting retail price: Prices are negotiated but import costs must be considered. Some designer stores will not have sales because they do not want to be associated with discount clothing. Order processing and confirmation: Regular updates from factories to confirm times and dates are essential to make sure everything is going to be delivered on time as any delays may mean that stock is out-dated by the time it arrives. Monitoring deliveries: Seasonal. Retail selling period: Stock is usually on the sales floor for approximately 8-12 weeks or a shorter period for sales. Monitoring sales figures: This allows for bestsellers to be determined meaning they can be restocked due to high demand. It also means that the availability of products can be established and anything that needs to be reduced, can be.
Trainee Buyer
Buyer
Assistant Buyer
Junior Buyer
Senior Buyer
Head of Buying
Merchandising Jobs Relationship between Buyer and Merchandiser: Merchandisers use sales forecasts to determine the best and worst sellers from the previous season as well as working out target margins including cost price and lead times. They also work create spreadsheets for Buyers to determine all the sales figures for the previous season to help to determine what should be stocked and what stores they should be allocated in for the next season. From continuous WSSI (Weekly Sales and Stock Intake) updates from the Merchandisers, Buyers can determine stock levels, loss prevention and delivery dates and if any changes need to be made. • Lead Times • Pre-processing Lead Time – research, decisions and negotiations • Processing Lead Time – manufacturing garments • Post Processing Lead Time – Dispatch to delivery to warehouse
Merchandising Jobs Trainee Merchandiser Assistant Merchandiser Junior Merchandiser
Merchandiser
Senior Merchandiser
Head of Merchandising
Relationship between Buyer and Designer The Designer will have a brief and a customer profile to follow to create a new range which the Buyer will then select from. The Buyer and Designer meet to discuss new, creative ideas that will appeal to the trend-focused consumer. This meeting of the two departments allows for the Designers to be aware of previous sales performance as an indicator of what will sell well in the following season. From this fabrics, colours and styles can be decided upon and once this has been established, costs can be agreed upon and adjusted if necessary to allow for the maximum profit to be made. It is important that the style of the brand is maintained through the clothing design as specific customers will expect certain styles from the brand.
Relationship between Buyer and Marketing
The relationship between the Buying department and the Marketing department is important to get the advertisements/campaigns for the new ranges out into the publics’ attention. It is a fast way to communicate to consumers what is current and where to find the products. The Marketing team are also responsible for collecting data from direct and online surveys to help the Buyer create customer profiles. In addition, they are in charge of brand promotions, providing samples for photoshoots and publicising the brand well on social media to target the right audience.
Relationship between Buyer and Retail Staff
The Buyer and the business’s retail staff must communicate often with each other in order to help the Buyer have a clear idea of what is successful and what is not. The retail staff are at the heart of the customers’ shopping experience so they are aware of best sellers, reasons for returns and complaints as well as the success of promotions and customer feedback.
Relationship between Buyer and Technologist
The Technologist ensures that garments are made from the right fabrics and in the right size by carrying out fabric testing and using fit models. In fast fashion this process is not as important to the business as they want the products in the stores as soon as possible so short-cuts have to be made. The Buyer works with the Technologist to monitor the quality of the merchandise to avoid high returns rates due to faulty garments.
Relationship Conclusion
For a Fashion Head Office to succeed, all departments must work together and communicate well to reach their joint goal. Without any one department, the business would not succeed. All departments must work to create and maintain the brand’s identity to target a specific target audience so that the right products can be marketed and sold to the right consumer.
Business Companies
Sole Trader A person who works for themselves rather than a business is known as a Sole Trader. They are responsible for the entire business and as a result keep all of the profits after tax. They can however have other people working for them. Partnership Two or more people have joint ownership and responsibility over the business. The profits are shared and tax is paid individually. As with a Sole Trader, any losses are also shared. Limited Company A business that is run by a ‘Director’ and has shareholders named ‘members’. The Director doesn’t have to have shares in the business. There are different types of Limited Company, namely, Private Company Limited by Shares, Private Company Limited by Guarantee, Private Unlimited Company and Public Limited Company (PLC). A Private Company Limited by Shares is where the members are responsible for the money unpaid on their shares in comparison to a Private Company Limited by Guarantee where the Director financially backs the business to a certain amount if anything goes wrong. A Private Unlimited Company is where there is no limit to the liability that members have, in comparison to a Public Limited Company (PLC) where the shares in the business are for sales to the public and the members’ liability is limited to the unpaid amount on shares. Gov.uk, (2016). Choose a legal structure for your business - GOV.UK. [online] Available at: https://www.gov.uk/business-legal-structures/overview [Accessed 15 Jan. 2016].
