House of Sunny Strategic Business Plan by Isabelle Simpson

INTERNATIONAL STRATEGIC BUSINESS PLAN ISABELLE SIMPSON WORD COUNT: 3227

CONTENTS

INTRODUCTION

BUSINESS MODEL CANVAS

MARKET POSITION

BOWMAN’S STRATEGY CLOCK

COMPETITOR ANALYSIS

INTERNATIONAL OPPORTUNITIES

TARGET CONSUMER

SITUATION ANALYSIS

DEVELOPING A STRATEGIC PLAN

JUSTIFICATION OF STRATEGY

MISSION AND OBJECTIVES

MARKETING PLAN

TIMELINE / 5 YEAR PLAN

BALANCED SCORE CARD

REFERENCES

This assignment will devise a strategic plan to expand a small business into a new market, developing an international growth strategy for House of Sunny. Founded in Hackney 2011 by Sunny Williams, the brand is British owned and focusses on creating staple pieces in their own unique styles and prints. “ With a strong focus a craft, we are driven to make a staple of the moment with a feeling that lasts. We are driven to create timeless designs by portraying an aesthetic that is uniquely our own.” (House Of Sunny 2015) Currently the brand has one permanent store and one pop up shop within London, as well as selling through wholesale retailers such as Selfridges. This makes them an ideal brand to create an international strategic business plan for, as they currently ship worldwide if customers are happy to pay the larger price for shipping.

BUSINESS MODEL CANVAS Developed by Alex Osterwalder, the Business Model Canvas helps to explore the business model and preferred strategies used by the chosen brand. Each section of the model explores a different part of the business.

KEY PARTNERS

KEY ACTIVITIES

• Key partners for House of Sunny include influencers such as: Bella Hadid, Kendal Jenner and Dua Lipa. • They also work with wholesalers such as Flannels, Selfridges and Urban Outfitters. • They only work with factories who are sustainable and responsible.

DISTRIBUTION CHANNELS • Online through their own website, Urban Outfitters, Selfridges , Flannels • In store through Selfridges and Urban Outfitters. • They currently ship worldwide, however this gets more expensive the further away from the UK that the products are being delivered.

• Member scheme to keep customers informed with deals. • Pop up stores. • Working with influencers on TikTok and Instagram to promote products.

KEY RESOURCES

• Permanent store in Broadway London, and pop-up store in Mayfair. • Wholesalers such as Selfridges, Urban Outfitters and Flannels. • They have a large brand presence on Instagram with 630K followers. • Their TikTok account has 120K followers, but the hashtag ‘#HouseofSunny’ has over 45 million views, so their user generated content on TikTok generates more reach than their own account.

“The Business Model Canvas was developed by the Swiss business model guru Alexander Osterwalder and management Information Systems professor Yves Pigneur. They defined nine categories for the Business Model Canvas which they refer to as the building blocks of an organization.” (ToolsHero 2017)

VALUE PROPOSITION • Drop culture, launching new products twice a year. • Creating unique and fun pieces of clothing that are also sustainable. • Biodegradable packaging. • Similar patterns within every drop to keep the style of the brand but updating the colour scheme or clothing style. • “Quality is always foremost in thought whilst ensuring affordability is never sacrificed to achieve this.” (House Of Sunny 2015)

COST STRUCTURE • House of Sunny currently have two stores open in London, their permanent store in Broadway and their pop-up store near Mayfair. • According to RocketReach, House of Sunny has 28 employees. (2021) • Through their website they will ship worldwide, for the UK this is free with an £81 spend, Europe and US is free with £126 spend and the rest of the world is free with a spend over £200 . • Their products are all sourced responsibly and made in factories that support sustainable manufacturing methods.

CUSTOMER RELATIONS

• House of Sunny mainly use user-generated content to market their products and grow their customer base through hauls on platforms such as YouTube or TikTok. • Influencers will post pictures and tag brands such as House of Sunny to promote the brand and sometimes use affiliated links to get their followers to buy the products. • They have a member scheme, where consumers can sign up to recieve 10% off their first order as well as get deals and all of the latest news emailed to them.

CUSTOMER SEGMENTS • Gen Z and some Millennials. • Mainly women. • Consumers who are interested in limited availability pieces to increase the exclusivity of the collections. • Consumers who will pay slightly more to get sustainable and unique pieces. • Consumers who shop sustainable and want to support smaller businesses that are worried about the environment. • Consumers who shop on ASOS or Urban Outfitters and enjoy wearing more unique and exclusive pieces.

REVENUE STREAMS • House of Sunny create revenue purely though fashion sales from their e-commerce website and two London stores. • They will gain some business from influencer adverts promoting the brand. • Unlike other fashion brands such as Ganni, they do not offer any products separately from their fashion. • Creating a range of shoes or a cheaper brand to sell cosmetics would help with this.

It is clear from the model above that House of Sunny have successful partnerships with influencers and wholesalers that drive their current business within the UK. They also have a large presence on social media across their own accounts as well as mentions from consumers on platforms such as TikTok. Social media is an important marketing tool for the brand as their main target consumer is Gen Z and Millennials, and this is where they will see the most advertising. Their two newly opened stores in London create a space for consumers to experience the brand first hand, and try on products before purchasing, which would reduce return statistics. House of Sunny are well known for creating unique staple pieces at a good price point, these items are responsibly sourced and as sustainable as possible. Consumers also like the exclusivity of the brand as they release items in two collections a year, as a ‘drop’.

(Author’s Own 2021)

(O’Donoghue 2020)

MARKET POSITION The market position model below explores the market leader, challenger, follower and nicher for the sustainable knitwear / loungewear market within the UK. MARKET LEADER - GANNI MARKET CHALLENGER - H.O.S

Ganni are a Danish fashion brand who create unique, mostly sustainable garments. They are sold within their own stores as well as through wholesale channels with companies such as Selfridges and Flannels.

MARKET LEADER GANNI

MARKET CHALLENGER HOUSE OF SUNNY

(BOBB 2020) MARKET FOLLOWER - MONKI

(HURR 2021)

MARKET FOLLOWER MONKI

MARKET NICHER - TALA

MARKET NICHER TALA

According to Similar Web’s report on Ganni, over the past 6 months they have had 714K visits to their UK website, which has continued to grow over time. (2021) Ganni has an overall sales revenue of $16.8 million in 2020. (EcommerceDB 2021) Year on year Ganni has grown relative to it’s previous year, despite the difficulties with COVID-19 and trade deals. House of Sunny are the focus of this project, a smaller sustainable brand selling mainly knitwear pieces such as dresses, cardigans, tops and trousers. As well as these main categories they sell bags and accessories. House of Sunny is looking to challenge market leader Ganni by creating sustainable pieces with a unique style, while undercutting Ganni’s prices. House of Sunny’s annual turnover is on average £1.8 million according to Pomanda (2020). Compared to Ganni, this makes them a much smaller brand, however they are already competing with Ganni as they are available within both of the same wholesalers at a lower price. This indicates that House of Sunny are already on the way to becoming the market leader within this sector of the market. Monki is a brand within the H&M group, that has continued to grow their revenue year on year since 2015. Monki sells mainly fashionable pieces, not many of these are sustainable however they do sell similar styles to Ganni and House of Sunny. Monki is ranked #122 within the category of ‘e-commerce retailers’ and has < 0% market share within this category according to EcommerceDB, (2021). Monki’s average operating margin is 15.43% and their profit ratio is 11.97% according to FashionBi, (2020). This indicates that the business is currently doing well and as their revenue continues to grow year on year, these numbers will only increase. Tala is a small UK based brand, selling completely sustainable activewear. This caters to a very niche area of the target market that House of Sunny will be aiming for. Consumers who want products that are completely sustainable and transparent throughtout the design and manufacture process will buy from brands such as Tala. Combining an affordable price point, sustainable values and inclusivity, Tala has become a very popular brand within activewear; “the brand has already generated revenue of £5.2 million in less than a year. Its mission is to create ‘on-trend, affordable, high-performance activewear, that is 100% up-cycled and honest’” (Hill 2020) With their revenue so high after only being founded in 2019, Tala are a competitor to watch out for or take inspiration from within the sustainable fashion industry. (Author’s Own 2021)

(ASOS 2021) (TALA 2021)

Although Ganni is the market leader, House of Sunny is slowly pulling themselves towards the leader position. They are beginning to challenge Ganni’s pricing strategy as they undercut prices while still being sustainable and unique. Monki follow Ganni and House of Sunny though the designs they produce, however they do not follow the higher brands in terms of sustainability. Tala are leading in terms of pure sustainability, as they have grown the business to be worth over £5 million in two years. Taking inspiration from how Tala have grown and created their garments to be completely sustainable would help House of Sunny to overtake Ganni and become the market leader within this sector of the market.

