In this literature review we examine in the context of the UK clothing industry the growth and emergence of what has been termed the discount or value clothing segment led by brands such as George at ASDA. The review here aims to give a synthesis of the background to these developments, linking theoretical observations as to explaining their growth with empirical observations concerning their capturing of a significant part of the UK clothing retail market. The impact of these developments is further assessed in relation to the competitive pressures now experienced by mid-market retailers such as for example Bhs and Marks and Spencer.
Retail or retailing as vital part of economic activity within modern societies is often defined as any business that directs its marketing efforts towards satisfying the final consumer based on the organisation of selling goods and services, (Gilbert, 1999). However it is true that the pace of globalisation and development in technology seems to be more and more shaping retailing business’ responses to what are increasingly demanding customers locally and globally. Even with more demanding customers though the power of retailers’ brands has been growing and recent research has illustrated that the relatively powerful position of retailers in the business sector appears to be clear cut, (The Economist, 1995).
For example one of the UK’s top ten retailers Tesco launched its fashion range to operate in tandem with its traditional food retailing business which offered it significant competitive capabilities in competing in the discount clothing retailing industry. This is to say that the shift from the traditional trading of food to clothing retailing by Tesco is characterised by large scale multiple chain outlets which in itself is a major trend in the modern retail environment, (Baxter, 2004).
Along with these trends another important factor for consideration is that the consumer has become more segmented while demanding more in terms of added value to goods and services. Thus retailers seek to provide up-to-date goods by using well-presented merchandise in order to create better shopping environments, in a sense place have become just as prominent as product in the clothing retail industry. The trend towards big shopping centres which are often placed next to large or concentrated urban areas is the result of retailers seeking to take advantage of beneficial locations for trade for their outlets and also offer means of achieving economies of scales which aim to provide convenient and flexible shopping environments for customers. In addition to large retailers the important technical aspects related to the rising role of smaller retailers who are able to provide flexible shopping times and delivery channels has been argued as reflecting people’s demand for less time to be spent on shopping and satisfying their requirements for more convenient shopping styles to suit individuals, (Markham, 1998).
It is also vital to mention at this point that the benefits offered by the Royal Mail as well as other private operators such as DHL delivery systems makes for a vital role for mail ordering retail forms being one of the key features of the UK’s retailing industry, (Coopey, O’Connell and Porter, 2005). However continued expansion and generally wide access to the Internet has increasingly shaped consumer’s behaviour towards home shopping in that mail order catalogues are replaced by websites and other online shopping portals with the effect being that e-shopping is now increasingly used instead of mail ordering or ordering over the telephone by UK shoppers.
Arguably then in the UK context more and more people have seemingly accepted e-shopping forms and it has been estimated that the scale of the global e-commerce market would be $7.3 trillion in 2004 having grown from $145 billion in 1999 reflecting this growing importance for e-commerce with current trends in the UK matching these wider ones, (Suh & Han, 2003). It would appear to be readily visible then that the general retailing environment is a more complex one than in the past. Retailers as such must be more sophisticated in terms of their core operations in order to maintain long term organisational growth and increased customer bases by exerting their power over suppliers and selling and targeting the correct goods for diverse customers in the most cost effective and profitable manner. Gilbert (1999) suggests powerful retailers also have a significant impact on consumers in that they shape their behaviour in respect of consumer demand since purchasing is generally selected from what preferred retailers offer in terms of products particularly brand products.
There is growing interest in the study of the retailing industry since there has been significant growth in this retail sector with the increased dominance of the fashion industry and in particular the clothing retailing segment of this industry. This has been accompanied with the industry occupying a critical role in satisfying customer’s needs for style, values and lifestyles through the promotion and selling of fashion goods. The fashion industry in the UK employs more than 300,000 people and has significant effects on economic structure and wider social policy due to fashion being one of the largest business sectors that contributes to national economic performance from a supply side and demand side perspective, (Easay, 2002).
Fashion essentially is about creating and/or changing thus fashion business depends on to a large extent on short term trends which itself is a reflection of designers’ creativity as well as customer demands. It is estimated that the womenswear sector which is viewed as the largest segment in the clothing retailing has traditionally shown the most growth however consumer pressures in terms of demands for exclusive and perceived stylish garments see retailers preferring smaller volume runs of stock and distribution , (Williams, 2002). Therefore in the clothing retail context women are argued to constitute the major proportion of consumers in the modern clothing industry, (Domosh, 1996).
