Lecture 2- Fundamentals of Fashion Marketing PDF

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Fundamentals of Fashion Marketing

This section looks at how the retail marketing mix emerged and the six elements of the retail marketing mix. 1.0

Retail marketing mix

Marketing as a discipline began to take form in the 1950’s during a period where the focus was mostly on tangle (physical) goods and subsequently, tools such as the marketing mix started to emerge. The marketing mix is a ‘toolbox’ that the marketer has at his/her disposal in order to manipulate a product or service and is a means of transferring marketing planning into practice. The marketing mix was first popularised by McCarthy in 1964 and is also referred to as the 4P’s (Product, Price, Promotion, Place). Each of these P’s consists of a further mix of elements itself (e.g. product mix, price mix, promotional mix, place mix).

As marketing began to expand and more and more businesses adopted marketing practices, a gap began to emerge between the marketing of tangible products and the marketing of intangible products (services). Academics and practitioners felt that the 4P’s was insufficient for the effective marketing of services and an expanded marketing mix for services was proposed by Booms and Bitner (1981) that included the four traditional elements (product, price, promotion, place) with the inclusion of an additional three elements (physical evidence, people, process). Over time, variations of the marketing mix have emerged with some adding more P’s and others introducing alternative frameworks such as the 4C’s ( Consumer wants and needs; Cost to satisfy; Convenience to buy and Communication; The retail marketing mix was designed specifically for the retail environment by Berens (1983) and consists of 6P’s (Product, Price, Promotion, Place, Presentation, Personnel). This is the version of the retail marketing mix that is most popular and is referred to as the retail marketing mix or the 6P’s of retailing. In addition to the original 4P’s introduced by McCarthy, it includes personnel and presentation as

these are considered to be the two main elements that differentiate the retail environment and provide the customer with a unique retail experience. 1.1

Product

The key questions for the product-based decisions for the retailer include:



Product assortment (product breadth and depth, consistency of product lines)



Level and type of customer service (delivery options, degree of self-service)



Supporting services (credit and after service initiatives)

1.2

Price

Price is the exchange value of goods and service, usually expressed in terms of money (price is what you pay and value is what you get in return). Sophisticated pricing models that incorporate science and psychology are used by apparel and fashion brands to attract consumers and maximise profits. Some of the popular pricing strategies include:



Penetration

pricing

(setting

a

price

in

order

to

maximise

market

penetration/market share) 

Price skimming (setting a price that may be periodically reduced in order to maximise profits)



Competition based pricing (setting a price that is in line with competition)



Premium pricing (setting an inflated price to reflect a premium or luxury brand status)



Psychological pricing (variety of initiatives to induce a positive psychological reaction; e.g. £9.99)



Price bundling (where two of more items; e.g. dress and jacket, are priced as one item)

 1.3

Cost base pricing (pricing based on adding a percentage or mark-up on costs)

Promotion

A unique feature of retail promotion is that two or more brands are often involved; the brands that the retailer is selling and the retailer brand itself. Image oriented retail promotions are focused on creating awareness of and promoting the retail store image, whereas product range promotions are designed to generate favourable

attitudes and behaviours towards the retail store itself. In fact, some retail promotions and advertising are entirely or partially paid for by the brands (co-operative advertising/promotions). Key elements of the promotional mix include:



Advertising



Sales promotions



Point-of-sale



Word-of-mouth



Personal selling



Digital/social media



Merchandising (also falls under Presentation. Why does merchandising also fall under promotions?)

1.4

Place

Often referred to as ‘location’, place decisions involve the location, business hours and the utilisation of the retail space and environment. The pressure placed on physical retail stores in recent years from the online environment has been immenseness. Maximising revenues and profits for every square foot of space has always been challenging for stores and the online dimension has intensified this pressure and radically changed the nature of competition in the apparel and fashion industry. Many apparel and fashion brands now engage in multi-channel retailing with the aim of moving towards a totally seamless customer experience (omnichannel) regardless of what the consumer is purchasing and whether online or instore. Creating a seamless experience (omni-channel) requires integration at three levels:

1.5



Online-mobile-instore



Convenience-choice-experience



Order fulfilment-customer service-inventory control

Presentation

In the context of retail, presentation is concerned with the physical evidence or the physical environment that communicates the retail store image and includes elements such as exterior and interior facilities and layout, delivery vehicles, staff

and staff uniforms, websites, lighting, noise, smell, temperature, layout, signs and symbols. The environment in which the retail service encounter takes place is referred to as the ‘servicescape’.

Pre-COVID, apparel and fashion retailer brands were redesigning and investing heavily into experimental physical stores by integrating technology into the instore experience in order to revitalise the declining physical retail sector. The pandemic has significantly altered consumer behaviour and along with government restrictions has haltered the resurgence of such prominent retail spaces for the foreseeable future. Is there still sufficient demand for physical stores and will apparel and fashion retailers continue to invest in physical stores post-COVID?