BOWMAN’S STRATEGY CLOCK Bowman’s Strategy Clock is often used in place of Porters Generic 5 Forces, and explores the market position of a retailer and their competitors. Looking at each brand in detail and their price versus their value gives an idea of the brand within close competitors that offers the best value for money, and the key characteristics that a brand in that section will present.

“The Bowman’s Strategy Clock was developed by the two famous economists Cliff Bowman and David Faulkner. The main focus of the model is to make the companies aware of their position in the market as compared to their competitors.” (Bhasin 2018)

Clockface Position

Name of Strategy

Price

Value

Characteristics

Fashion Example

6-7

Basic

Low

Commodity-like product to price-sensetive customers with low switching costs.

Primark sell knitwear at a low price point and also offer a few sustainable options within their range. The prices within knitwear start at £5.

8-10

Basic-Hybrid

Low

Mid

10-11

Hybrid

Low

High

11-1

Hybrid-Different

Mid

High

Need to achieve a low-cost base in ways that Nasty Gal sells knitwear at a low price-point but competitors cannot match to sustain this. offers a higher quality thank Primark. They do not currently offer any sustainable options and their prices begin at £12. Achieving differentiation at a low price at the Weekday offer sustainable knitwear options at a same time by investing in low cost base. lower price point but give customers better quality than both NastyGal and Primark. Their prices for knitwear start at £20. Offer benefits different from competitors House of Sunny offer high quality sustainable that are valued by customers, so products knitwear items for a middle price point between are perceived as better. Weekday and Ganni. Their knitwear begins at £66.

1-3

Different

High

3-6

Doom

High

Low

Offer benefits different from competitors Ganni offers a range of knitwear, some sustainable that are focused on their customer base with but not everything. They offer alternative styles of a price premium. knitwear for consumers with a more ‘quirky’ style. Their knitwear prices start at £105. Do not provide value for money, either not This position has no fashion example as any brand cheap enough to be basic or not different that falls into this category normally goes bankrupt enough to warrant the premium price. very quickly.

(WhereToGet 2018)

(Author’s Own 2021) Bowman’s Strategy clock shows that House of Sunny are in the hybrid-different category, meaning that they offer high value items for a mid price point. Consumers would prefer to purchase from brands within the hybrid category as they then get the best quality for the lowest price, however high quality for a mid price is still good. Brands such as Primark and NastyGal offer low and mid quality items for a low price, so this is fair for the items that they sell however they will not last as long as higher quality products.

(Primark 2021)

(Weekday 2021) (NastyGal 2021)

(House of Sunny 2021)

(Ganni 2021)

House of sunny and Ganni are the top two positions, showing that they offer benefits to consumers such as sustainable options and are focused on their consumer base specifically. These two brands will aim to design pieces that they know their consumers will purchase, instead of mass producing any items like Primark and NastyGal do.

COMPETITOR ANALYSIS - 4P’s The 4P’s model explores the marketing mix of a brand, by looking at their price, product, place and promotion. Analysing these four areas can help to define marketing options within each sector, and ensure that the marketing tactics in place meet the consumer needs. “The 4Ps is one way – probably the best-known way – of defining the marketing mix, and was first expressed in 1960 by E. J. McCarthy in his book, ‘Basic Marketing – A Managerial Approach.’” (MindTools 2017) Shown in the table below is the 4P’s model for NastyGal, Weekday and Ganni, comparing their marketing around the four sections. From this it is clear that NastyGal are the only brand of the three using e-commerce only to sell their products, whereas Weekday and Ganni use a mix of brick and mortar stores and e-commerce. Ganni and Weekday also use wholesale channels to expand their brand into new markets and reach consumer groups that may not necessarily fall into their target audience. All three of these brands have a presence on social media and will often use this channel to promote new products or work with influencers to create social media marketing posts. Using a mixture of all these marketing techniques would be the most effective way to market a brand, especially to a conscious consumer such as Gen Z and Millennials.

BRAND (Logos-Download 2016) “Nasty Gal started in a tiny San Francisco apartment stacked with killer vintage, a single laptop and an eBay account. We now carry new clothing, shoes and accessories under our own label–all for gals who know how to own it, and have the confidence to just be themselves.” (NastyGal 2021)

(SEEKPNG 2019) “As of today, our industry isn’t sustainable. Producing new things normally isn’t. We do however put sustainability at the core of Weekday,  and we aim to make responsible choices in everything we do. For us, this is the only way forward.” (Weekday 2021)

(LOGOVECTORDL 2021) “GANNI is a state of mind more than a way of dressing. It’s about making women feel like they are capable of anything. We’re working on being the most responsible version of ourselves.” (Ganni-World 2020)

PRODUCT • • • • • • • • • • •

• • • • • • • • • • • • • • • • • • • •

Knitwear Outerwear Denim Basics Loungewear Nightwear Swimwear Activewear Plus size, petite and maternity Shoes Accessories

Outerwear Knitwear Denim Loungewear Basics Swimwear Underwear Bags Accessories Menswear Denim Knitwear Outerwear Lingerie Sleepwear Loungewear Swimwear Accessories Bags Shoes

PRICE NastyGal’s clothing prices range from £4 to £199 when items are full price. Their accessories range from £2 to £80 full price.

PLACE NastyGal is a completely online store, selling through their website and app.

PROMOTION • Social media - Instagram, TikTok, Facebook and Twitter. • Influencers - creating ‘edits’ with influencers and having them promote this on social media. • Email marketing.

Weekday’s clothing ranges from £3 to £215 full price, and their accessories range from £7 to £35.

Weekday sell through their e-commerce website and app as well as their brick and mortar stores in London. They also sell through wholesale on ASOS.

• Social media - Instagram, (weekday do not use TikTok but #weekdayfashion has over 43 million views), Facebook and Twitter. • Digital marketing. • Using influencers. • Word of mouth.

Ganni’s clothing ranges from £50 to £1195 and their accessories range from £20 to £375.

Ganni sell through their e-commerce website and their two brick and mortar stores in London. They also sell through wholesale in Selfridges and Flannels.

• Social media - Instagram, Facebook, TikTok and Twitter. • Email marketing. • Social media influencers promoting different Ganni products using #ad. • Word of mouth.

(Author’s Own 2021)

(NastyGal 2021)

(Weekday 2021)

(Ganni 2021)

The Cost Leadership Strategy:

“The Cost Leadership strategy involves being the leader in terms of cost in your industry or market. Simply being amongst the lowest-cost producers is not good enough, as you leave yourself wide open to attack by other low-cost producers who may undercut your prices and therefore block your attempts to increase market share.” (MindTools 2017)

The Differentiation Strategy:

“Differentiation involves making your products or services different from and more attractive than those of your competitors. How you do this depends on the exact nature of your industry and of the products and services themselves, but will typically involve features, functionality, durability, support, and also brand image that your customers value.” (MindTools 2017)

The Focus Strategy:

“Companies that use Focus strategies concentrate on particular niche markets and, by understanding the dynamics of that market and the unique needs of customers within it, develop uniquely lowcost or well-specified products for the market. Because they serve customers in their market uniquely well, they tend to build strong brand loyalty amongst their customers. This makes their particular market segment less attractive to competitors.” (MindTools 2017)

COST LEADERSHIP

COST FOCUS

DIFFERENTIATION FOCUS

COST

DIFFERENTIATION

SCOPE

The table opposite shows how the different sections can be mixed to create different parts within each strategy, resulting in a more in depth analysis of the brand being looked at. Using these sections to analyse a brand’s main strategy will give an idea of how they choose to penetrate the market that they operate within, and how they plan to become more successful within it.