Fashion Retail Environments Online Retail Online fashion retail is where merchandise is purchased over the Internet. It has massively grown in popularity over the years due to the convenience. Wholesale Retail The bulk sale of goods for resale to retailers. Branded Buying This is the process of buying in designer goods. High Street Buying in high street pieces that focus on on-trend fast fashion that can be replaced season by season. Concession Concessions have multiple retailers in one space that stock a small selection of the best selling pieces.
Customer Demand Topshop’s target customer has been stated by previous brand manager, Jane Shepherdson as being ‘15- to 30-year-old women, but internally we target everyone who loves fashion, regardless of age or income.’ She adds: ‘I think the biggest change [in the high street since the 1970s] is one the consumers have driven, in that they are much more fashion-savvy these days, and demand much more than they did. The impact of the media has meant that everyone knows what the celebrities are wearing, where they got it, what the designers are showing on the catwalk and so on, so they want a bit of it too.’ In comparison, their website states that, ‘Topshop appeals to students, professionals, fashion taste makers and high profile A-List stars alike. United by their desire for the latest forward thinking trends, these shoppers enjoy both the store’s exclusive cult status and accessibility simultaneously. With over one million customers visiting stores every week in pursuit of an up-to-the minute fashion fix, the average customer is a loyal follower of the brand. She cannot be defined by her age – which can range from early teens to fifty something’s – but instead her attitude. Style conscious and independent, she is addicted to fashion but is not dictated to. Instead she throws away the rulebook and aims for a unique look.’ (Lawrence, 2014) Lawrence, J. (2014). Initial Brand Research: Topshop Target Market. [online] Jonquil.myblog.arts.ac.uk. Available at: http://jonquil.myblog.arts.ac.uk/2014/02/20/brandresearch-topshop/ [Accessed 24 Jan. 2016].
Store Policy Bring your unworn item and your receipt to any of our stores (excluding those within department stores) within 30 days of purchase and we will exchange or refund it via the original method of payment. Without a receipt we will exchange your unworn purchase for an alternative product at the current selling price. topshop.com, (2016). FAQs. [online] Available at: http://www.topshop.com/en/tsuk/category/faqs-9/home
Action Plan Bershka Project
12/11/2015 – Proposal and catch up with outstanding work 13/11/2015 – History of fashion brand –market research on brand
25/11/2015 – Business planning and Photoshop
14/11/2015 – Online research
mood board and concept boards and logo
15/11/2015 – Customer profile – existing and your range
26/11/2015 – TRIP TO LONDON
16/11/2015 – Mood board 17/11/2015 – Concept board
27/11/2015 – Range building on Photoshop
18/11/2015 – Business planning
28/11/2015 – Buying cycle
19/11/2015 – Business planning 20/11/2015 – PESTLE – factors influencing range
29/11/2015 – Financial spreadsheet
21/11/2015 – Name of range, logo, mission statement
30/11/2015 – Conclusion
22/11/2015 – Primary research – photos, questions
01/11/2015 – Evaluation
23/11/2015 – WGSN – key trends and trend specific forecasting 24/11/2015 – Sourcing materials, suppliers and fabrics
02/11/2015 – Finish outstanding work 03/12/2015 – Finish outstanding work 04/12/2015 – Finish outstanding work 05/12/2015 – Finish outstanding work 06/12/2015 – Finish outstanding work 07/12/2015 – Finish outstanding work 08/12/2015 – Finish outstanding work
History of Inditex & Bershka Created in 1998, Bershka was the fourth brand to be created by the Spanish group Inditex. Their other brands include Zara, Massimo Dutti, Pull&Bear, Oysho, Uterqße, Stradivarius and Zara Home with 10% of Inditex’s sales coming from Bershka. Bershka targets fun, teenage customers who love music and art. The brand is very on-trend but is less focused towards the urban-loving customers that Pull&Bear are. Inditex are known for their fast fashion brands which design, manaufacture and allocate their products around the world in two weeks. The brand is very focused on visual merchandising in each store including the latest art and music in spacious, architecturally beautiful buildings. The visual merchandising is updated every season in each section of the brand which comprises of Bershka, BSK and Man. Inditex aims to be a sustainable company and as a result became part of the Ibex 35 in 2001. Their environmental strategic plan has led them to make their London Oxford Street store eco-efficient. The only other stores currently in the UK are three other stores in London and one in Brighton. Inditex.com, (2016). Our history - inditex.com. [online] Available at: http://www.inditex.com/our_group/our_history [Accessed 15 Jan. 2016]. Yin, P. (2014). Bershka Store Report. [online] Slideshare.net. Available at: http://www.slideshare.net/nieviy/bershkastore-report [Accessed 15 Jan. 2016]. Wikifashion.com, (2015). Bershka - Wikifashion. [online] Available at: http://wikifashion.com/wiki/Bershka [Accessed 15 Jan. 2016].