1.6

Personnel

People represent the business and the brand and the image they present internally and externally is important. The first significant contact the consumer makes is often with an employee and the initial impression employees create is essential and quite often long lasting. Personnel based strategies include:



Employee recruitment and training



Management style



Culture



Customer service

Fundamentals of Fashion Marketing

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Internal Environment Analysis using the VRIO Framework

This section covers the internal environment analysis using the VRIO framework. VRIO is an acronym for Value, Rarity, Imitability and Organisation. It is a questionbased framework that can be addressed in a decision tree format. 2.1

Value: Does the business offer a resource that adds value for the consumer and can it exploit an external opportunity with an internal strength/capability? No:

The business is at a competitive disadvantage and needs to re-evaluate its resources and capabilities in order to identify value.

Yes: 2.2

If value is identified, move onto Rarity.

Rarity: Does the business control scarce resources or capabilities and does it have something that is difficult to source but high in demand?

No:

The business has value but lacks rarity and is in a position of competitive parity. Although the business resources are valuable, they are common and this makes competing in the marketplace challenging (but possible). Go back one step and re-evaluate.

Yes: If value and rarity is identified, move onto Imitability. 2.3

Imitability:

How expensive is it for others to imitate or duplicate the

businesses resource or capability and how difficult is it to find a substitute for this resource of capability?

No:

The business has a resource that is of value and rare, but can be easily copied (or is affordable) and therefore the business has a temporary competitive advantage . In this state it is difficult to continually hold an advantage or stay ahead of competition and it is recommended that the business go back one step and re-evaluate.

Yes: If the business offers something that is valuable, rare and difficult to imitate, move onto organisation.

2.4

Organisation: Does the business have organised management systems, structures, processes and culture in order to exploit key resources and capabilities?

No:

Without the internal organisation and structure, it is difficult for a business to exploit the potential of its rare, valuable and difficult to imitate resources. In such an instance, the business will have an unused competitive advantage and will need to re-evaluate its organisation, structure and processes.

Yes: The business has navigated all four components of the VRIO framework and achieved sustainable competitive advantage.

Fundamentals of Fashion Marketing Both micro and macro are current and forward-looking frameworks used to uncover the current situation and well as trends and potential opportunities and threats in the external environment. This section covers the external micro environment using the Porters 5 Forces Framework.

3.0

Micro Environment Analysis: Porters 5 Forces

Porters 5 forces was developed by Michael Porter in 1979 and is one of the most highly used and regarded strategic business tools. The framework identifies five areas (forces) which make up the competitive environment that can have an impact on a business and its profits. Examine the framework and criteria for each of the 5 forces carefully and you will notice that bargaining power of buyers/customers and bargaining power of suppliers are both linked as are the threat of new entrants and the threat of substitutes (why are these linked?).

3.1

Threat of new entrants

The easier it is and the more attractive it is to enter a particular market, the higher the treat that exists to existing players in the market. Factors such as economies of scale, barriers to entry and economies of scale are key elements. For example, having a low-cost base (or price) or spending significant amounts of marketing and advertising may make it difficult for new players to enter the market. How easy it is to enter the fashion retail sector or the fast fashion market? (e.g. How much would it cost to setup? How would you compete? Could you compete effectively online? Can you source supplies and stock? What is the current competitive nature of the market? How profitable is the market?).

3.2

Threat of substitutes

This is concerned with the likelihood of customers identifying a different way of doing something or consuming something. What is the threat of substitutes in the apparel and fashion retail sector? (e.g. People purchasing vintage/used cloths? Consumers renting cloths and fashion items? Consumers

making

their

own

clothing

and

fashion

items?

Consumers

exchanging/swapping cloths?).

3.3

Bargaining power of buyers/customer

The key question here is ‘how easy is it for buyers/customers to place pressure on you’? The higher the customer power, the more pressure they are likely to place on a business and the more pressure on its prices and profits. The size of the customer and the size of the order, how easy it is for the customer to switch to another retailer and the cost of switching to another retailer are key factors that determine the bargaining power of buyers/customers. What is the bargaining power of buyers/customers in the apparel and fashion retail sector? (e.g. How much buying power do customers have? How easy it is to switch to alternative retailers? How price sensitive are customers?). 3.4

Bargaining power of suppliers

How easy is it for your suppliers to place pressure on your business? Factors such as how many suppliers exist, the size of suppliers, how unique the suppliers are, your ability to switch to alternative suppliers and the switching costs all dictate the power balance for suppliers. What is the bargaining power of suppliers in the apparel and fashion retail sector? (e.g. How many suppliers exist? What is the size of the suppliers? How easy is for suppliers to find alternative buyers/customers?).