BROAD

Porter’s generic forces are split into three sections, Cost Leadership, Differentiation and Focus, then from this he sub-divided into Cost Focus and Differentiation Focus to give more scope within analysis. “These three approaches are examples of ‘generic strategies,’ because they can be applied to products or services in all industries, and to organizations of all sizes. They were first set out by Michael Porter in 1985 in his book, ‘Competitive Advantage: Creating and Sustaining Superior Performance.’” (MindTools 2017)

NARROW

COMPETITOR ANALYSIS - PORTER’S GENERIC FORCES

SOURCE OF COMPETITIVE ADVANTAGE (Author’s Own 2021)

House of Sunny follows both the cost leadership strategy as well as the differentiation strategy, as they offer well priced sustainable items while also offering different elements within the brand such as their drop culture. Cost leadership: House of Sunny are a cheaper to alternative to Ganni, although they still offer unique knitwear pieces that are responsible. This puts them at the top of the market within the ‘Cost’ sector. Consumers would prefer to purchase from House of Sunny as they can offer everything that Ganni does while being a lower price. Their items are a similar quality and both responsibly sourced while catering to the same target consumer with their new and unique pieces. Differentiation: House of Sunny uses ‘drop culture’ to market and sell their products, this works by releasing two collections a year and then never producing these pieces again. This creates a sense of exclusivity and excites customers for their drops. Most of their items are limited addition, however they tend to repeat the styles that they have used previously but change the pattern and colours to update their collections yearly. Within the responsible sector of the market, no other brands use ‘drop culture’ as House of Sunny do, so this sets them apart from their competitors as consumers know that they will always be able to purchase from a brand such as Ganni, whereas they have to go onto the House of Sunny website at the correct time to be able to purchase the products they are after.

(House of Sunny 2011)

INTERNATIONAL OPPORTUNITIES “According to the professional services firm PwC, the world’s economy will double in size by 2042, with an average growth rate of just over 2.6 per cent per year between 2016 and 2050. Brazil, China, India, Indonesia, Mexico, Russia and Turkey are poised to grow at an annual average rate of approximately 3.5 per cent compared to 1.6 per cent a year for Canada, France, Germany, Italy, Japan, the United Kingdom and the United States.” (2021) Brazil, Russia, India and China have been grouped as they are contrasting economies but all have rapid growth, this group has been named BRIC. The BRIC countries are four of the largest emerging economies around the world and are continuing to grow. As well as these countries, the N-11 (Next 11) have been identified as the next countries to rapidly grow their economies. “The N-11 was chosen by Goldman Sachs Group, Inc in a 2005 paper exploring the potential of BRIC and the N-11. The next eleven are South Korea, Mexico, Bangladesh, Egypt, Indonesia, Iran, Nigeria, Pakistan, the Philippines, Turkey, and Vietnam.” (Kenton 2021) Looking at this overall group of 15 countries, there is potential for any business to expand into at least one market, and this creates new opportunities for the brand that they have not explored within the current market they are operating within. For House of Sunny, international opportunities could include offering new styles and shapes to suit the styles and cultural beliefs of international consumers, or increasing their yearly ‘drops’ to accommodate markets that do not work to a schedule of two fashion seasons a year. The model below outlines the major global economic trends to help identify the best international market for House of Sunny to expand into:

EUROPE

CHINA

JAPAN

INDIA

OTHER ASIA

BRAZIL

The US is slowly recovering from the pandemic, however “In the first quarter of 2020, growth declined by 5%. This signaled the onset of the 2020 recession. It also ended 128 months of expansion, the longest in U.S. history.” (Amadeo 2021). As well as this, disposable income is currently reduced due to unemployment rates; “At the onset of the pandemic, the unemployment rate skyrocketed to 14.7% in April as companies furloughed workers. It remained in the double digits through July.6 By the beginning of 2021, the unemployment rate decreased to around 6%, where it remained in June 2021.” (Amadeo 2021) GDP growth within Europe has consistently been slow since the 2000s; “Between 2014 and 2019, the economy progressively recovered, with annual growth rates around +2 %. However, in 2020 there was a drop of just above 6 %, mainly due to the effects of the Covid-19 pandemic.” (Europa 2021). Ensuring that the supply chain is strong will be crucial to ensure constant growth within Europe, “The key driver of the recovery has been private consumption.1 This indicates two factors: First, there is strong pent-up demand for goods and services that have been inaccessible during the lockdowns.” (Dr Boersch 2021). The UK has almost completely recovered financially from the pandemic; “Gross domestic product (GDP) is estimated to have grown by 0.1% in October 2021 and is 0.5% below its pre-coronavirus (COVID-19) pandemic level (February 2020).” (Office for National Statistics 2021). On top of the issues raised by the pandemic, Brexit will have a continuing effect on the economy “Brexit will, in our view, continue to weigh on UK capacity. Combined with our assessment of COVID-19 impacts, this means that we expect the economy to be 2½% smaller in 2024−25 than under the OBR’s pre-pandemic (March 2020) forecast.” (Nabarro 2021) China has always had a rapidly growing economy, and this is still continuing to grow despite the pandemic, “Since opening up to foreign trade and investment and implementing free-market reforms in 1979, China has been among the world’s fastest-growing economies, with real annual gross domestic product (GDP) growth averaging 9.5% through 2018, a pace described by the World Bank as ‘the fastest sustained expansion by a major economy in history.’” (EveryCRSReport 2019). China are also looking to explore emerging technologies and innovative processes, “The Chinese government has made innovation a top priority in its economic planning through a number of high-profile initiatives, such as “Made in China 2025,” a plan announced in 2015 to upgrade and modernize China’s manufacturing in 10 key sectors through extensive government assistance in order to make China a major global player in these sectors.” (EveryCRSReport 2019). Japan are trying to invest into their infrastructure and education systems as their economy continues to grow, “On November 19, Kishida’s cabinet approved a larger-than-expected 55.7 trillion-yen fiscal stimulus package that will still need parliamentary approval. The package includes more funding for universities and digitalization of rural areas to raise productivity growth. It also includes money to raise semiconductor manufacturing capacity, which could improve the country’s economic security.” (Wolf 2021). On top of this, Japan is expected to grow their economy within the next year; “After witnessing a decline in economic growth in Q3 2021, Japan is poised for a firmer recovery in Q4, which should continue into next year.” (Wolf 2021). India have seen improvements within their economy and are using this success to invest in their key industries; “The private equity - venture capital (PE-VC) sector recorded investments worth US$ 10.7 billion across 137 deals in August 2021, registering a 5x YoY growth.” (IBEF 2020). They have also had production linked initiatives approved within fashion, “In September 2021, Prime Minister Mr. Narendra Modi approved the production-linked incentive (PLI) scheme in the textiles sector—for man-made fibre (MMF) apparel, MMF fabrics and 10 segments/products of technical textiles—at an estimated outlay of Rs. 10,683 crore (US$ 1.45 billion).” (IBEF 2020) Asia may suffer from the effects of de-globalisation as they are not as easy to access by the rest of the world, “Lockdowns and travel bans have slowed the flow of goods and people between Asia and the rest of the world, which were coupled by reports of reshoring—the transfer of business operations back to the organization’s country of origin” (Garner 2021). As the digital economies grow globally, Asia are well equipped for e-learning and digital trade; “many Asian economies—including Singapore, South Korea, Taiwan, Hong Kong, and China—are well-equipped to handle this increased digitalization.” (Garner 2021). The pandemic has had a positive effect on the Brazillian economy as it has meant more investment in the country, “GDP growth is projected to reach 5% in 2021, but to slow down to 1.4% in 2022 and 2.1% in 2023. The vaccination campaign has accelerated and economic activity, underpinned by private consumption and investment, restarted as restrictions were lifted.” (OECD 2021). Despite this investment, supply chain issues have slowed their recovery from the recession; “Exports have benefited from the global recovery, the robust demand for commodities and a weak exchange rate. However, supply bottlenecks, lower purchasing power, higher interest rates and policy uncertainty have slowed the pace of recovery.” (OECD 2021)

INTERNATIONAL OPPORTUNITIES The map below has been developed by BCG, and identifies the top global growth hotspots. “ While emerging markets may be divergent in their growth rates, there are still global growth hot spots—opportunities with higher-than-average growth rates—for companies to chase.” (BCG 2021)

CUBA:

Cuba is slowly beginning to open up their international market by re-establishing relationships with the US and loosening their rules around businesses. “All of these changes have created interest and excitement, and many of Cuba’s government ministries are backed up with requests from outside organizations looking to forge ties to the country.” (Fitzgerald et al. 2016) Results from a BCG survey suggest that opportunities will expand for consumer goods companies over the next 10 years. Understanding the Cuban culture is the first step to expanding the market and being able to reach the Cuban consumer. “The Cuban economy is centralized, and many Cubans work for the government, earning a state salary of, typically, $20 to $25 per month. As a result, purchasing power in Cuba is limited, with more than 75% of Cuban households earning less than $1,000 per year.” (Fitzgerald et al. 2016).

