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Essay: External factors affecting Nike footwear and apparel sector in the UK

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1.0 Executive Summary

The objective of this report is to identify the external factors affecting the Nike footwear and apparel sector in the United Kingdom. The analysis for the external factors affecting Nike Inc in UK will be obtained by using the Porters Five Force. The five forces method will be applied by focusing on the female market, athleisure, wearable technology and emerging markets.

1.1 Porter 5 Forces

Porter (1980) states that the competition in any industry is dependent on 5 factors which are:

1. Buyer Power

2. Supplier Power

3. New Entrants

4. Threats of Substitutes

5. Degree of Rivalry

The details of each of the five factors are mentioned in the appendix below.

2.0 The UK Footwear Industry

According to Market Line (2017) the UK footwear industry grew by 1.9% in 2017 to reach a value of 11,196.5 million$ and is expected to reach a value of 12,645 million$ by 2022 which is an increase of 12.9% since 2017. Nike remains the leading player in the footwear market in the UK at 13 % value share.

2.1 Athleisure

According to a report carried out on Passport (Mar 2018) athleisure remains a part of consumer lifestyle. This is mainly due to the consumers interest in their appearance while exercising while their general fitness continues. This trend has a positive impact on sportswear in particular with sports inspired apparel and footwear. Athleisure is expected to continue to evolve over the next 5 years as consumers embrace sportswear as daily clothing and match it with fashionable items. Collaboration between sportswear and fashion brands is only going to boost this trend and keep growing in the future. Sportswear brands that focus on performance have the opportunity to make their products functional and also make a fashion statement which helps them diversify their product portfolio. (Euromonitor International 2018)

The red-hot athleisure trend has led many retailers and brands to unveil their own collection in recent years, and the term has been added to the dictionary. The “sport leisure” style has become the largest category in the US sneaker space beating “performance”- oriented footwear. (Forbes 2018)

While athletic wear was created for a specific use i.e. for sports or athletics athleisure clothing could theoretically be for any use and this versatility of athleisure clothing has attracted so many consumers to this category. It’s also generally more durable, with properties like wrinkle and odour resistance incorporated into its techy fibres. (Business Insider 2017)

2.2 Technology

According to Euromonitor International (2018) there is growing trend of wearable technology in today’s global market due to which sportswear and wearable tech is beginning to merge and is expected to continue over the years. In today market wearable technology is limited to heart rate tracking and movement. This is predominately due to less affordability. But as consumers become more tech savvy products will become more sophisticated. Personalisation is said to be the key to wearable technology. For example, Samsung showcased a belt at CES 2017 which record similar statistics of any fitness watch but also provides personalise weight management and healthcare plan. (Euromonitor International 2018)

Nike used to have their own branded Nike fuel band designed to compete with Fitbit and others. Nikes efforts ultimately failed, and the company shut down the entire project. Nike was a $32 billion a year revenue company in 2016 while Fitbit was on $2 billion. This shows the size of the company has very little to do with the success of wearables and some of the biggest players have difficulties. (Forbes 2016)

Nike’s plan in the wearable tech space was to focus on making apps instead of the higher-priced but lower-margin FuelBand hardware after growing a sizeable online community. The company’s decision is complicated by the longstanding partnership and board relation between Apple and Nike. (Financial Times 2014)

2.3 Female Market

Sneaker culture has long been the province of men. For years, the typical line-up of sneaker heads waiting for the latest drop was almost completely composed of teenage boys. However, to change this and as a part of its stated ambition to grow its $6.6 billion women’s business to $11 billion by 2020, the American sportswear giant unveiled Unlaced: a new retail concept during the Paris Fashion week that the company is calling “a fantasy sneaker destination for women” (Business of Fashion 2018)

For years, athletic products for women were simply designs for men in smaller sizers and more feminine colours. However, the ‘shrink it and pint it’ strategy no longer works. In 2016 apparel sales grew by 3 percent, reaching $218.7 billion according to data compiled by the NPD Group. Athleisure continued to be a top growing segment that year, with an 11 percent increase that made it a $45.9 billion market. Including women in the sportswear comes at a time when the account for a significant share of all buying decisions. A 2013 Nielsen report reveals that American women alone wield $5 trillion to the $15 trillion purchasing power annually. (Business of Fashion 2017)

2.4 Emerging Markets

The health and fitness industry in China are expanding a t a rapid pace and is expected to generate more than $5 billion in 2015, after an average yearly growth of 14% over the past five years. Nike is capturing this trend and the company registered a 27% growth in revenues from Greater China in the 6 months period ended in November 2015, compared to the same period in the previous year. Greater China was the fastest growing region for the company in this period, with growth figures for North America being 9%. Nike with more than 10 % share of the market is well poised to consolidate its position in the region which can be a key revenue driver for the company in the future. (Forbes 2016)