Business Plan Business Summary My business idea is to sell a party clothing range within Bershka aimed at 18-30 year old women. The name of the brand is Mínimo (mee-ne-mo) which translates to ‘minimal’ in Spanish. I chose a Spanish name because Inditex, which Bershka is part of, is a Spanish company. The range itself is based around minimalism so the pieces in the collection can be styled in so many different ways to create different looks. Mínimo will be a luxury brand, more expensive than the normal Bershka prices but the pieces from the Mínimo collection are timeless and are of a higher quality. I have decided to make the company a Public Limited Company because it will allow shares to be sold to the public and means there is a possibility to enter the stock market.
Business Aims
Elevator Pitch
1) To maximise Bershka’s profit margins.
My range is a minimalistic party range for Bershka called ‘Mínimo’ – a Spanish word meaning ‘minimal’. The pieces will be simple but structured and will speak for themselves creating an effortless-looking outfit. I hope to bring in a new customer market for Bershka with my range as it is aimed at 18-30 year olds. However, the young market that Bershka already have will not be ruled out as the pieces are not trend-focused meaning they would suit almost anyone. Mínimo’s competition is Reiss and All Saints in the sense that Reiss has high quality clothing but All Saints have the basic, minimalistic pieces but don’t have the quality with their clothes that my range will have. The pieces from the collection will last for years because they are made from high quality materials and are pieces that can be worn time and time again in different ways but will never
2) To bring in a larger target customer to Bershka – target niche. 3) Expand further into the UK market (currently Bershka is only located in four areas of London and one store in Brighton). Stores with Northern England and the Midlands would bring in a new market. Primark’s value merchandise has been extremely successful in the UK so there is no reason why Bershka cannot be equally as successful. 4) Expand further into the global market, specifically the United States. 5) To produce more ranges for Mínimo
Proposal The brand I have chosen is Bershka, part of the Spanish distribution group Inditex. The reason for this is because the clothes are simple, on-trend and affordable whilst remaining as environmentally-friendly as possible. I noticed that the brand is focused on teenagers so I decided to create a sophisticated party wear range for 18-30 year olds to try and bring in a wider audience whilst keeping with the laid-back feel that the brand is known for. Whilst incorporating this effortless feel with a edge so it will link in well with the Autumn/Winter season. Although the range is going to be targeted towards an older audience and the prices will be more expensive than the prices of the fast fashion collections that are currently in their stores, I believe it will fit in well with the current ranges. The new range will not rule out the younger audience but will hopefully bring in a new type of customer to Bershka. Once this has happened, the company will be able to have more stores within the UK without fear of competition taking their customers. The methods I will use are listed in my action plan. This will allow me to evaluate the progress of my work and ensure I am on target.
Name, Strapline & Mission Statement Name: Mínimo Strapline: Simplicity is the ultimate form of sophistication – This is perfect for getting across the type of customers that would suit this brand. It is about women who know what their style is and love fashion without having a wardrobe full of unworn clothes. Every piece of clothing they own is carefully selected and can be worn past the current season. Mission Statement: Mínimo was created for women who want beautiful party pieces in their wardrobe that will last beyond a season. We will aim to provide our customers with high quality clothing that will last them for years to come whilst keeping the prices as low as possible.