Men however certainly engage in clothing product buying activities however women’s high involvement in relation to clothing buying appears to be more complex and be a more meaningful enterprise for the majority of marketers. Indeed women’s dominance in the clothing market in terms of purchasing can be detected as far back as the mid-19th century which saw women being targeted as the main consumers. Abelson (1989) contends that shopping during this period became a daily ritual for middle-class women in shaping their social images within their respective national contexts.
Drawing on this perspective it is unsurprising to note that social characteristics such as culture, values and beliefs have had and continue to exert a strong influence over clothing selling. However more recently due to the changing role of women in social and economic life such as increased participation in work female consumer demands have begun to focus more on time spent on shopping, convenience in where and how to shop along with flexibility in shopping. This feature may be seen as one contributor to the entry of supermarkets into the clothing retailing industry in tandem with their food and other retail business as such aiming to provide a one stop shopping environment for consumers.
In terms of clothing retailing retailers seek to satisfy customers’ needs by providing in-demand fashion goods. However the changing characteristics generally in this mature industry result in numerous challenges for clothing retailers in maintaining their competitive positions, (Mintel, 2005). Reflecting this one of the main features in a mature industry are intensive levels of competition along with lower customer loyalty. Namely in such industries there is increasing power for customers which has the effect of driving retailers to be more value adding focused as a mechanism for continued survival in such industries.
Porter’s (1980) five forces framework which refers to potential entrants, buyers, suppliers, substitutes and industry competitors provides a useful framework for understanding the industrial environments in which competitive position are able to be achieved whilst bearing in mind the key external competitive environmental factors. The retail marketplace as mentioned previously is arguably at the mature stage of the industrial lifecycle with a stable growth rate yet more operators are entering into the industry thus competition has become both more extensive and intensive.
It is important to mention that competition in the fashion retailing industry comes not only from local operators amongst each other such as the position faced by Marks & Spencer in the traditional UK fashion retailing world but also is from international competitors with strong financial backgrounds such as Gap and more creatively minded retailers such as Zara. The entrant of supermarkets into the clothing retailing field has increased in a very significant way general competitive levels in the industry particularly in the value added and discount market segments. This at the same time has generated threats to clothing retailers who are operating in what is deemed the middle market.
Porter (1980) argues that competition in an industry will continually drive down the rate of return since price wars are often used by retailers in order to promote sales and capture market share. It is obvious that trends in clothing sales are not only influenced by levels of competition but are also associated with the wider features of the fashion industry itself. As a result of these trends just discussed the UK fashion retail industry has witnessed many of the major retailers experience significant reductions in profits, (British Council of Shopping 2004).
The increased power of buyers has the effect of driving down the prices of clothing through customers engaging in bargain hunting for higher quality products and services at lower prices in a variety of retail outlets. Thus retailers as a response strategy attempt to maintain existing customers and attract new consumers through providing value products at a lower prices with a branding strategy often being exploited as a useful tool of building up a good image of better quality products and a loyalty motivated relationship with customers over the long term.
However consumer behaviour towards fashion is dynamic, complex and inherently changeable due to the nature of styles, an example of which is the need for new clothing products with each season. This is discussed in more depth in the later section but here it is worth noting that successful fashion retailers are those who understand their target customers better. It is true to see consumers as presenting significant threats in some ways for retailers while research reveals that retailers tend to exert their power to suppliers, (Walters and Hanrahan, 2000). This is to say retailers sell what they select to sell bearing in mind consumer demands for fashion goods and the price war results in critical concerns on the cost control and efficient operation management.
These emergent features provide a critical perspective and framework for understanding the context of clothing retailers in respect of the integration process between suppliers, retailers and customers which is a pertinent dynamic in the industry. Egan (2001) argues that closer relationships between suppliers and retailers in terms of B2B models to a large extent generates more effective performance in creating competitive advantages through synergistic links. The power of brand names for retailers has a significant influence on the balance of power between suppliers and retailers and at the same time branded retailers are able to shape customers demands as well through influencing the nature of in-demand styles.
An example of this has been George (and other retailers) recruiting well-known designers to create and promote particular clothing runs, (Mintel, 2005). Additionally there is a trend for retailers to integrate backwards through buying suppliers’ plants in order to have more control more over the design and cost of production of clothing goods. In doing so customers at this stage are able to benefit from lower price products generally it must be said though produced outside of the UK and fashion retailers are able to build up effective relationships with both suppliers and customers.