(Markus 2021)

CHINA: (Shutterstock 2017)

(Fox 2021)

After reviewing all of the international opportunities within countries globally, China is the most appropriate country to expand House of Sunny into. This is due to their constantly growing economy and recent investment into infrastructure. A country such as China with these economic strengths will be the best place to launch a new strategy for international growth as it presents opportunities for new businesses. Investment into infrastructure gives businesses a chance to get into the heart of the city, and sit alongside current popular brands, and ensure that they are seen by the most consumers. Considering all of these strengths, China is the most appropriate market to expand into, for both e-commerce and brick and mortar retail. On top of this, the Chinese consumer is more adventurous with their fashion, so House of Sunny will fit well within their brand architecture. “Chinese consumers, and especially fashionistas, are increasingly adventurous style-wise, compared to what you see in Europe or America. They take more risks, they are less conservative, and this makes them turn to smaller brands.” (Gartner 2017)

China is one of the fastest growing global economies, “In the past 30 years China’s annual GDP has grown from US$361 billion to US$14,720 billion. That’s a nearly 41-fold increase, or a rate of 13.2% a year.” (Holden 2021). In recent months, China have struggled to recover from COVID-19 issues and pressure on their main industries, however their economy is beginning to grow again after dealing with these problems. “Economic growth will reach 8.1% this year as the economy rebounds” (OECD 2021) To help boost their economy, China are investing in infrastructure to encourage businesses to expand within major cities; “Infrastructure investment could reach 10 trillion yuan over the next five years, according to an estimate by the Industrial and Commercial Bank of China last year.” (Tang 2021) This is promising for business that are looking to expand into China, as the opportunities are opening up and have become available due to COVID-19. Innovative infrastructure will attract new businesses to China, and expand their market to include companies that were previously not interested. “China’s new infrastructure plan has developed into a strategy to meet the twin goals of stimulating job creation and preparing for new changes in the global economy, particularly in the realm of technology and sustainable development.” (Briefing 2020)

(BCG 2021)

BRAZIL:

Brazil have struggled to recover after the COVID-19 pandemic, however with the vaccine becoming mainstream and life heading back towards ‘normal’, their economy has begun to improve. “Aid to the economy came from the external sector, with exports growth nearly doubling from the first quarter to 9.4% in Q2.” (Samaddar and Barua 2021) As the global market continues to grow, this is aiding Brazil to grow their economy by allowing them to trade with the outside world. The COVID-19 vaccine has supported this growth within Brazil, as more of the country get vaccinated they can begin to re-open businesses and recover the economy within Brazil. “As of August 29, about 29% of the population has been fully vaccinated compared to just 12% in June.” (Samaddar and Barua 2021) According to Statista, GDP growth is up by 5.23% in 2021 compared to 2020. (2016) This shows that the market is steadily regaining strength and will soon be back up to it’s pre-covid levels. (Wee 2016)

(Pinterest 2021)

INTERNATIONAL OPPORTUNITIES - ROUTES TO MARKET Routes to market are the different ways that a business can access a new market and a new consumer. These are: direct, e-commerce, wholesaling, licensing, franchising, joint venture and pop-up shops. The table below will explore these different routes and how suitable they are for House of Sunny.

ROUTE TO MARKET

ADVANTAGES

DISADVANTAGES

HOW COULD THIS ROUTE BE USED?

Retailers will have greater control over customer engagement as well as price. (Gov.uk 2021) Can generate the highest margin of all routes to market. (Kirk 2018)

Resources are required to find clients and deliver to them without support within the market. (Gov.uk) Can be slow as retailers need to establish their business to begin selling. (Kirk 2018)

House of Sunny already use this route, this works well for them as they currently have two stores in the UK. Using this method they can retain customers and generate the most profit.

E-COMMERCE

Easy to set up, and open for business constantly. No barriers related to distance or location. (EHB 2021) No worries about stores being closed again due to COVID-19.

Consumers may worry about buying products that they cannot physically see and try on. Some consumers (mainly older) are wary to buy online incase of fraud. (EHB 2021)

House of Sunny have an e-commerce website that they use to sell their full range, as well as promote new products that are releasing soon. Customers can order through the website or see what is in stock in store.

WHOLESALING

Easy to sell a large quantity of products, and can absorb some of the risks with selling. This can also help to sell internationally without having to set up an international business. (EHB 2021)

No opportunity to build a loyal customer base for the brand as they will be buying through a wholesaler. Selling price will be lower as the wholesaler needs to make profit as well as the original retailer. (EHB 2021)

Licensing allows a business to take a product to market without having to set up within the market that they are looking to expand into. (Gov.uk 2021)

“The costs of registering all the intellectual property in advance of any income and ensuring the licensee will develop the market, as royalties are dependent on sales growth.” (Gov.uk 2021)

House of Sunny use wholesale to sell their products through Selfridges and Flannels. They have a section within the London Selfridges store but are online only for other wholesalers, this helps them to expand into a larger audience. Licensing could be used to partner a brand with House of Sunny and help them expand into an international market as well as creating some limited edition pieces with a new designer or artist.

FRANCHISING

More freedom as the franchise takes on most of the responsibility. Then the retailer has minimal expenses and higher profits, giving the potential for fast growth. (Startup 2021)

Poor quality franchisees may sometimes not declare all income and keep some for themselves, while also giving poor quality service and poor performance. (Startup 2021)

Franchising could be used to expand House of Sunny into a new market that they see as a risk, so that they are not taking the full responsibility or costs of this incase it does not work out as they were expecting.

JOINT VENTURE

This allows a UK company to establish presence in an international market and take advantage of the opportunities available in this new market, without taking full responsibility for costs. (Gov.uk 2021)

The UK business would not have direct control within the international market, and it is difficult to monitor performance while ensuring that the finances are correct. (Gov. uk 2021)

Similar to Licensing, this route would involve House of Sunny partnering with an international brand to help them expand into a new market. They could create a joint product to promote this launch.

Cheap and low risk, as it does not require paying for many overheads. Is a good opportunity to test out new products or services, and can give an insight whether something will work in that market. (EHB 2021)

No opportunity to create lasting customer loyalty as the store will be a temporary fitting. This also means that it can require a lot of planning to create an event for just a couple of days. (EHB 2021)

Pop-up shops already work for House of Sunny, and this would work well for the launch in a new international market as it is less risk than opening a brand new store but can test if the customers are interested.

DIRECT

LICENSING

POP-UP SHOPS

(Author’s Own 2021)

(McGinty 2020)

For House of Sunny, the most suitable routes to market are using pop-up shops and wholesaling. They have already used these methods within the UK and proved them to be successful, so these would be the two top routes to market to use when introducing the brand into a new international market. Once these methods have been tested, House of Sunny could explore the possibility of using licensing and franchising to create a limited edition range of clothing that is exclusive to the new market. This would increase interest in the brand while also using new routes to market within the market. Starting with routes that have been used before will test the success of the brand before jumping into new routes. This will give House of Sunny an idea of their performance within the new market versus the UK.