Customer Profile – Existing Range Frances is an 18 year old student from Madrid. Her fashion style is effortless and usually consists of jeans and a jumper and a basic t-shirt. Due to her age she doesn’t have a lot of money to spend so she loves Bershka for their value. She loves their jeans as they are always guaranteed to fit her. She wear Converse for everyday wear but if she is going to a party she will just change them to her H&M boots and Forever 21 handbag. Her celebrity inspiration is Ellie Goulding and she has recently started following Gigi Hadid on Instagram and she has fallen in love with her style too. She is only motivated to buy something if she needs another staple piece in her wardrobe or if she is out shopping with her friends and something catches her eye in in one of her favourite stores. Frances aspires to be a writer and loves nothing more than reading a good book. Nevertheless she is still like any other teenager in the sense that she loves social media and is constantly updating her Instagram with photos of herself and her friends having a good time.
Customer Profile – New Range Grace is a 25 year old Magazine Editor from Madrid. Her love of minimalism runs into her fashion choices. Her favourite designers are Victoria Beckham and Calvin Klein. She loves to shop as often as she can to gain inspiration for work. She mainly shops online at Asos.com where her favourite brand is Reiss for their quality pieces. and Locally, Zara is her go-to store as she loves their relaxed monochrome styles. Despite this, the international stores offer her so much more choice. She dreams of the day when she can afford high-end brands that offer quality clothing that could last a lifetime. For everyday she usually goes for something monochrome and loose to wear so that she is comfortable whilst sitting at her desk at work. For Friday night drinks (and sometimes Saturday nights if she does not have a lot of work) she loves to wear something simple for something that will still stand-out. She rents an apartment just outside the city with her friend Penny. Grace goes to a Pilates class twice a week and meditates every night before bed. She believes everything should have its place and be kept tidy, her motto is ‘clear space, clear mind’. As a result, Grace takes her time before buying anything, carefully seeing if it is going to add something to her life (and as far as clothes are concerned, to her wardrobe). She would love a boyfriend but believes it will happen when it is meant to. Grace is very personable as well as spiritual, she is the sort of person who would be there for you no matter what.
Who Are The Customers? The previous two slides give examples of an existing Bershka customer and a customer for the brand new range. Mínimo’s target market will be individual customers. The brand itself is completely new meaning none of the products have been sold elsewhere. will be based in Madrid (as Inditex who own Bershka are a Spanish organisation) but hopefully over time the brand will branch out globally into the UK (as there are currently only four stores in the UK at this time) with the help of social media such as Facebook and Twitter. After this time the brand will hopefully branch out into the USA. As yet Bershka is only available to everyone else online and I feel that the reason that they have not expanded further before now is because of competition from Primark and Forever 21, along with other fast fashion stores. However, with the Mínimo range in stores, Bershka will be able to offer something different from its competitors – a luxury minimalistic party range. The bestseller will be the leather jacket as it is an essential is everyone’s wardrobe. Customers of Mínimo will want quality clothing, they are not looking for something that is on-trend because they already know what they like. The type of customer that will be waiting for the range are those that are tired of having to shop online or in the same shops all the time. Most stores will offer the on-trend items and because they do not want that they have to look elsewhere. They may be grateful to be able to have somewhere different to shop and also (in the case of online shopping) being able to actually try clothes on instead of waiting for them to be delivered and then seeing if they are what they were hoping for. They won’t mind that the prices are higher than other high street stores because they are used to paying for quality materials .
Market Research Desk Research & Field Research Desk Research is carried out using the Internet, books and articles. This is secondary research using information found out by another person. On the other hand, Field Research , also known as primary research, is a much more successful method of research and involves directly asking the public of their opinions. By creating a customer profile for the new range of clothing, a target customer can be established and these consumers can be asked key questions to gain an insight into whether the range will be successful or not. Comparative Shop & Directional Shop A Comparative or Comp. shop involves the Buyer viewing current merchandise similar to your own that competitors are selling and paying special attention to materials and prices. A report is then produced using this information including sketches and photographs to see if your own business is missing anything key for that season. In comparison, a Directional Shop involves the Buyer taking trips for inspiration usually in the fashion capitals, London, New York, Paris and Milan to see how global trends differentiate. What sold well last season is established. Samples are bought and often suppliers will send swatch cards to the business and from all of this information a report is produced.
