MR 04 04-Cotton-On-Research-Paper-2-1-3 PDF

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MARKET RESEARCH REPORT

Market Research Team MR_04_04

13204538 Adrian Pantaleone 13190311 Ashley Prasad 13194168 Brandon Bodon 13269648 Mari Alkhamesi 13219934 Matthew Varrica 13237324 Nadia Acitelli 13226369 Nick Barklay 13035922 Nicola Palamara

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CONTENTS Executive Summary …………………………………………….…………………… 3 Research Issues and Objectives ……………………………………………. 4 Background and Motivation for Research……………………….… 4 Decision Problem……………………………………………………………. 4 Research and Objectives Questions………………………………… 5 Methodology……………………………………………………………………………

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Research Approach…………………………………………………………… 6 Types of Data Used ………………………………………………………… 6 Sampling ………………………………………………………………………… 7 Timescales ……………………………………………………………………… 7 Deliverables …………………………………………………………………… 7 Budget

…………………………………………………………………………… 7

Results …………………………………………………………………………………… 8 Conclusions

…………………………………………………………………………… 19

Recommendations ……………………………………………………………………… 21 Research Limitations ……………………………………………………………… 23 References ……………………………………………………………………………… 25 Appendices ……………………………………………………………………………… 26

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EXECUTIVE SUMMARY Cotton On is a prominent Australian clothing brand across the local and international retail landscape however, technological developments sees rise in the closure of physical stores and a reduction in their palpable presence. To combat this problem, our team has conducted research to establish a way to redirect customers back into Cotton On stores.

Research was directed at individuals aged between 18 and 35 years, living in Greater Sydney. The team utilised both exploratory and descriptive research methods to capture qualitative and quantitative results.

Our research revealed insights regarding: •

Brand awareness among target market

•

Cotton On in-store attractions vs online store attractions

•

Shopping behaviours and preferences of existing and potential Cotton On customers

•

The impact of Amazon on other e-commerce platforms

•

The marketing mix of Cotton On

•

Individual views on ethical clothing production and fundraising

These findings and insights allowed us to formulate recommendations to address the decision problem. We suggest an initiative to increase social media following as well as shifting focus from promoting affordability to showcasing clean and tidy stores and improving the frequency and quality of sales. Each of these factors would enhance the consumers shopping experience and attracting them to return to instore shopping rather than ecommerce channels. These recommendations will allow Cotton On to retain existing customers as well expand their customer base to a new audience.

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RESEARCH ISSUES AND OBJECTIVES Background and Motivation for Research With the increase in technological developments, Cotton On has experienced a decline in sales in their physical retail stores. The key motivators that form the basis of their decision problem are executive apprehensions regarding the shopping habits of consumers, the factors that influence when, where, why, and how they shop, and the threat of competitors entering the market.

Decision Problem The clothing retail sector in Australia is currently facing major challenges due to the exponential increase in the use of online shopping channels. Many clothing retail stores are shutting down or reducing their physical presence due to pressures from these new shopping technologies. The research conducted aims to produce insights into the reasons behind the shift away from the use of brick and mortar stores. This new information can be used to recommend ways to redirect customers into physical stores.

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Research and Objectives Questions Cotton On has provided the below research brief which allowed our research team to accurately determine the reasons why customers are choosing online shopping channels rather than brick and mortar stores. In order to construct a successful marketing strategy it was essential that our research was guided by the below points.

1. To identify the profile of clothing store retail customers and its brand awareness 2. To determine retail shopping habits of the target market §

How often, When & Why do consumers shop online or in-store shopping?

§

What technology & consumer trends are affecting clothing retail shopping?

§

What effect do malls have on clothing retail shopping experience?

§

What type of retail goods do consumers buy?

§

What are the key differences between online and brick-and-mortar store shoppers?

3. To determine the threat posed by Amazon entering the Australian market 4. To identify marketing mix characteristics. To determine: Product: •

If brand of clothing store is important in retailer choice.

•

What products would entice consumers to use a clothing store.

•

If exclusive product availability is an effective strategy for the retailer

Place: •

Why consumers would rather shop online than in-store.

Price: •

A pricing strategy for the retailer

Promotion: •

The best way to communicate information about a clothing store’s products to the target audience

•

5.

The best way to promote the clothing store shopping experience

Corporate and Social Responsibility •

To determine what best practices/ethical behaviour consumers expect from a clothing store

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METHODOLOGY Research Approach To address the decision problem, it was essential to employ both exploratory and descriptive research approaches. As the exploratory research approach allows for a small, controllable sample size, it was possible to gain quality information about interviewee’s thoughts and feelings. The descriptive research approach, which is quantitative in nature, provides concrete evidence of these feelings and attitudes on a broader population scale through statistics from a larger sample size.