Business Insider UK. (2017, April 4). How athleisure overtook fashion to become the dominant way that Americans dress. Retrieved November 18, 2018, from Business Insider UK: http://uk.businessinsider.com/athleisure-is-more-than-a-trend-2017-3

Business of Fashion. (2018, February 28). Nike Showcases Big Bet on Women’s Sneaker Market. Retrieved November 18, 2018, from Business of Fashion: https://www.businessoffashion.com/articles/news-analysis/nike-showcases-big-bet-on-womens-sneaker-market-paris

Business of Fashion. (2017, September 20). Global Sportswear Brands Making a Play for Women. Retrieved Nov (Placeholder1)ember 18, 2018, from Business of Fashion: https://www.businessoffashion.com/articles/intelligence/how-sportswear-brands-are-making-a-play-for-women

Financial Times. (2014, April 21) Nike’s FuelBand runs into trouble. Retrieved November 18,2018, from Financial Times: https://www.ft.com/content/b4813032-c972-11e3-89f8-00144feabdc0

Forbes. (2016, January 13). How China Could Be the Key Driver of Nike’s Future Revenues. Retrieved November 18, 2018, from Forbes: https://www.forbes.com/sites/greatspeculations/2016/01/13/how-china-could-be-the-key-driver-of-nikes-future-revenues/#736aa78013c1

Forbes. (2016, August 18). It’s a Jungle Out There in Wearable Technology. Retrieved November 18, 2018, from Forbes: https://www.forbes.com/sites/moorinsights/2016/08/18/its-a-jungle-out-there-in-wearable-technology/#1e4951f0109b

Forbes. (2018, February 9). The Athleisure Trend Isn’t Taking A Rest. Retrieved November 18, 2018, from Forbes: https://www.forbes.com/sites/andriacheng/2018/02/09/here-are-some-more-signs-athleisure-trend-still-has-legs/#497d943433cb

MarketLine. (2017). United Kingdom – Footwear. London: MarketLine.

MarketLine. (2018). United Kingdom – Footwear. London: MarketLine.

Passport. (March 2018). Sportswear in United Kingdom. London: Euromonitor International

4.0 Appendix – Five Force Analysis

4.1 Buyer Power

According to Market Line (2018) buyers in this market footwear purchases are a necessity so overall sale volumes are high as there are plenty of buyers. This reduces the power of individual consumers. However, UK consumers are becoming more environmentally conscious when purchasing footwear, recognising the benefits of better quality of shoes with a longer lifecycle. Footwear can be expensive so in times of weak economic growth purchases are less frequent. The current demand is also becoming increasingly depended

or repair the footwear they currently own; but this is not a significant factor in the UK. The only real substitute is sports oriented footwear like football boots and indoor gym shoes but as these are on fashion trends which drives up the power of market players as a consumer cannot switch to a different product without losing some attractive features of the products, they currently own. (Market Line 2018)

4.2 Supplier Power

According to Market Line (2018) most of the footwear sold in the global market are sourced from low cost manufacturing location mainly from South-East Asia. So many western manufacturers are unable to compete with the mainstream footwear market. The high number of manufacturers in low cost manufacturing regions provided potential for switching and this coupled with the economic advantage held by western retailers and wholesalers, the power of suppliers is weakened. Due to this it is difficult for manufacturers to establish themselves in retail so there is hardly any forward integration except for the popular brand names. The rising price of raw materials also causes trouble in the footwear market which in turn affects footwear sales and product mix. (Market Line 2018)

4.3 New Entrants

As per Market Line (2018) the cost for retail operations are relatively low new entrants are fairly common. However, as this market has a large number of well-established retail groups that can leverage significant economies of scale through bulk purchasing and pooling of back office operations it is often difficult for new entrants to substantially expand their operations. (Market Line 2018)

4.4 Threats of Substitutes

According to Market Line (2018) footwear is a necessity the threat of substitutes in the footwear market is very limited. In less developed economies it is common for consumers to wear second-hand shoes only used for specific activities they don’t pose a real threat. Online footwear sales channel is a fast-growing threat, but majority of traditional footwear retailers are recognising this and are moving into multi-channel sales to stay competitive. Another potential threat for domestic suppliers is the value and volume of directly purchased footwear from overseas. (Market Line 2018)

4.5 Degree of Rivalry

According to Market Line (2018) even though footwear retailing is highly fragmented the market is dominated by large retail groups between whom there is a high degree of rivalry. Competition is also increasing as foreign retailers and footwear specialists are entering the domestic market introducing more styles and brands. Traditional footwear delivery which is based on two seasons is changing towards the fast fashion environment. Due to this more and more consumers are buying shoes on impulse. Hence the market expects to see a more rapid change of assortment with diversity. As this generates more sales, manufacturers are responding to this trend further intensifying the competition. (Market Line 2018)

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