Market Research
Lurex
Flat shoes
Black Lace
Leather jacket
Trade Shows The Buying Season is split into two seasons, Spring/Summer (January-July) and Autumn/Winter (AugustDecember). This is the time when Buyers meet suppliers and can purchase for over six months in advance because it can often take up to a year to develop a complete range. The exception to this is individual garments which can be made much faster. Although it can take businesses this long for a new range to reach stores, new products are put into stores approximately once a month to keep styles looking fresh and up-to-date. This includes best sellers which Buyers may decide to stock again and again in different versions. However, in fast fashion short-lived trends are produced much faster but the downside of this is that clothes produced are of a lower quality than those which have taken longer to produce with harder to source materials. The yarn trade show which specialises in knitwear happens in early January and July in Florence, the textile show happens in early February in Moscow, New York, Paris, Sao Paulo and Shanghai and branded fashion in late February. Pure trade show is a predominantly womenswear event in London where over 700 brands and up-andcoming designers with other sectors including Spirit which is focused on young fashion. In addition, Magic trade show is the world’s largest marketplace for fashion and takes place every February and August.
Mood Board
Concept Board
Range Plan
MĂnimo Logo
SWOT for MĂnimo
Strengths •Bringing in a new customer-type to Bershka. •Keeping with Bershka’s minimalistic theme so that the style of the brand remains. •The garments will be of a higher quality so will last longer. Weaknesses •This will be a luxury brand which will mean the prices will be higher than the usual Bershka prices. •The range is not targeted to teenage girls who are looking for disposable merchandise and the original brand is. Opportunities •The increased prices of the range in comparison to Bershka’s prices could mean an increase in profit for the business. •The range appeals at a larger, slightly older audience which may bring in more sales for Bershka. •With an increased target audience and possible increased profits, Bershka could expand further into the UK (as currently only four stores are operating there) and globally, specifically in the USA as the number of stores there is limited in comparison to in Europe. •With the range being produced for A/W, there may be more chance of women shopping at alternative places that they do not usually shop in search of the perfect party wear. Threats •Bershka isn’t know for luxury pieces so it may be difficult to re-brand it as having a luxurious range within stores. •Due to garments being a higher quality, consumers will not have to shop as often which may mean that Berhka’s original ranges may lose sales as a result. •There are many other high street brands that have collaborations with designer brands.
Weaknesses •This will be a luxury brand which will mean the prices will be higher than the usual Bershka prices. •Business strategy: Advertising is crucial in informing customers of this brand new range that will be different from the usual Bershka merchandise. Consumers need to know that the reason for the increased prices is due to quality of the products. By using celebrity endorsement, consumers are more likely to shop the new range. •The range is not targeted to teenage girls who are looking for disposable merchandise and the original brand is. •Business strategy: The RRP is similar to that of Topshop or River Island so it is still within high street pricing. Pieces can still be purchased by teenage consumers but instead of the merchandise being disposable, they are ‘treat’ purchases. This is where a young celebrity endorsement would benefit the brand so that the new range appeals to the teenage market as well as someone is their thirties. Gigi Hadid or Cara Delevingne would perfect as they are in the middle region of the target market. Threats •Bershka isn’t know for luxury pieces so it may be difficult to re-brand it as having a luxurious range within stores •Business strategy: By branding the range with a celebrity in a glamorous party setting, the range is immediately sold as luxurious. •Due to garments being a higher quality, consumers will not have to shop as often which may mean that Berhka’s original ranges may lose sales as a result •Business strategy: By making the range only available in a set amount of units so that once it has sold out it is no longer available, it will be more enticing for consumers. By then creating a second range for sale a couple of months after the release of the first one, consumers would likely be quick to snap up merchandise before it is likely to sell out again.