TARGET CONSUMER

HOUSE OF SUNNY’S TARGET CONSUMER

CONSUMER TRENDS Consumer trends are changing due to COVID-19, and many people are realising what to prioritise now that retail stores are back open and trading. The main shifts have been within sustainability, conscious consumerism and technology. During lockdowns, consumers have realised the ease of online shopping and how accessible it is to all generations, increasing the use of technology within stores to create a seamless buying experience between in store and online businesses will interest consumers. “Many consumers say they shop at retailers that support causes they believe in, and some are willing to boycott companies whose actions are unethical. Consumers are becoming more thoughtful about what they purchase, where it comes from and how their buying habits affect the world around them.” (Thomas 2021)

House of Sunny’s target consumer is mainly Gen Z, as they are the most style focused as well as conscious of sustainability and responsible manufacturing methods. House of Sunny describle themselves as a brand who are, “Driven to create timeless designs by portraying an aesthetic that is uniquely our own.” (House of Sunny 2015) Their target consumer enjoys purchasing unique pieces that are limited by the drops and collections that House of Sunny create bi-yearly. This exclusivity appeals to a younger consumer, as the excitement of the drop and the new collection will be advertised on social media. For these consumers, getting a limited edition item is considered special as less people will have it, and this adds to the value of these garments. “This sales tactic, which consists of releasing a limited-edition product or collection in small quantities at select retail locations, without much advance warning, is what we have come to know as a “drop”. The basic idea is to create a sense of urgency and the illusion of scarcity among consumers.” (Van Elven 2018)

CUSTOMER PROFILE NAME: KATIE AGE: 21 GENDER: FEMALE LOCATION: LONDON SOCIAL CLASS: MIDDLE CLASS JOB ROLE: DIGITAL MARKETING ASSISTANT INCOME: £28,000 BUYING PROCESS: Katie tends to buy one or two more expensive items every month instead of purchasing multiple cheaper garments. This means she can invest in more responsible items from brands that she supports due to their ethical and responsible decisions. She prefers to buy classic and timeless designs so that they will fit well into her current wardrobe, and do not require her to purchase more pieces to style them with.

(Birchall 2018)

(Achim Berg 2021)

INTERESTS: Katie enjoys spending time with her friends at the weekends at bars and restaurants. As well as this, she enjoys second hand shopping at charity shops around London to find well-priced designer items.

The graph above shows that online sales within China and the US are more popular than in Europe. Online sales in 2021 are at a lower % share than 2020, as stores have now re-opened and the opportunity to shop in-store has been given back to customers. The offline sales is significantly larger than online sales, showing that despite the ease of online shopping, consumers globally prefer to shop in store, even if the opportunity is there to shop online.

FAVOURITE BRAND: LUCY & YAK (Birchall 2018)

TARGET CONSUMER THE CHINESE CONSUMER Expanding into China would open up a brand new international market for House of Sunny, and with the Chinese market continuing to grow rapidly this would increase their profit and add to their consumer pool. Similar to most consumers globally, the Chinese consumer has shifted their focus due to the COVID-19 pandemic, and have realised their true worries around purchasing and consumption. One of the most important aspects of a brand for the current consumer is their online presence. “Brands should view online as a must do and start setting digital key performance indicators, while considering the role and interaction of different online and offline channels.” (McKinsey 2020) Brands need to ensure that they are connecting their online channels with their direct-to-consumer, social commerce, ecommerce marketplaces, and physical marketing channels. This will ensure a seamless experience for customers both in the real world and within the e-commerce market. According to Wen-Ju, the Chinese consumer is beginning to challenge social norms to make changes within the fashion industry. Consumers are interested in “inclusivity, interaction, and innovation, from challenging gendered clothing to reinventing the limits of social media.” (2021) (Ho et al. 2019)

(Lifestyle Monitor 2021)

According to Lifestyle Monitor, the Chinese consumer mainly shops within department stores for fashion, closely followed by speciality stores. This indicates that the consumer is not brand-loyal and prefers to have the option of looking at lots of different brands, which is why they will shop in a department store. Although department stores within the UK are declining, China seems to prefer shopping there and the country are continuing to invest in department stores across their biggest cities. “There were around 37 major transformation and upgrading projects across China’s department store industry – equating to some four million sq-m – a figure close to double that seen in 2018.” (FrameWeb 2020)

“The rapidly expanding middle class will account for 60% of the $15 trillion* in additional consumer spending expected between now and 2030.” (Visa 2021)

(Oxford Economics 2016)

As the middle class population grows in China, consumers are more likely to spend an increased amount on material items such as fashion. As shown in the graph above, the middle class population has grown by 86% between 2010 and 2018. This indicates that the population will only continue to grow and create more consumers to shop in the mid priced fashion market. These consumers tend to be more worried about shopping sustainable and responsible brands, and are happy to spend more on their clothes to involve these elements.

Due to China’s one child policy that was implemented between 1980 and 2015 means that many families will only have one child to pass their wealth onto. This increases the wealth of each child as overtime they will inherit all of their families money. Increased wealth indicates that individuals will have a higher disposable income and additional spending power. “The increase in the scale of consumer demand over just these five years is twice the current total size of UK consumer spending. And while a decade ago China’s consumer market was only one-sixth the size of that in the US, by now it is already one-third the size.” (Oxford Economics 2016)

SITUATION ANALYSIS

ADMINISTRATIVE DISTANCE

The CAGE model below is used to compare two countries, in this case China and the UK to determine how House of Sunny can successfully create a strategic plan to move into the international market. The CAGE model analyses cultural, administrative, geographic and economic distance between the two countries. “Pankaj “Megawatt” Ghemawat is an international strategy guru who developed the CAGE framework to offer businesses a way to evaluate countries in terms of the “distance” between them.” (OpenText 2011) Information within the CAGE model tables below has been taken from the Hootsuite Reports written by Simon Kemp (2021).

CULTURAL DISTANCE

CHINA POPULATION

AGE

RACE

SEX

1.44 Billion

POPULATION

Median age is 38.4

91.11% of the population was Han Chinese, and 8.89% were minorities. 48.7% Female, 51.3% Male

AGE

RACE

SEX

UK 68.05 Million

Median age is 40.6

87% of people in the UK are White, and 13% belong to a Black, Asian, Mixed or Other ethnic group 50.6% Female, 49.4% Male

LITERACY RATES

95.2% of women aged over 15, 98.5% of men aged over 15. Average literacy rate overall is 96.8%

LITERACY RATES

NORMS, VALUES, BELIEFS

The traditional cultural values are harmony, benevolence, righteousness, courtesy, wisdom, honesty, loyalty, and filial piety.

NORMS, VALUES, BELIEFS

Traditional values include democracy, liberty, mutual respect and tolerance of faith and beliefs.

LANGUAGE

71% Chinese/Mandarin and 29% other including English, Cantonese, Portugese, Mongolian and Haix.

LANGUAGE

92.3% English, 1% Polish and 6.7% other, including Panjabi, Urdu, Arabic, French, Portugese and Spanish.

LEVEL OF EDUCATION

17.7% aged 25-64 attained some form of post-secondary education. 9.7% aged 25-64 attained a bachelor’s degree or higher.

LEVEL OF EDUCATION

45.7% aged 25 to 64 attained some form of post-secondary education. 22.6% aged 25 to 64 attained a bachelor’s degree or higher.

USE OF CREDIT CARDS INTERNET SPEEDS MOST USED SOCIAL MEDIA

20.8% of people have a credit card.

155.89 mbps for mobile connections, 158.66 mbps for fixed connections. WeIxin (WeChat) was the most used social media at 73.2%, followed by Sina Weibo at 47.1%. (Author’s Own 2021)

USE OF CREDIT CARDS INTERNET SPEEDS MOST USED SOCIAL MEDIA

99% of women aged over 15, 99% of men aged over 15. Average literacy rate is 99%.

65.4% of people have a credit card.

59.19 mbps for mobile connections, 81.07 mbps for fixed connections. Youtube was the most used social media at 79.9%, followed by Facebook at 73%. (Author’s Own 2021)

According to the cultural distance section above, China is much larger than the UK in terms of population, however it is clear that the UK is a more educated country. The UK has an overall literacy rate of 99% while China has an overall rate of 96.8%, this can also be seen in the percentage of adults with a bachelor’s degree. Internet speeds are significantly higher in China than the UK, indicating that their infrastructure is superior. Credit card use is much higher in the UK, with only 20.8% of Chinese consumers being a credit card owner while 65.4% of the UK are. The median age in the UK is slightly higher than in China, suggesting a healthier lifestyle overall.