3.5

Intensity of rivalry

The focus here is on the competitive nature of the market and the key areas to look at include the number and strength of competitors in the marketplace, do competitors have a sustainable competitive advantage, how loyal are customers and how easy is it for customers to switch to alterative retailers. In recent years, the trend of customers switching to online purchases has increased with the corona virus speeding up the demise of many apparel and fashion retailers. This has shifted the competitive landscape in which consumers are increasingly searching on multiple platforms for the best deals and prices as well as the need for new and emerging business models that cater for a new dynamic customer.

What is the intensity of rivalry in the apparel and fashion retail sector? (e.g. How price sensitive are consumers? How has consumer buying behaviour changed? How loyal are customers?).

Fundamentals of Fashion Marketing Both micro and macro are current and forward-looking frameworks used to uncover the current situation and well as trends and potential opportunities and threats in the external environment. This section covers the external macro environment using the PESTLE Framework.

4.0

Macro Environment

The macro environment factors are the uncontrollable external forces which influence and impact on a company’s decision making and performance. PESTEL analysis is a macro environment framework used to identify, categorise and analyse key external factors that represent threats and opportunities a fashion firm is faced with right now and into the future. PESTLE is an acronym and stands for Political, Economic, Social (or Socio-Cultural), Technological, Environmental and Legal.

The fashion industry has undergone various phases of disturbance in recent years; transitioning from offline (bricks and motor) to online (e-commerce) and from ecommerce to social media-based channels. This has all been dwarfed by the recent and ongoing COVID pandemic that is leading to a wholescale transformation of the fashion industry.

In an industry that is highly competitive and continually evolving to keep pace with the dynamic behaviour of consumers, fashion brands, retailers and companies must find ways to adapt to the continual shifts in the apparel and fashion industry. Between the years 2018-19, the fashion industry can be described as undergoing a period dominated by emerging technologies and in particular, technologies that were bridging the gap and engaging fashion consumers with and the fashion brands.

The fashion industry is currently focused on crisis management and contingency planning, which must eventually be succeeded by re-modelling the entire global fashion industry. The virus has affected everyone’s daily lives with levels of anxiety and uncertainty being experienced by individuals and businesses alike on a daily basis. Although the timeline and eventual severity of the pandemic is not yet known, there is no doubt that the fashion industry is just entering a long phase of turmoil and reshaping.

Many variations of PESTLE exist and It does not matter which variation is used, so long as the key external factors are covered in a systematic manner. Some examples are:



PEST: Political, Economic, Sociological, Technological



PESTLIED: Political, economic, sociological, technological, environmental, legal, international, environmental, demographic



STEEPLE: Sociological, technological, environmental, economic, political, legal, ethical

4.1

Political

Political stability is a critical dimension for any industry and none more so that the apparel and fashion industry where significant segments rely on the seamless transition of goods and services between national borders and markets. Political issues and decisions tend to be set over medium and long-term time horizons and therefore have a long-term lasting impact on industry, with global terrorism and political instability being the key factors impacting the global apparel and fashion industry; the higher the level of political instability, the higher the uncertainty in the industry.

Leading fashion brands and businesses tend to face limited political challenges due to their power and influence in comparison to smaller brands and businesses. The focus of leading fashion brands and businesses is more on ethics and compliance.

Brexit (UK’s departure from the European Union and Customs Union) is one of the biggest political issues facing the fashion industry at both the UK, European and global levels. The EU is the UK’s largest trading partner and the UK apparel and fashion industry is structured on tariff-free access to the EU and if no agreement is reached by December 31 st 2020, the UK faces a very real risk of export tariffs into and from the EU. This would prove devastating for the UK apparel and fashion sector that has already been severely hit by the coronavirus pandemic. The UK’s top clothing and apparel export partners include Germany, Republic of Ireland, France and Italy and its top imports coming from China, Bangladesh, Turkey and Italy. Without a trading agreement the UK falls under the World Trading Organisation rules; where goods and services are subject to customs checks and tariffs. This would make apparel and fashion goods and services more expensive for consumers from outside the UK as well as making imported goods and services more expensive for UK consumers.

US elections will have a significant impact on the global economy at every level. The current administration’s policies that have triggered a US-China trade war are likely to escalate if President Trump is returned for another term. Clothing is among the highest import categories from China to the US, accounting for 40% of the US apparel market. Any continuation or acceleration of the trade-wars (started July 2018) between both countries will have a significant impact on the global fashion industry. In fact, factories have already shifted from China to Southeast Asia and Bangladesh (e.g. Calvin Klein, Tommy Hilfiger, Levi’s, Crocs and Uniqlo have shifted production out of China). The Trump administration’s trade war with China may have a multifaceted impact on the fashion in...