Essay: Analyse competitive position of River Island (retail fashion industry)

In this essay, I am going to choose one competitor from the retail fashion industry and I will be particularly focusing on analysing the competitive position of this company assessing the external factors that are influencing its success or failure. Various external factors can affect the ability to achieve strategic goals and objectives. These external factors might include competition, social, technological changes, and the economic and political environment. (Good one to know, 2017) I will be including how some of these factors are affecting my chosen retailer. The company who I have chosen to write about is River Island.
The size of the UK’s clothing retailing market by the National Statistics’ Consumer Trends publication outlines the total consumer expenditure on all clothing in the UK. From this I have analysed that consumer spending on clothing has increased year-on-year throughout the past 5 years, rising by 24.9% from £41.84bn to reach an estimated £52.24bn. This is because clothing is an essential commodity for all members of the UK population and furthermore as the population grows there is a need for higher volumes of clothing to be sold in the UK. (Keynote, 2015)
I have chosen River Island as it is one of the most recognisable brands in the retail fashion industry offering numerous clothing lines and is one of the current market leaders. Taking recent data from our group presentation when researching the Growth of Specialist UK Clothing Retailers (2011-2015), River Island showed a percentage of 23.4% growth from 2011 to 2015. From (Mintel, 2016) River Island have also maintained their market share, which is currently 1.6%. This is due to them focusing on key market trends and keeping up with consumer tastes. River Island did also report flat sales in 2015 but decided to focus on investing profits back into the business to drive growth, (Armstrong, 2016) this explains why they are going to continue to grow in the 2017 year with new plans to bring numerous new clothing ranges to market.
An external factor that will effect River Island is that the retail fashion market is highly competitive and not dominated by one or more company, unlike other markets. This means that there is intense competition in the market as all the retailers are in a battle to be different. (Bush, 2016) From previous research, the market shares are spread evenly among leading fashion brands such as Next, H&M, Zara and the Arcadia Group. No retailers are significantly ahead of their competitors. From this, I believe that Zara and Topshop are River Island’s biggest threats. Zara in particular as clothing retailers are increasingly competing to introduce new products and trends to retail stores more rapidly than their rivals do to meet consumer demands. Zara is one of the fastest companies to turn around the latest trends with clothes produced and reaching stores within 2-3 weeks and because of this have become one of the UK’s fastest growing retailers due to its fast fashion approach and its flexibility in terms of production. (Stevenson, 2015) This could be a threat for River Island as even though they do put out new stock in their stores frequently their focus is on restocking their best selling items whereas their competitors have new stock and designs coming to store all the time. (The Student Room, 2015)
Another competitor H&M is currently focusing on international expansion, in 2016, H&M planned to open 425 new stores, which means they are entering new markets in New Zealand, Cyprus and Puerto Rico. (Sourcing Journal, 2016) However, the River Island retail brand has only 300 stores, 40 of which are located overseas in Continental Europe, the Middle East and Australia. (Businessoffashion.com, 2017) Ultimately, this poses a threat for River Island, as they not that well known globally with less international stores so other competitors could potentially have increased market share and strengthened market positions in the future.
Furthermore, there is a high threat of potential entrants into the market. Lately we are seeing the development of many online only fashion retailers, this is because there are cheap start-up costs and new brands can build themselves a platform to establish easily through social media channels, mainly Instagram which they can not only reach a wide audience but their specific target market as well. This affects River Island as online only stores with an already established brand are now entering the high street. E.g., Missguided who opened their first store in London in November 2016 could open more stores and compete with leading high street retailers if they are successful online it could bring consumers to their high street stores also. (Retail Gazette, 2016)
Another external factor that is likely to affect River Island is the uncertainty of what Brexit will mean for retailers. Following the vote, the pound fell to a seven-year low. This will have a negative impact on the fashion industry, as production will be more expensive. River Island do produce some of their clothing outside the UK and will therefore experience a rise in manufacturing costs. Furthermore there is no guarantee Britain will still have access to the free market, meaning there is a possibility exporting and importing will become difficult. This means uncertainty over new trade agreements the government will be able to make, and the impact this will have on the export and import of fashion goods. Overall Brexit will affect the economy, which will affect the consumer, which will eventually affect the retailer, and back to the economy. River Island could soon become more expensive as they may have to increase their prices to cover their costs. (Thenationalstudent.com, 2016).
River Island have however increased the number of items that they manufacture in the UK by 50 per cent, and that has reportedly improved efficiencies within the business. (Retailgazette.co.uk, 2015) This is because it is more economical to produce goods and this gives the opportunity to react to changing trends and get them to consumers quicker, furthermore close to nine in 10 shoppers would be interested in buying clothes made in Britain but British goods tend to be very expensive which puts most people off buying. (Mintel, 2016). Customers could be therefore be put off buying in River Island due to them having more expensive prices than other street retailers already and their prices may keep rising due to the uncertainty of the British economy.
Additionally River Island do target the 18-25 year old demographic, these are the consumers who are using social media a lot and are aware of the ever changing trends in fashion, this means River Island need to react to this and keep up to date with what their target market want. Adbrands.net, 2017) Part of River Islands target market is students, but students do not have as much money as they did in previous years and some even struggle to pay their rent meaning they may prefer to shop at places like Primark in which they do not have to spend as much as River Island for several pieces of clothing.
However, we are seeing an ageing population of cities and shopping habits too are reflecting these wider demographic changes. (Retail Think Tank, 2016) This means River Island could see an opportunity to offer clothing for the older consumer and either create new clothing lines to supply this demand or create a sub-brand if they do not want to affect their current demographic targets. It is important for River Island to understand these are older consumers who still think of themselves as young at heart.
Another important external factor is technology, recently River Island and other retailers have started using contactless payments to speed up the buying process, and this means it will be an expected service instead of an augmented service. River Island have also saw an opportunity to speed up service even more by offering a customer a different place to pay by card only and cash at a different till, this appeals to people who are in a rush and want to be in and out quickly. River Island also are focusing on making it easier for its customers to buy online, From a survey taken by (Mintel, 2016) revealed 43% of women returned items of clothing they purchased online, with poor fit the biggest reason for doing so. To help solve the problem of sizing River Island has collaborated with EyeFitU, an app that matches users measurements with the brand’s size charts so shoppers can be sure of always getting the correct fit. This is a good opportunity for River Island as consumers are always looking for ways to aid their decision making of buying a product.
River Island have also introduced an innovative delivery option for click-and-collect customers who have paid for their orders and are unable to collect from the store. River Island has teamed up with Shutl to launch Click and Don’t Collect which gives customers who have selected ‘click and collect’ the option of changing to Shutl’s delivery service and getting their order delivered instead to their door within 90 minutes, or at a time convenient to them. This is another opportunity for River Island as consumers are increasingly expecting products and services to be brought directly to them, wherever they are.