PESTLE ANALYSIS

One political factor that will affect the luxury sector is Brexit. From the results of the referendum the value of the £ had fallen against the $, this meant that there was a temporary lift in sales in the UK luxury market.

However, the move in pricing was forcasted to negatively affect domestic and international spending.

For UK shoppers, luxury purchases have become smaller and less frequent. Yet, in Feburary of 2017 there was a report that stated that globally London was the city with the most potential for luxury retail growth.

It will be hard to know what the value of the £ will be over the coming years.

However, Diesel will remain on top of the UK market if they show to their consumers a high level of customer service, communication and individuality.

If Diesel were to share a sense of commitment to increasing the sustainability of their company towards the environment and their social responsibility as it will allow them to stand apart from their competition (Refer to appendicies 9&10). (Verde Nieto, 2017)

Another political factor that is affecting the luxury sector is the sudden surge in terrorism.

Europe houses almost half of the major fashion capitals in the world. Statistics show that there has been a decline in tourism in 2016 than that of 2015. This a problem because in many luxury markets, tourists make up most of their consumers; an example of this is the French luxury market.

Economic

The first economic factor that has affected the luxury sector is the end of the recession. With the increase in employment, consumers now have more money to spend on luxury items and therefore sales will increase for luxury brands such as Diesel.

Another economic factor that will affect the luxury market is the falling price of cotton however reports show that demand is only to increase.

The price of cotton began to rise in 2016 due to the increase in its demand, supply then fell from the Chinese market sending cotton buyers into a panic. The fall in global ending stocks is predominitly due to the reduced ending stocks in China as well as global consumption outweighing production. (Neate, 2013 & MINTEC, 2017)

Social

Today’s society is more environmentally aware than ever. Consumers want to buy into a brand that supports social injustices and environmental issues.

Ethical shopping is becoming increasingly important, consumers are becoming increasingly aware of the source of their products and how it is produced (Refer to appendix 10). This influences fashion brands such as Diesel to become more sustainable and close the loop around recycling and reusing clothing.

Another social factor that affects the luxury retail sector is that Diesel must compete with other fastfashion retailers; todays consumers are impatient and unloyal to just one brand, they see what is on the catwalk and will gravitate towards the brand who can provide a balance between high quality and reasonable prices.

Technological

Diesel’s main competitor Levi’s offers a virtual try on experience for their consumers; this is where the consumer puts all of their measurements, height, age and weight.

The system will then bring up an image of a body type similar to that of the consumers so that they can know what a specific pair of jeans looks like on them without having to physically try it on.

If Diesel were to update their technology to the standard (or higher) of that of their competitors so that they can remain competitive in this fast moving industry and do not fall behind.

Another technological advancement Diesel could make in order to enhance their competitiveness in the luxury retail sector is to introduce iBeacons.

iBeacons allows mobile apps (running on both iOS and Android devices) to listen for signals from beacons in the physical world and reacts accordingly to deliver relevant information based on the consumers location (in-store or passing by).

The iBeacon can create notifications for the consumer such as;

- Personalised deals

- Discounts

- Products recommendations (for example, in-store availability of viewed products to help improve the consumers experience.

‘Retailers can combine online buying behaviour in-store location data gathered via beacons to serve customers with relevant information or offers right at the point of sale.’ (iBeaconInsider)

Legal

A legal factor that will affect the luxury retail sector is that of corporation tax. This is because if corporation tax rises, businesses will be more likely to move to third world countries where corporation tax is lower.

In the UK, corporation tax for Main Rate (companies with profits over £300,000) such as Diesel has remained at 30% from 2014 up until 2017(GOV.UK, 2017).

Another legal factor that has affected the luxury retail sector was the increase in taxes and levies. However it has been reported from Bain & Co. that the luxury market in the US and Europe had improved tremendously despite these factors, and demand in China continues to rise.

However, it has been recognised that governments tend to target the luxury retail sector, implementing increased taxes and levies because their consumers have a higher disposable income. Yet according to Bain & Co., ‘sales are defying initial concerns over eurozone turmoil and fears of a cool down in emerging markets.’

Environmental

The first environmental factor that will affect businesses such as Diesel in the luxury retail sector is cotton.

Cotton is a major factor when dealing with denim. Diesel must think of new ways in how to tackle the affects it has on the environment and to become a more environmentally sustainable brand by moving towards organic cotton certified by GTOS which are tested against a strict criteria of environmental and social criteria. Cotton growing uses large masses and pesticides than any other are of agriculturial production, poisoning the earths air, water and soil (EcoOutfitters, 2014).

Diesel’s parent company OTB is very vocal about their ethical ventures. Their newest project is the collaboration with San Patrignano. This focuses on the Italian communitiy, coming together in order to help young people suffering with any kind of addictions.