Next PLC - Clothing Retail
Next PLC - Clothing Retail
Contents Page
.0 Introduction
.1 Background
2.0 Competition
3.0 Observational Research
3.1 Store Environmental Design
3.2 Merchandise Presentation
3.3 In store customer communication
3.4 Consumer senses appeal
4.0 Interview/Questionnaire
5.0 Performance of the retail industry
5.1 Analysis of Next and key competitors
6.0 Positioning
7.0 Store location
7.1 Shopping Centres
7.2 Retail Parks
8.0 Marketing Mix
8.1 Product Design
8.2 Product Range
8.3 Shelf Space
8.4 Advertising
9.0 Recommendations
0.0 Reference list
1.0 Appendices
.0 Introduction
The following report will initially offer an insight into Next plc and will go into detail to investigate and evaluate Next PLC in terms of their characteristics, history and performance as retailers.
Analysis will take place in the form of both primary and secondary research and will relate the past and present consumer trends and evaluate the effect this has had on current retailing in the sector in the U.K including competitor positioning. Primary research will take place in the form of an observational study of two or more Next stores and competitors in order for comparisons to be made. The author also felt it necessary to carry out a small questionnaire regarding consumer's views on Next and some of its main rivals.
The report will also take into account and analyse the company's position and its retail marketing mix.
Based on the conclusions derived from the analysis mentioned above the author will endeavour to offer explanations for the success of Next and make recommendations for future success.
.1 Background
Next retail chain was founded in 1982 when menswear specialist J Hepworth and Sons purchased a chain of rainwear shops called Kendalls and converted it into womenswear under George Davies. The first store opened with an exclusive co-ordinated collection of stylish clothes, shoes and accessories for women in February 1982 and by the end of its first season the Next concept had proved so successful that it was already trading from 70 stores throughout the UK. It was not long before collections for men, children and the home were soon made available.
The launch of Next men took place in August 1984 and by December of the same year was trading from 52 shops. 1984 also saw the launch of the first mini department store in Edinburgh incorporating womenswear, menswear, shoes and a café.
Next was one of the first to stretch its clothing brand to home wares with the introduction in 1985 of Next interiors range of soft furnishings. The same year the first department store to incorporate womenswear, menswear and interiors opened in Regent Street, London.
In 1986 Next became Next plc and in the same year acquired the Grattan plc (mail order company) from which Next directory was to be launched.
Childrenswear was added to Next in 1987 called simply 'Next boys and girls' and this was followed by the introduction of the Next directory in January 1988 in the form of a hard book containing 350 pages.
The rapid expansion of Next as described above threatened to stretch the recently established brand too far. This aggressive expansion was in danger of undermining the strong brand appeal that had helped create the initial success. By the end of the decade Next was in financial trouble and this lead to the departure of George Davies who went on to become one of Next's main competitors creating George at Asda clothing brand.
Next however survived and today trades in over 450 stores in the U.K and Ireland and continues to offer its products through Next directory and online shopping which was launched in 1999. The company continues to expand its already large range of services with the addition of next flowers in 2001 and the most recent Wedding List Service in 2005. Recent years have also seen several larger format stores open across the UK in particular in edge-of-town or out-of-town areas as the company concentrates on relocating stores to larger units which allow a much wider product offer.
2.0 Competition
In order to analyse and compare Next it is important to establish who their main competition is. Due to the diversity of the product range Next competes with a wide variety of businesses ranging from Next's traditional competitor in Marks and Spencer to in recent years stronger high street players as well as increased competition from supermarkets. Therefore below are listed some of Next's more well known potential competitors (which vary according to product offer)
*
* Arcadia group (Top Shop etc)
* BHS
* Asda
* Debenhams
* French Connection
* Gap
* H & M
* Ikea
* John Lewis
* Marks and Spencers
* Matalan
* MFI
* Moss Bross
* Mothercare
* River Island
* Tesco
* TK Maxx
* Zara
Despite increased competition in Next's primary focus the clothing sector, M&S, Next, Arcadia Group, Matalan and BHS still represent 44% of the total sales of 2004 'making the UK one of the most concentrated clothing sectors in Europe' Mintel.