The Communist Party of China is the ruling political party within mainland China, however since 2013, the government has led an anti-corruption campaign. This is one of the main differences between the UK and China, as the UK is a democracy whereas China is a communist country. Counterfeiting has always been a large problem within China, and their exports of good counterfeit items globally. “According to Europol, 86% of all counterfeits worldwide originated from Mainland China and Hong Kong in 2015. This added up to a total value of almost 400 billion USD in counterfeit goods.” (Daxue 2021) Within China, there is legislation in place to attempt to reduce the amount of counterfeiting, however it is not currently reducing the rate of counterfeit manufacture. “The Anti-Unfair Competition Law of the People’s Republic of China also regulates the offence of counterfeiting under Article 5, stating that a business operator shall not harm his competitors in market transactions by resorting to counterfeiting a registered trademark of another person” (HG.org 2021)

GEOGRAPHIC DISTANCE On average, China has a warmer climate than the UK. The average temperature in Hong Kong in June is 31 degrees whereas in London it is 20 degrees. Hong Kong and London have a similar amount of precipitation per year on average, however in Hong Kong it is more common between April and September whereas London has more rainfall between October and March. (WeatherSpark 2021) Body shapes within China are dramatically different to those in the UK. On average women in China are much smaller than women in the UK. “The study found that body shapes in China are, on average, much smaller and more homogenous than in the US and Europe. Men have similar average heights in China and the US but have dramatically different average chest and waist sizes as well as weight. Body shapes in the UK are similar to those in the US.” (Kollewe 2008)

ECONOMIC DISTANCE Within China, the wealth is not distributed fairly, “In 2020, the wealthiest 1 per cent of Chinese people held 30.6 per cent of the country’s wealth, up from 20.9 per cent two decades ago, according to a Credit Suisse report. That has resulted in a widening income divide in the country.” (Mullen 2021) In the UK, “the ONS calculated that the richest 10% of households hold 44% of all wealth.” (EqualityTrust 2018) This information shows that within both countries, the wealth is so unequally divided, meaning that more middle and upper class consumers can afford higher quality products and services. According to Textor, the GDP of China amounted to 14.8 trillion US dollars in 2020, highest in the BRIC group. (2021) The same year, the UK’s total GDP amounted to 1.96 billion pounds according to Clark (2021). In comparison, China was the second largest economy globally while the UK was sixth. The lower total of the UK was partly down to the effects of COVID-19 as well as having slower economic growth than China overall.

DEVELOPING A STRATEGIC PLAN - TOWS

“The TOWS Matrix is derived from the SWOT Analysis model, and was developed by the American international business professor Heinz Weirich. The TOWS Matrix is aimed at developing strategic options from an external-internal analysis and is a practical tool, particularly in the fields of business administration and marketing.” (ToolsHero 2017)

EXTERNAL OPPORTUNITIES - O • New technologies within the fashion industry that could be used to manufacture products. • Changing consumer attitudes towards brands taking accountability for their sourcing and manufacturing methods. • New distribution channels emerging within the industry. • Growing middle class population. • Consumers have more disposable income following COVID-19 lockdowns. • Partnering with fashion designers or artists to create limited collections.

INTERNAL STRENGTHS - S

SO - USING STRENGTHS TO MAXIMISE OPPORTUNITIES

• All products are designed and sourced within the UK. • Strong focus on creating timeless basics. • One permanent store and one pop-up shop. • Accessible pricing. • Stocked by wholesalers such as Selfridges, Flannels and ASOS. • Large following on Instagram (630K). • Delivers worldwide, and offers this free when customers spend over a certain amount. • Being a mostly sustainable and responsible brand. • Celebrity endorsement through social media and news channels.

• Incorporate new technologies into their supply chain to show transparency on social media and prove to customers that they are a responsible brand, not greenwashing. • Increase their offer within Selfridges and Flannels, as the growing middle class population will tend to shop in these places it will increase their target audience. • Focus on creating a limited edition range of timeless basics with the styles that existing consumers love, but partner with a designer or artist to create a new pattern or colour scheme. • Their new store could offer a window into a new market of consumers with a higher amount of disposable income following COVID-19, as they do not need to shop online and can go into store. • Use their UK sourcing routes to explore emerging distribution channels and how these could enhance consumers shopping experience.

INTERNAL WEAKNESSES - W

WO - MINIMISING WEAKNESSES BY TAKING ADVANTAGE OF OPPORTUNITIES

• Sizes only range from 6 to 18, not as inclusive as they could be. • Do not offer a petite / tall range. • Only design womenswear. • Delivery to some countries can be very expensive. • Their only stores are in London. • The brand is not well known within international markets. • Much smaller presence on TikTok, which is slowly becoming the most popular social media channel within Gen Z. • Prices will always be higher than competitors who manufacture abroad.

• • • •

EXTERNAL THREATS - T • • • •

Competitors with loyal customers. Competitors with a bigger physical presence. Changing consumer attitudes. Other brands use cheaper labour in China and India, they may be able to offer the same products but undercut with their prices. • Market is slowly becoming increasingly crowded with smaller sustainable fashion brands. • Cost of raw materials could increase due to import tax after BREXIT.

ST - USING STRENGTHS TO MINIMISE THREATS • Consumers will be drawn to House of Sunny’s USP; the fact that they design, source and manufacture all of their products within the UK. • Opening their two physical stores will begin to grow their brand presence within the UK. • Consumers will pay more for a sustainable and responsible product over a product that has been manufactured using cheap and non-ethical labour in China or India. • Some increasing costs could be absorbed by the business, or even increasing their prices by 1-2% would not deter customers. • Using influencers and celebrity endorsement on social media will keep the brand current and interest the younger markets, helping to keep House of Sunny above new competitors.

WT - MINIMISING WEAKNESSES AND AVOIDING THREATS

• Creating a section on the website to input consumer’s specific measurements so that the clothing can be altered to fit them exactly. Using new technologies such as AI to scan or input consumers measurements, • Open pop-up stores in larger cities across the UK such as Manchester, Birmingand then products could be altered or manufactured to meet these size reham and Edinburgh to increase brand awareness and presence across the UK. quirements, removing the need for a numerical sizing chart at all. • Increase their use of social media and influencer partnerships to reach a larger New distribution channels will mean that their lack of physical presence withaudience, and get ahead of smaller brands trying to penetrate the market. in the UK does not matter, and the brand can be allocated across wholesalers • Offer deals on their website to combat the higher prices such as ‘spend £100 and smaller UK stores such as Urban Outfitters. and get a free tote bag’, this will put them a step ahead of competitors as conPartnering with current fashion designers or artists would give House of Sunny sumers will feel as though they are getting a better deal and choose to shop the scope to advertise on social media - specifically TikTok and reach their with House of Sunny more. younger audience (Gen Z). • Create marketing that shows their transparency within the supply chain and Consumers are becoming more conscious aft er COVID-19, and have a higher post on social media to show consumers their responsibility within the fashdisposable income following lockdowns so increased prices for a responsible ion industry, and how they are different to competitors. product is not a problem. (Author’s Own 2021)

To conclude the TOWS matrix, House of Sunny need to incorporate more influencers and designers into their collections and marketing plans to cater to their target audience of Gen Z. Using AI technology would benefit House of Sunny, as they could create custom sized pieces for consumers who could not wear the numerical sized garments that they currently offer, putting them ahead of the competition as they could offer any size. Increasing their offering within wholesale partner stores such as Flannels and Selfridges would show consumers outside of their target audience their full range, and encourage them to purchase from a new brand; therefore increasing their target consumer.

DEVELOPING A STRATEGIC PLAN - PORTER’S 5 FORCES “Porter’s Five Forces is a business analysis model that helps to explain why various industries are able to sustain different levels of profitability. The model was published in Michael E. Porter’s book, ‘Competitive Strategy: Techniques for Analyzing Industries and Competitors’ in 1980.” (Scott 2021) The five forces are: competition in the industry, potential of new entrants into the industry, power of suppliers, power of customers and threat of substitute products. POTENTIAL OF NEW ENTRANTS INTO THE INDUSTRY

THREAT OF SUBSTITUTE PRODUCTS COMPETITION IN THE INDUSTRY Within China, the market for sustainable knitwear is relatively small, so the threat of rivalry for House of Sunny is low. “Public interest is on the rise for sustainable lifestyles and people are receptive to sustainability initiatives” (GMA 2021) The need for sustainable brands within China is clear, and entering the market with these initiatives would attract the conscious consumer who currently has very limited options. Competitors within China include Icicle and SiiZu, two brands that offer sustainable knitwear staple pieces at (SiiZu 2021) a mid-price point. The options that these two brands offer are very simple and could be classed as ‘basics’ whereas House of Sunny’s designs are significantly more colourful and patterned. Both brands offer limited options and are focused on their online presence more than a physical brand presence.