As mentioned earlier increased and more widespread access to the Internet enables consumers to gather more information related to their preferred retail products before they make purchasing decisions concerning those products. In this sense customers not only look for information on goods but also engage in new forms of shopping namely e-shopping. Porter (1980) argues that the search for other products which are able to provide or perform similar or same functions can be viewed as substitutes thus this new mode of e-shopping may be seen as a source of critical substitutes for traditional clothing retailers at all levels of the retail marketplace. It needs to be considered then that the role of discount and value adding clothing retailers along with department stores, independent high street retailers as well as supermarkets to a large extent is related to the need for satisfying customer needs by offering lower prices for clothing products.
Hence price war are often to be seen in the discount clothing market such as that between Primark and Tesco, . However one of the key advantages offered by internet shopping is argued to be the fact that it is able to provide lower price clothing through benefiting from lower costs in terms of physical entities, operational and management cost as well as lowered expenditure on human resources, (Elliot, 2002). This is to say offering lower prices as a useful tool for gaining market share by discount and value adding clothing stores has been and will continue to be more challenged from internet shopping. As such there is a potential threat in consumers shifting from traditional retail stores to shopping online in their search for lower priced clothing, (Baxter, 2004).
Based on this the continued emergence of e-shopping forms will shape traditional fashion retailer’s competitive position in the market and their long term strategies. Such responses will need to be cognisant that price may not be able to be used as a single or sole tool by discount stores and supermarket clothing retailers in competing in the global clothing business environment. Current responses to the threats from the substitute form of E-shopping has seen clothing retailers such as Marks & Spencer and Next providing online shopping websites in order to support their traditional retailing methods in combination with mail order retailing as well. In contrast discount stores and supermarket clothing retailers as a principal response have exploited international sourcing in terms of securing products at the lower costs and leveraging quick responses to consumer demands in order to compete through offering lower prices while maintain quality levels of products, (Birtwistle et al, 2003).
There are traditional discount fashion retailers such as department stores like Primark as well as high street stores like New Look while Marks & Spencer, Next, Bhs have generally dominated the middle marketplace. It is reasonable to say that discount stores concentrate on improving their performance by offering lower prices but good quality products through cheaper international sourcing in which to some degree consumers in the middle market have turned to these stores due to issues of perceived value for money in purchasing products, .
Increasingly middle market retailers tend to respond to this competition through looking for cheaper sourcing countries from areas such as Asia, the Middle East and some European countries in order to improve their competitive capabilities in competing in the price at which products are offered to customers, (Harris, Brewster et al. 2001). Other trends have been towards internationalisation with an example being Next’s overseas franchise operations reported as being successful with overseas sales increasing by 26.9%. Similarly the retailers overall profit increased dramatically due to effective cost control and merchandising from overseas into the UK, (Datamonitor, 2004).
In addition to the severe competition between discount retailers and specialist retailers in the middle market the entry of supermarkets into the clothing retailing industry has accelerated the pace of competition in the industry entire. For instance ASDA and Tesco have operated successfully in introducing clothing product ranges into the marketplace which has presented significant competitive threats to traditional discount retailers in the UK market. Porter (1980) suggests that new entrants are able to bring new capacity to the industry which can be good for long term industrial growth.
In the case of the entry of supermarkets the use of discount pricing as one of the most important promotion tools is based on the efficiency in response of such companies in terms of sharing functions and information as well as large customer base from their other retail operations. However research also shows that customers taking advantage of price discount generally return to their favourite retailer brands after availing themselves of discounted product offerings, (Ehrenberg et al, 1994). This suggests that supermarkets as traditional food and daily trading retailers need to build strong store brand names linked to their clothing ranges in order to build customer loyalty. One of the more successful examples of this can be seen in the case of George at ASDA, (Mintel, 2005). In general it can be said of the UK clothing industry that there are various forms and types of new entrants at all levels of the market with the result being that branding strategy plays a critical role in maintaining long term customer loyalty and competitive advantage.
The common definition of consumers suggests that individuals as well as groups of people purchase products or services for personal use, household use or as a gift. In other words they are clarified as end users of particular products that they purchase. Linked with this retailers are situated as being in the final step of the distribution chain and are as a result closely linked with these final users or customers. Therefore it is useful to look at concepts dealing with conceptualising consumer behaviour regarding clothing product buying.
Blackwell, Miniard and Engel (2000) define the beginning step of consumption processes as the recognition of needs which itself can be influenced by various factors such as reference group values, self esteem and value systems within cultural circumstances. For instance research has illustrated that sales are one of the most popular promotional tool and often become driving factors and motivational reasons in ensuing stages for customers in defining their buying needs, (Smith & Taylor, 2004). Promotions like ‘buy one get one free’ are consequently also important sale tools in supermarkets where customers are influenced to purchase products that they do not necessarily need but are driven to purchase by the promotional tool.