3.0 Observational Research
The observational research was based primarily on three Next stores located in the following areas;
* Cambridge City Centre
* Leeds City Centre
* Cambridge Grafton Centre
The author chose these stores as he felt they offered a good comparison of stores across the country and also the chance to analyse and compare Next city centre stores to out of town stores (Cambridge Grafton Centre).
Using the total visual merchandising process when analysing the three stores the author aims to outline key differences and also to make comparison against its main rivals.
The first thing the observer identified between the three stores was how similar they were in the four key areas; store environment deign, merchandise presentation, in-store customer communications and consumer senses appeal.
3.1 Store environment design
It became apparent from researching Next that the newer shop fascias are predominantly glass creating a much more modern and sophisticated feel.
Inside the three stores were very similar ...
This is a preview of the whole essay
Using the total visual merchandising process when analysing the three stores the author aims to outline key differences and also to make comparison against its main rivals.
The first thing the observer identified between the three stores was how similar they were in the four key areas; store environment deign, merchandise presentation, in-store customer communications and consumer senses appeal.
3.1 Store environment design
It became apparent from researching Next that the newer shop fascias are predominantly glass creating a much more modern and sophisticated feel.
Inside the three stores were very similar with structured layouts using a combination of both free flow and boutique layouts allowing shoppers to move easily between fixtures encouraging browsing, whilst sections are also arranged in the form of individual shops and therefore targeting specific market segments (Rosenbloom 1981). The Leeds store was slightly different in that it felt a bit more cluttered. A reason for this could have been that the three stores had a very similar product range despite the two Cambridge stores being significantly larger.
All three stores felt softly lit despite the use of hundreds of low voltage tungsten ceiling lights, this could be to 'encourage patrons to peruse the merchandise at greater length' Markin et al (1976). This was very much in line with many competitors however was particularly in contrast to Zara (Leeds) as despite using the same ceiling lights felt much brighter which could partly have been due to the white floor and also because much more use of natural light was made. The reason for the different approaches in lighting could be due to the difference in sales strategies as Rook (1987) recommended the use of bright light to facilitate impulse purchases which Zara might be more reliant as much of their product range is up to the minute fashion and relies on consumers seeing the garment and making the decision to buy it there and then as it may quickly be sold out or out of fashion.
The interiors of the three stores were in majority white with very little colour used apart from to bring attention to the pay areas (See In-store customer communications). All the clothes racks were silver in colour and this was the same throughout the stores. Again this was very much in contrast to many of Next's rivals with River Island a prime example using much more colour to create a more vibrant and fashionable effect appealing more to the fashion conscious youth market. Walls were often painted using bright primary colours with some having the added effect of modern street art on the walls to give a certain youth and trendier edge.
3.2 Merchandise Presentation
Although the presentation of clothing allowed for consumers to get a feel of the full product range and made the best use of space available it was displayed in a very uninspiring way with very little use of displays.
This is in stark contrast to most competitors with Top Shop and Miss Selfridges being the most obvious as stores are laid out into themes with extensive use of half and full-mannequins to show new looks and accessories with much more emphasis put on changing fashion styles.
3.3 In-store customer communications
All next stores were well sign posted ensuring that consumers knew where all desired sections are located. There is good use of information to ensure that the consumers know where the necessary sizes are.
Next Promotions are well advertised through posters in shop windows and is famous for its extremely popular Christmas sale.
3.4 Consumer Senses Appeal
The Next stores are becoming increasingly modern from a visual point of view and inside offer a clean and relaxed atmosphere for consumers to shop in.
The author feels that the Next stores reflect well the brand image and also its target customers. With the emphasis believed to be more on quality and a broad demographic appeal with the majority of sales coming from the 20 to 40 year old bracket rather than several main competitors who are more focussed on producing up to the minute fashion garments with a younger target age group.