(Icicle 2021)

“Chinese consumers remain brand conscious but, unlike shoppers elsewhere, they focus on value so intensely that brand loyalty is often secondary.” (Yuval Atsmon et al. 2010) Chinese consumers are generally more focused on the product rather than the brand, so the threat of similar products is high compared to the threat of competitor brands. Currently, the substitute products within China are all non-sustainable options, so House of Sunny’s garments will fill a gap within the market. Some luxury brands such as ‘I am Chen’ offer knitwear styles similar to House of Sunny, but at a much higher price point. These items are availavle through wholesalers and online but they do not have a physical presence within their own stores in China.

The potential threat of new entrants to House of Sunny is currently high as there is a gap in the market for well priced sustainable knitwear. This means that brands could easily create products to fill this gap and become a competitor for House of Sunny.

(Williams 2021)

However, due to China’s lack of sustainable initiatives, it is not currently a worry that the market will become saturated. “It seems that fashion hasn’t caught up with western countries yet since these trends seem new in Chinese culture.” (Yuval Atsmon et al. 2010) If these trends are new within China, it will take fashion brands years to catch up to where to western world is with sustainability.

POWER OF CUSTOMERS POWER OF SUPPLIERS

As shown in the table opposite, consumers behaviours have changed due to COVID-19, and they are more likely to buy sustainably sourced products than non-sustainably sourced. 55% of respondents also commented that they would be inclined to purchase goods that have been produced locally, and House of Sunny would need to find sustainable suppliers within China to continue to keep their footprint low and manufacture products locally to their stores.

Suppliers are the beginning of the chain within fashion, and have the ultimate power over whether a brand is sustainable or not. Consumers want to see transparency within the supply chain and this begins with brands choosing suppliers that care about the environment, not just profit. “Seventy-three percent of Millennials are willing to pay more for sustainable goods, said a 2015 study by Nielsen. The study of 30,000 consumers in 60 countries found that consumer goods brands with a demonstrated commitment to sustainability grew more than those without.” (SourcingAllies 2021). Using a sustainable supplier is crucial for House of Sunny, to preserve the brand values that they currently have in the UK and transfer these over to China. “Between 40% and 60% of a company’s carbon footprint resides upstream in its supply chain – from raw materials, transport, and packaging to the energy consumed in manufacturing processes. For retailers, the figure can be 80 percent,” (McKinsey 2021) Ensuring that the supplier chosen is actually sustainable and not greenwashing will be an important task, where factory visits and paperwork reviews will need to be done.

(Statista 2021)

(Essentra 2021)

These changes in consumer behaviour show that consumers have begun to realise the importance of sustainable fashion and the effect that it has on the environment. As customers use this spending power and vote through their purchases, it will become clear which brands are favoured and these will most likely be the sustainable brands. “Chinese consumers are conscious of their environmental footprint. And especially the disasters that are linked to it. Following several natural disasters, such as the recent floods in Henan province (July 2021), preserving the environment has become one of China’s top priorities.” (Yuval Atsmon et al. 2010).

JUSTIFICATION OF STRATEGY

ROUTES TO MARKET

Identified within the situation analysis and international opportunities sections of this research, China has been selected as the most appropriate emerging market to expand House of Sunny into. “Today, China is the second largest apparel market in the world, valued at nearly $2 billion USD.” (Heuritech 2021) Focussing heavily on sustainability will put House of Sunny a step ahead of most Chinese fashion brands, as the country is well known for using cheap labour and un-ethical methods of manufacture. Proving that House of Sunny is different from these brands will be an important step so that consumers understand their brand values. Creating a joint venture will help to integrate House of Sunny into the Chinese fashion market more effectively than trying to penetrate the market alone. A joint venture could be collaborating with a brand, designer or artist to create a campaign for the launch into a new international market. Collaborating with a Chinese artist to create a limited edition collection of garments would increase interest in the collection as it would be marketed towards the Chinese consumer, and then selected best sellers of their mainstream collection could be on show in the pop-up store alongside this. Using the tried and tested styles of clothing that House of Sunny sell in the UK would be the base for these garments, then using the work from an artist such as Lou Yi to give the items their design.

In the UK, House of Sunny’s most successful routes to market have been using pop-up shops as well as wholesaling. These methods have been essential to improving their brand image and positively impacting their brand presence within the UK fashion market. These two routes to market will be implemented into the strategy to launch House of Sunny into China, along with a joint venture. Using these three routes together will gain interest of customers and entice them to try out a new brand. The pop up shop will be a crucial part of the launch so that Chinese consumers can physically see and try on the pieces, as they will have never seen the brand before. Pop-up shops also help to pick up passing customers who may not specifically fit into the target consumer but are still interested in the brand. “ WHEN DIPPING A TOE INTO A NEW MARKET, POP-UP STORES HELP BUILD BRAND AWARENESS BEFORE BRANDS COMMIT TO A FULL STOREFRONT. BRANDS CAN ROOT THEMSELVES IN A COMMUNITY TO FIND THEIR TARGET CUSTOMERS WITHIN AN AREA. USE FACE-TO-FACE INTERACTIONS TO ENGAGE CUSTOMERS (LIKE THE METHODS HIGHLIGHTED ABOVE) AND BUILD TRUST PRIOR TO FULLY INVESTING IN A NEW MARKET OR FULL OFFLINE SALES STRATEGY.” (CRANE 2018) (Keyes 2019)

(Yi 2017)

Looking at the two paintings by Yi (2017), they are similar to House of Sunny’s style of pattern that is used for their knitwear collections. Using this art to create some of the classic styles from House of Sunny such as the ‘Hockney’ dress would create interest around the brand. As well as using this art to give the current styles an update for the international launch, they could be promoted on social media by Chinese influencers. “Online sales are increasingly being driven by social media influencers. Frost & Sullivan, a consultancy, estimated that influencers generated 32.9 billion yuan ($4.7 billion) in sales in 2017. More than two-thirds of Chinese consumers are influenced by social media in their purchasing decisions, according to a survey by the Centre for International Governance Innovation.” (Pinduoduo 2020) These influencers would be using China’s most popular social media platform ‘WeIxin (WeChat)’ as identified in the CAGE analysis. This would be the most effective way to reach House of Sunny’s target consumers within China.

According to the graph opposite by Keyes (2019), pop-up stores increased market visibility by 51%, increased sales by 46% and increased social media engagement by 46%. These three elements will be essential within House of Sunny’s strategy to increase their brand awareness and physical presence. On top of this, it is proven to improve customer’s understanding of the brand, as they can speak to staff and see physical products to experience the quality and fit of the garments. All of these experiences lead to better customer retention and understanding of the brand’s values. If the pop-up store is successful, these customers will become regular customers of the brand’s permanent store, meaning they already have a small customer base as soon as they open the store. This will increase user-generated content created by these customers and word of mouth communication about the brand. To launch House of Sunny, the campaign will be based within Chengdu, which has been named the leader in fashion consumption power within China. “Chengdu topped the index with a total score of 9.3 and ranked first in ‘fashion consumption power,’ ‘fashion business potential,” and “fashion cultural power.’ As such, it is clear that this well-balanced city has an edge in many facets of its makeup.” (Wu 2020) Shanghai or Beijing would be the obvious choice to place a new business, however the cities are so saturated with retailers, and neither of these cities are actually the fashion capitol within China. “Though the per capita GDP of Chengdu was not the most outstanding one among the featured cities, such as Hangzhou, its annual growth rate ranked first with 7.2 percent. Meanwhile, consumers from Chengdu demonstrated an exceptionally strong awareness of fashion and online purchasing preferences.” (Wu 2020)

MISSION AND OBJECTIVES

MISSION STATEMENT: We are in the business of craft ing staple pieces for conscious consumers by providing premium fashionable and responsible clothing. We strive to create carefully craft ed staple pieces, with a feeling that lasts as long as the garment. Quality and affordability are at the forefront of our focus, so each product can become the perfect addition to elevate any wardrobe.