Types of Data Used In terms of exploratory research design we used In-depth interviews (qualitative data) and a online questionnaire for our descriptive research design (quantitative data)

1. In Depth Interviews In total, 8 in-depth interviews were conducted aiming to identify key trends in the attitudes and feelings of members of the sample with varying demographics. The open-ended nature of in-depth interviews allowed for respondents to expand on their answers, gaining informative insights about the factors contributing to decreasing rates of Cotton On in-store customers. Besides pre-written interview questions, the process was highly unstructured, excluding probing for further clarification which allowed the interviewer to manage the interviewees’ understanding of the question in order to get a relevant answer. These interviews were conducted over a relatively short time of 20 minutes, requiring observation and interpretive skills, allowing for slight generalisability of results, evoking many important insights.

2. Questionnaires As a form of exploratory data, our team utilised a questionnaire, covering the scope of research objectives. Through the data gathered from interviews, we were able to restructure questions to achieve relevant responses. Google Forms was utilised to gather and organise responses, assisting to visualise the information collected. The questionnaire method was chosen to produce results that could determine descriptive information, relationships and causal predictions in relation to Cotton On’s physical and online climate. This was an efficient way of generalising results and deriving concrete facts that allowed us to make conclusions about how to revert the wider population back to Cotton On stores. This data collection took place over two weeks, hence, a substantial amount of responses were collected. .

7 Data Analysis Techniques For the in-depth interviews, a debriefing analysis was conducted by summarising the comments from interviewing to reveal trends in the insights. In terms of quantitative data, bar charts and pie charts were used along with a chi-square analysis and regression analysis. Sampling Sample Size In terms of the in-depth interviews, the sample size entailed 8 participants. This is consistent with the requirements of qualitative data as it revealed a deep understanding of an individual from the target market. Our team believe this sample size derived insights that were highly significant for our research.

The questionnaire consistent of a larger sample size; 87 respondents. This substantial number allowed our team to gather results and draw trend reflecting the thoughts and beliefs of the wider population. This also allowed a range of demographics to be analysed and more accurate recommendations were identified to solve the decision problem. Quota Sampling This method involved the selection of future participants according to pre-specified quotas such as demographic characteristics e.g. age, race, sex, income. The survey was distributed to people appropriate for our target market (18- 35 years), making data relevant to Cotton On. Snowball Sampling Involved subjectively identifying and qualifying a set of initial respondents who can, in turn, help our team identify additional people to be included in the study. This sampling technique was beneficial as it allowed the respondents to pass on the survey to similar demographic and psychographic characteristics. Convenience sampling Samples were drawn at the convenience of our team. The convenience of emailing surveys and sending through social media platforms to respondents was beneficial and increased the time-efficiency of the responses.

Deliverables The survey results were collected via Google forms, and various charts and graphs were designed to display results. The graphs created by Google Forms, (included in the Results section) enabled the data to be clearly and succinctly represented in visual form, making it easier to understand and draw conclusions. Research budget The initial budget of our primary research was $0; as we had no cash to spend. Due this factor, we could not offer non-monetary incentives (lollies or chocolates) to our survey respondents and interviewees. Thus, the selected research methods were free of charge.

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RESULTS Qualitative and quantitative research methods were utilised. For qualitative, various in-depth interviews, were carried out and recorded. For quantitative, a questionnaire with 87 respondents has been analysed to determine trends and provide solutions to decision problem set by Cotton On.

1.1: Profile of clothing store retail customers: Figure 1: Gender of Participants

Figure 2: Age of Participants

Figure 1 & 2 depict the profile of customers that participated in this study. Figure 1 highlights that out of the 87 participants, there were more females (74%) than males (26%). Figure 2 most participants in the study were aged between 20-24 years old (35%), followed by 15-19 year-olds (33%), accurately reflecting the target market of Cotton On.

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Figure 3: Distance from Nearest Shopping Centre Figure 3 emphasises that the majority study participants (55%) live within a 20-minute car drive from their nearest major shopping centre. With 39% of participants living 20-40 minutes away

Figure 4: Consumer Personal Income Frequency Figure 4 expresses that the majority of survey participants had lower personal incomes, with 27 people having an annual income under $10,000 and 18 people bringing in $10,000 $29,000 per year.

1.2: Brand Awareness Figure 5: Awareness of Cotton On

Figure 6: Awareness of Cotton On website

Figure 5 emphasis that 97% of the participants in this study were familiar and had shopped within a Cotton On store. However, Figure 6 highlights that only 60% of the participants had visited the Cotton-On website, a potential issue in Cotton On’s overall brand awareness.

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2.1 : Retail shopping habits of Cotton On’s target market Figure 7: How often do consumers shop IN STORE at any fashion retailer?

In Figure 7, 35.6% of participants shop in store at fashion retailers monthly, and 24.1% shop at fashion retailers fortnightly.

Figure 8: How often do consumers shop ONLINE at any fashion retailer? Similarly, Figure 8 indicates that 23 participants shop bi-monthly for clothing items online from fashion retailers, with 19 of participants indicating they shop online at fashion retailers at least once a month.

It is worth noting that 13 people indicated that they do not shop online at any fashion retailers. Besides this, the results between consumers shopping in store and online for

clothing

items/accessories

from

fashion retailers can be described as somewhat similar.