4.0 Interview/Questionnaire
As well as the observational store survey the author felt it useful to carry out additional primary research in the form of a brief questionnaire/ interview with consumers to understand their views on Next and although the author recognises that due to the small amount of data collected generalisations cannot necessarily be made it did however raise some interesting points.
The author found that consumers in their late twenties to fifties thought of next to be up to the minute affordable fashion with the mail order being a big plus due to the quick delivery and the ability to return things to any store. The 'kiddies Range' was also seen as extremely good quality with a wide variety of choice.
This was very different from the views of the younger consumers who despite recognising that the Next brand indicated quality were less concerned by this and instead often considered the product lines to be dated and even expensive compared to many competitors like Top Shop and H&M. Men differed slightly in this age range as although they considered the casual clothing to be dated the majority considered Next fashionable for products where quality is of more importance like formal where.
5.0 Performance of the Retail Industry
The UK clothing industry has continued to grow year on year, with the exception of 2003 where the market experienced a 1% decline in sales, at an amount much greater than the growth in population. The market experienced an apparent boom in consumer spending after the millennium but there have been a number of factors that have helped the UK clothing retail industry in recent years including lower prices, better value and the importance society places on fashion.
(Snapshots clothing UK 20040
It is believed that the growth has also occurred as consumers have a higher disposable income and more leisure time to shop.
The market is predicted to continue growing up until 2008 however at a much slower and more consistent rate.
5.1 Analysis of Next and Key Competitors
Over the last five years Next has seen a steady increase in not only a percentage of the U.K but also the European sales market.
With its percentage of the UK market increasing by 2,2% over the five years as main competitors continue to lose share (see above) Next continues to close the gap on market leader M&S and in 2004 took second place from Arcadia. Even with Next's continued increase in sales M&S continues to dominate the British Clothing Market, despite poor performances over recent years, with an 11.8% share.
The increase of sales and Next's tight cost controls and improved buying margins in
turn has meant an increase of profit from £218million in 2000 to £422 million in 2004 and with profits estimated to reach £435-450 million for 2005.
Despite Next's continued increase in sales and profit there has been a decrease in annual sales growth since 2001/02 reflecting intensifying competition in Next's home market.
Much of Next's continued sales and profit increases have been boosted by new store openings and the expansion to existing stores. This can be seen by the chart below, as over the last five years there has been a 24% increase of stores resulting in 464 in 2005.
At end January
2001
2002
2003
2004
2005
Total no of stores
374
380
403
428
464
Uk Stores
336
331
344
358
384
Uk sales area (m)
52,700
84,110
217,300
264,300
309,200
Uk sales per m (£)
7,803
8,074
7,871
7,514
7,176
UK sales per outlet
3,354
4,083
4,688
5,155
5,546
Average store size (m)
454
556
632
738
805
More significantly however and more in line with Next's current strategy as they continue to move to larger premises and more out of town outlets is the increase in size of the average store by 351m. This has seen Next increase Uk sales area by 102% over the past five years with only a 14% growth in the number of stores.
This is in comparison to major competitors like H&M who also continue to increase their store portfolio but with more emphasis being placed on store location especially in Europe where their focus has gone from larger outlets to smaller concept stores. This allows the company to locate in large cities where securing larger premises could prove difficult. Aside from this it enables H&M to locate outside large cities to towns where larger stores might not be necessary.
Alongside Next the big successes over recent years have been much more fashion led stores like TK Maxx, Top Shop and Zara which appeal to a much younger demographic more concerned on fashion than quality. TK Maxx is becoming an ever increasing force more than doubling its store portfolio in recent years and although the Arcadia group has suffered a decrease in their share of the UK market its is believed in Top Shop they have the brightest star in the fashion market. Zara currently has 38 stores in the UK and over 600 stores in 50 different countries and is believed to have 'turned the retail challenge on its head' as it prides itself on the ability to deliver high fashion garments before anyone else. Consumers do not buy for the brand or quality but for the responsiveness of the company and in return are willing to pay a small premium.