However the literature suggests that to what extent the consumer intends to resolve their perceived needs and motivation depends on the relative importance of the problem and the difference between the current and desired situation corresponding to the product being considered for purchase, (Foxall, Goldsmith & Brown, 1998). Linked with this modern customers have become more sophisticated with the effect of experience being that price is often used as an indicator of the quality of goods on offer, (Jobber, 2001). This is the case for clothing buying activities where brand name, price, style as well as quality tend to have important effects on the decision making process related to the purchase of products. According to Entwistle (2000) clothing is not simply treated as a garment but takes on significance in that people often use fashion and clothing goods to define and negotiate their identity within social settings.
The increasing power of customers enables them to bargain for lower price clothing yet pure discounts on price are not necessarily vitally important for them in making buying decisions. This perspective on consumer behaviour provides a useful angle for conceptualising discount clothing retailers and supermarket clothing operators who seek to create competitive advantage largely through offering better value for money lower priced products. As suggested by Foxall, Goldsmith and Brown (1998) there are several stages after the need recognition stage before the final buying activity therefore a communication strategy used to build up effective customer relationship and brand image by fashion retailers should be used in order to achieve strategic goals in the most cost effective manner.
In the retail context women are suggested to constitute the major proportion of clothing consumers in the modern fashion industry, (Domosh, 1996). An important point to consider in relation to this is that women are more involved in both social and economic life within society which results in increasing demands on fashion, style and self identity for women which is often expressed in choice of clothing and recognisable brand names in clothing. Additionally a determinant of the degree to which customers evaluate a brand is the level of involvement namely that high involvement means extensive evaluation of a product and any comparable products, (Hawkins, Best and Coney, 1989).
With buying clothing products the degree of involvement is suggest as being typically medium to high involvement, (Breward, 2000). Bearing in mind the concept of involvement and the roles of women involved in buying clothing products it is useful for clothing retailers such as discount clothing stores to exploit effective marketing tools in maintaining customer loyalty through providing value added clothing and developing long term loyalty based relationships with customers.
An example of this would be relatively successful introduction of store credit and loyalty cards by a number of clothing retailers, (Mintel, 2004). In addition growing social pressures on women such as time commitments to work have the concomitant effect of women having less time to go shopping in a physical sense. E-shopping then as a result of this trend presents significant threats to traditional fashion retailers, . As such while supermarkets tend to use their convenient locations and one stop shopping premises to create competitive advantages for their discount clothing sections. However in terms of fashion professional brand images through responding and making use of designer inspired fashion trends, styles and tastes plays a vital role in building strong brand names for supermarkets. Doing so will greatly enhance discount clothing retailers’ ability to maintain customer loyalty in terms of repeat buying.
The clothing retailing industry in the UK has experienced intense changes resulting from the growth of discounted clothing retail selling. The middle market may be characterised as being dominated by multiple specialist fashion retailers such as Marks & Spencer, Top Shop and Next while department stores such as Debenhams and Selfridges stores have a strong competitive influence within the industry in the luxury fashion product sector. The position of discount retailers including Primark and New Look has been significantly challenged by the entrance of supermarket operators such as George at Asda and Tesco while intense competition from international chains such as Gap, Zara and H&M has also increased due to the accelerating pace of globalisation. As a result Whitefield (2001) argues that the UK clothing retailing industry is one of the most competitive in Europe with multiple clothing retailers having captured approximately 70 per cent of the overall clothing market in turn generating a high concentration within the industry.
This phenomenon of retail concentration means that inefficient and undifferentiated clothing retailers are unable to survive in this mature industry in the UK context, (Abernathy et al, 1999). The price orientated discount clothing retailers have so far sought to build brand names reflecting value for money principles in order to compete with retailers in the middle marketplace as well as supermarkets who target similar customer groups and segments of the market. Major discount clothing retailers have been concerned with cost delivery and quality as their key criteria for suppliers in such a way as that lower pricing and quality product levels are able to be achieved in meeting customer demands, (Jackson & Shaw, 2001).
International sourcing of clothing products would seem to be a common tool used by discount clothing retailers and supermarket operators in achieving cost effective product cycles. However there are hidden disadvantages in buying from overseas such as transportation costs, political circumstances such as the recent trade dispute between the EU and China and the inability of repeating orders at high speeds, (Hines, 2000). Therefore more UK retailers including both discount and middle market retailers have seemingly turned back to local suppliers seeing quick response to stock needs as playing a vital role in attaining competitive advantages in the UK market, (Birtwistle et al, 2003).
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