11 2.2: Preference of consumers: In store vs Online Figure 9: Overall, do consumers prefer shopping In store or Online for Cotton On items?

Figure 9 demonstrates that majority of participants (76%) would prefer to shop in store for their clothing items as opposed to online.

In an attempt to find why this is the case, we provided 5 potential reasons a consumer would shop in store compared to online and observed the most agreed reasons. The 5 reasons listed were: Store Ambiance and Atmosphere, In-store only Sales, Store layout/presence of a range of physical products, ability to try on clothes before buying and presence of customer service. The majority supported that in-store sales (Figure 10) and having the ability to try on clothes before buying in store (Figure 11), were the main reasons they shopped in-store.

Figure 10:

Figure 11:

Thus, presenting potential marketing routes that Cotton On can exploit, primarily revolving around providing additional in-store or clearance sales to customers and encouraging consumers to try on clothes before they purchase them.

12 2.3: Technological trends affecting retail fashion shopping Figure 12: Chi-Square to test for independence between Cotton on consumers that shop online and consumers that follow Cotton On on any social media platform:

From these results, since the chi-square statistic (13.307) is larger than the chi-square critical value (3.84), these two events are NOT independent. I.e. whether a customer does or doesn’t shop online at Cotton On, DOES DEPEND on if they follow/don’t follow the brand on a social media platform. We can successfully reject the Null Hypothesis that there is no correlation between following on a social media platform and shopping on the Cotton On website. This can also present a potential marketing route, where Cotton On promote and improve the quality of their social media pages; the more people that follow their social media pages, the more likely online sales will increase. Figure 13: The number of people currently following Cotton On on a social media platform:

Figure 13 indicates that majority of

participants

within

the

questionnaire (79%) do not follow Cotton On on any social media platforms, presenting a potential missed online shopper market.

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3.1: Consumer perception and purchase history from Amazon: To determine the true impact Amazon may have in entering the Australian market, the primary research gathered from the in-depth interviews as well as survey responses to the questionnaire were analysed.

Figure 14: Would you consider buying clothes from Amazon? Figure 14 begins to reveal the true extent of Amazon’s current grip of the Australian fashion retail market. With 65 participants stating that they would not even consider buying clothing items from Amazon, we begin to realise that Amazon’s influence on the Australian retail fashion market is currently not alarming.

This is affirmed by the in-depth interviews conducted, where the majority of participants responded to the below question in mostly the same manner:

“Is Amazon a platform you use or would consider using to purchase clothing and accessory items”

Thus, it is evident that Amazon currently isn’t in a position to drastically overtake firms that have an established brand within the retail fashion industry. This is primarily attributed to the lack of trust and unpredictability attached to shopping at online-based retailers (e.g. Amazon) for clothing items.

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4.1: PRODUCT - To determine if brand of clothing store is important in influencing consumer choice Figure 15: Which of these clothing stores have you/would you consider shopping at? (Participants could choose multiple options of those presented)

Figure 15 illustrates that majority of participants have or would consider shopping at General Pants Co. (60) and Cotton On (59). Given clothing stores such as Cotton On, Jay Jays and Factorie target similar markets with similar clothing items, however express such difference in consumer preference, it can be concluded that the brand and brand image of a clothing store does influence consumer decisions. The same reason can also be provided to explain the difference in consumer preference between Big W and Best & Less, both offer similar clothing items at similar prices, but majority would prefer to shop at Big W when it comes to clothes.

4.2: PLACE – To determine why consumers would rather use an online retailer versus a brick-and-mortar store As addressed earlier (Figure 9), majority of participants (76%) would prefer to shop in store for their clothing items as opposed to online.

However, similar to the method used to determine why these customers would rather shop in store over online, we provided 4 reasons to all 87 participants on what is/would be the most important influence for shopping online over in store for clothing items. We then compared what most reason most customers seem to strongly agree with the 4 reasons listed were: Lower priced items/cheap online shipping, convenience of shopping from home, availability of buy-now-pay-later services and savings from online discount codes. The two reasons that gained the most support from participants were lowered priced items/cheap online shipping (Figure 16), and the ability to further reduce the overall price through online discount codes (Figure 17).

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Figure 16:

Figure 17:

This is affirmed by the quantitative interviews where the vast majority of interviewees attributed an either ‘important’ (4 rating) or ‘very important’ (5 rating) to lowered priced items/cheap online shipping, and the ability to further reduce the overall price through online discount codes.

Thus, it can be concluded that although majority of consumers would prefer to shop in-store for their clothing items, the primary reason as to why consumers shop online revolves around the lowered prices that one can typically find online from either low shipping costs, finding a clothing retailer that has items on sale almost instantly and using online discount codes.

4.3: PROMOTION – To determine the best way to promote the clothing store experience In answering this, we looked at Cotton On’s perceived weaknesses by it consumer base. From this, we believe that the most effective message to promote from Cotton On would be one where it focuses on improving its weak areas, then promoting this improvement as evidence that they listen to and care for customers.

Figure 18: What factors do you feel Cotton On need to improve upon to enhance their...