SMART Objectives 1. 2. 3. 4.

Grow brand awareness. Increase brand awareness within China by 2022. This can be measured by looking at engagement on their social media platforms and tracking sales. Increase customer base. Ensure that at least 15% of the total customers are brand loyal by 2024. This can be measured through e-receipts and member schemes. Increase sales channels. Grow from using just two sales channels in 2021 to at least 3 by 2023. This can be measured by looking at online and in store sales. Open a physical store. Open a brick-and-mortar store within China by 2026.

MARKETING PLAN PRICE

PRODUCT

• Prices in the UK for House of Sunny range from £50 to £150, and in Chinese Yuan this is equivalent to ¥440 to ¥1300. This is cheaper than their competitors Icicle who’s prices average at ¥6000. • For the range of dresses that will be created using Yi’s artwork, the price will be slightly higher than the UK price due to the customisation of the pattern and extra work that has been put into the garments. • The best sellers that will be sold in the pop-up store will be equivalent to the UK prices in order to keep the brand comparable to the prices within the UK. • Using the same pricing strategy will also help to track progress against the UK market, as the figures will be in the same range.

• For China, a new range of products will be created using artwork from contemporary artist Luo Yi. Her art is ‘abstract landscapes’ and this fits well with House of Sunny’s current theme within the UK. • This design will be printed onto the ‘Hockney’ dress to create a small limited edition ‘capsule’ collection to be sold within the pop-up shop and on the Chinese website. • Each dress will be printed slightly differently to make every piece unique, increasing the exclusivity of the product and including ‘drop culture’ into the Chinese market as they use it within the UK. • The range will be carried in sizes 4 - 18, one size smaller than they currently carry in the UK. As identified in the situation analysis, on average China has a smaller body type than the UK, so this smaller size is necessary.

PLACE

PROMOTION

• The pop-up shop will be located in Chengdu, mainland China. This is the fashion capitol of China, so is the most appropriate city to implement the launch into. • As well as the pop-up store, House of Sunny could have a consession within the Wangfujing department store in Chengdu. Wholesale within department stores has been successful in the UK, so planning to do this in China too will be a step taken within the next few years. • Placing the pop-up inside a shopping centre would be the best location to begin within an international market, as consumers who would normally shop there will see the store as well as consumers who have heard about it through the businesses marketing. • High levels of foot traffic through the shopping centre will increase the volume of customers inside the store and drive sales.

• House of Sunny use their social media to market within the UK, and in China WeChat is the most popular social media. Shown opposite are two examples of posts that could be used across social media, one to show the inside of the pop-up store and one to display the new collection. • Along with social media posts, influencers and celebrities would be used to share posts and gain customer’s attention around the launch into the Chinese market. • As well as using social media, House of Sunny could create a member scheme with a newsletter and email marketing. This would include posting on their social media before the pop-up opens to build excitement around the launch and get consumers to sign up for updates around the launch date and collection.

(Author’s Own 2021)

(Author’s Own 2021) (Author’s Own 2021)

5 YEAR PLAN AND TIMELINE

To monitor the amount of loyal customers, they will have to sign up using their email address to be sent their receipt. The form below will appear at the checkout both online and in store, taking the customer’s email and analysing to see if they have shopped before.

Examples of how the concession within Wangfujing could look.

Use social media platforms such as WeChat to promote the new launch and excite customers about the exclusive products available.

(House of Sunny 2020)

(Author’s Own 2021)

GROW BRAND AWARENESS WITHIN CHINA BY 2022

2022 2022 will commence the launch of House of Sunny into the Chinese fashion market.

(JLL 2018)

(Author’s Own 2021)

2023

The dresses shown here are mock-ups of what the House of Sunny X Lou Yi dresses could look like.

The first step of this launch will be to create the pop-up shop within Chengdu and design the garments inspired by Yi’s artwork.

(Kim 2021)

2023 will be the beginning of the expansion into wholesale for House of Sunny within China. This will enter them into a new segment of the market and give them access to new target customers.

INCREASE FROM TWO TO THREE SALES CHANNELS BY 2023

Wangfujing is one of the largest department store chains within China, and this is why they have been selected to be the main wholesaler for House of Sunny. The department store describes itself as ‘mid-market’ (Jll 2018), and has locations in Chengdu, Beijing and Shanghai. These are three of the most important fashion cities within China, so the placement is perfect. Expanding into these stores will encourage a new target customer to shop with House of Sunny, and will make it more accessible to everyone.

INCREASE CUSTOMER BASE BY 2024

2024

(Author’s Own 2021)

Using this method of collection email addresses also opens up opportunity to send loyal customers offers and deals such as 10% off when they spend a certain amount, or a points system when they spend in store.

5 YEAR PLAN AND TIMELINE (Author’s Own 2021)

(Author’s Own 2021)

Examples of how Yi’s artwork could be made into other garments.

Expand the range of Lou Yi clothing to include tops, trousers and cardigans. This will then become a permanent range within China. More artists will eventually be incorporated into this.

2025

(McGinty 2020)

(House of Sunny 2020) (Pinterest 2021)

OPEN A BRICK AND MORTAR STORE BY 2026 This report has explored the strategic business plan created for House of Sunny, and how they can expand into a new market. The international market that has been identified as the most suitable for House of Sunny is China, as they are an emerging economy with increasing investment into infrastructure and new businesses.

2026 Continue using influencers and celebrity endorsement to ensure House of Sunny stays relevant on social media and proceeds to grow within the market.

After exploring the correct city to open a permanent store in, House of Sunny will set up their first international store in China. Inspired by the UK stores, it will follow the same aesthetic to ensure a cohesive design across both markets.

The Chinese consumer is fashion forward and conscious, exactly the customer that House of Sunny is targeting in the UK. This creates a market ready to accept the new brand.

(Teh 2018)

(Spedding 2020)

(Shanghai 2019)

Starting with a pop-up store in Chengdu will assess the suitability of China for House of Sunny, and see what the response from their consumer is. Once this has been evaluated and as long as the results are positive, a brick-and-mortar store will be set up within China to solidify their place in the market.

BALANCED SCORE CARD The balanced score card is a model used to measure performance of objectives with metrics and key performance indicators (KPI’s). “The concept of BSCs was first introduced in 1992 by David Norton and Robert Kaplan, who took previous metric performance measures and adapted them to include nonfinancial information.” (Tarver 2021)

Objectives

Measures (KPI’s)

• Measure social media engagement. • Monitor sales within the pop-up shop and through the Chinese e-commerce website. Grow brand awareness within China by • Monitor the total footfall across both sales channels and see how 2022. this increases over time.

Increase sales channels from two in 2021 to at least 3 in 2023.

• Monitor sales within the pop-up shop and e-commerce website, to ensure that they are both growing. • Introduce a wholesale concession inside a department store and monitor growth throughout 2023.

• Use a member scheme to send e-receipts and use this information to see which consumers have shopped the brand more than twice, Increase customer base and ensure this makes them a loyal consumer. that at least 15% of total customers are • Monitor the total consumers versus how many are loyal consumbrand loyal by 2024. ers.

Open a brick-and-mortar store within China by 2025.

House of Sunny’s brand new London store

• Monitor total sales performance within China across 2022-2024 to ensure that opening a store is justified. • Measure total sales performance across the period of the pop-up store. • Measure footfall between Shanghai, Beijing and Cheungdu malls to determine the best place for a store to be implemented. (Author’s Own 2021)

Shown in the balanced score card above, are the four smart objectives created for House of Sunny’s international business plan for China, and how metrics can be used to measure them. Each target has been created for the following year to ensure that expansion continues to grow steadily but will not overwhelm the business. Loyal consumers and increasing sales are the two most important components of the four objectives as this is what will grow the business within China and encourage new customers to shop with the brand. “Customer loyalty increases profits, improves sales success and allows for sustainable growth. A well-designed and well-executed loyalty programme can help you retain existing customers, attract new customers, reduce turnover and drive profits.” (Rocket 2021)

(Kim 2021)

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