Financial Spreadsheet
Financial Analysis I began calculating the financial Merchandising figures for the Mínimo by working out the ‘cost price’ for each individual garment by taking the ‘RRP’ and dividing by 1.2 to take into account the 20% VAT being deducted. This figure is then divided again by 2.5. For example, the long-sleeved leather jacket is £150 divided by 1.2 = £125, £125 divided by 2.5 = £50. From this, the ‘profit margin’ can be calculated which is RRP – cost price = gross profit, (gross profit divided by RRP) x 100 = profit margin percentage. For example, the profit margin for the pleather leggings is £40 - £13.33 = £26.67, (£26.76 divided by £40) x 100 = 66.68%. From this, taking into consideration that the range will be sale for 16 weeks and using the ‘sales per week’ for each garment, the ‘total quantity for 16 week period’ can be calculated by multiplying the sales per week by 16. For example, the total quantity for the 16 week period for the pleather pencil skirt is 25 x 16 = 400. ‘Replenishment’ is calculated as 15% of the overall quantity. The ‘total cost’ is calculated as follows, (quantity + replenishment) x cost price, for example, the chiffon boot-cut trousers total cost is calculated as 50 x £26.66 = £1333. The ‘total RRP’ is calculated as (quantity + replenishment) x RRP. For example the total RRP for the low-cut body with knickers is 80 x £40 = £3200. From all of this financial analysis, it is then possible to calculate the total cost of the range by adding all of the individual total costs of the garments. The same applies for calculating the total RRP for the range (add all of the total RRPs for each individual garment). This then allows for the ‘total gross profit’ to be calculated by taking away the total cost for the range from the total RRP for the range. The best sellers from the range are likely to be the body and the leggings. They are not only the lowest cost price garments from the range, they are also pieces that are very popular with the target market at this time and can easily be paired with a variety of other garments to produce multiple outfits meaning a great value cost-per-wear. With future buying decisions if a second range were to go into production, it would be key to look at the financial data for this range as an indication of what is likely to sell well and what the budget should be for individual garments and the whole range.
Evaluation Critically evaluating Unit 10, I now understand what being a Buyer fully entails and the importance of research, sourcing and communication for them. A Buyer has many elements to consider including customer demand, market trends, store policy and financial budget. One of the first things that a Buyer should do is carry out a PESTLE for the business. This will help to establish factors that are either positive or negative for the business and from this a SWOT analysis can be carried out. Any opportunities can then be utilised and any threats can be attempted to be minimised. A PESTLE uses media articles that are found when researching the business and this gives an indication of how the public views the business. This along with field research, for example general public questionnaires, target customer questionnaires, etc., can be used to gain a bigger insight into the business and the market that it is attracting. Desk research such as online research, books and articles can also be used to understand the scope of the business. In addition to this, this market research can also be used to understand the global market that the business may have (or may want to have). This would be done in the same way as with the local market, but this time the particular global area would be targeted and researched. One of the areas that was covered in this Unit was retail environments. For the MĂnimo range I would begin with keeping the environment as a concession within Bershka. The range is only going to have a limited number of stock for each garment to entice consumers with ‘exclusive’ pieces. If the range were to be sold online, it would not be worth the cost of running the website because the garments would likely sell out immediately.
Another area that was covered within this Unit was head office and shop floor Buying environments. These have very distinct roles and purposes. Head office deals with everything from original designs right through to production whereas the shop floor is where merchandise is displayed and sold. As a result, one would not exist without the other. As with all of the departments within the head office of a business, they are working towards the same goal and offer a symbiotic relationship with each other. The main head office department to interact with the Buyer is the Merchandising team. The difference between these two crucial departments is that Merchandising is related to financial targets and sales forecasting in comparison the Buying is more focused on trend forecasting and going through the process from the original ideas for the range to the production and monitoring of the progression. For the Mínimo range, a target customer was established by researching into Bershka’s target customer. Due to the range being an exclusive party wear range, it seemed appropriate to aim the range at a slightly older market whilst not ruling out their original market. This strategy seemed to work well because not only was a new target market brought into the business but Bershka’s original target customer has a new range to purchase from. The range as a whole works well together with the exception of the chiffon boot-cut trousers that do not work with the rest of the range’s young, party wear style. Other developments within the range would entail further comp. shop research to better understand the materials and pricings used.