6.0 Positioning
Positioning is very important in Retail marketing and retail strategy, it starts with a product, a piece of merchandise, a service, an institution or even a person. (McGoldrick, P. 2002)
Using the Generic issue strategy below is outlined where the author believes Next's current positioning to be. The author believes Next to have quite a broad target market with a varied product portfolio and also appealing to a variety of ages. The author did not believe next to be far over to right as Next's products are competitively priced as over the last few years it has continued to reduce costs but also it products are aimed at the mass market and are not overly innovative or specialised.
Generic Issues Strategy (McGee 1987)
Next has stated that it does not intend to continue lowering its prices over the Next few years. Porter believes that retailers should avoid the middle.
Next have a wide variety of consumers however from a study carried out by BMRB on behalf of Mintel (see appendices) it is clear to see that Next is outperformed by major competitors in the age groups 15-19 and 20-24.
7.0 Store Location
Store location is frequently considered to be the single most important element of retail marketing and Clark and Rowley (1995) suggested you 'can be the best retailer in the world but if you set up your store in the wrong place, you'll never do much business'.
Next has traditionally been located in the high street in the Central Business District, which is has always been primarily where consumers would go to shop. This area will have a high level of potential consumers in it (Dibb, 2001) however such locations have proved problematic in terms of accessibility, car parking, higher costs of property and maintenance. These problems have resulted in considerable change in store location over recent years with many more stores appearing in the following areas;
7.1 Shopping Centres
A shopping centre is a group of retail and commercial establishments that is planned, developed, owned and managed as a single property. Recent years has seen the shopping centre become increasingly important and a key attraction to consumers is the ease of everything under one roof. Next stores will often be found in these centres as Next continues to locate in areas that offer ease of use for consumers.
7.2 Retail Parks
Retail Parks are predominantly located out of town and are located near a major motorway or main road with adequate parking to offer easy accessibility. Next over recent years has located much more in these areas and has seen this as an area for expansion. As their product range increases larger store formats have become necessary and such retail parks can offer these requirements often at much cheaper rates than much smaller city stores.
8.0 Marketing mix
8.1 Product Design
With the manufacturers hold over the design and production functions having been eroded in the shift of power experienced over the decades Next is able to design their products before working closely with manufacturers to ensure that these designs are produced to the necessary standard and quality. Next employs fashion designers and researches to ensure that they stay up to date with the latest fashions and trends.
Next go to extreme lengths to ensure their products are made to the highest quality and so constant checks are made of the factories and extensive research is given into better quality fabrics and decorative detailing. All this effort has not been unnoticed by the consumer as the Next brand continues to be associated with Quality.
8.2 Product Range
Next's product range continues to expand since the first store selling women's clothing, shoes and accessories was established in 1982. It now has Men's, Home and children's departments in the majority of stores.
Next women's collections include sizes up to 22 and also a petit range making sure that Next caters for the majority of size and shapes. It also has an Occasions' collection, which includes outfits for the bride and bridesmaids.
Next's men is the area that is said to have the 'greatest opportunity to improve' as collections are believed to have been to narrow and missed fashion trends as their casual wear collection changes little from season to season. The men's formal side however is considered extremely good with products ranging from 'Luxury Tailoring in the finest Italian cloth' to Woolmark suits and 'performance suits'.
In recent years there has been the introduction of Next Flowers, whereby flowers can be purchased then delivered to the door anywhere in the UK and most recently a Wedding Service List. The continual expansion of Next's range aims to ensure that their stores offer a wide range of products and also services to the consumer. This continued expansion of product range and department size sees the company competing more and more with major department stores like Debenhams.
Aside from the product ranges mentioned above Next has also started its own gadget range with a wide selection available in some larger stores.
Next product range varies from store to store depending on the store size however Next is continuing to increase the average store size and with the majority of new store openings focussing on larger stores in order to ensure the highest product range possible.
8.3 Shelf Price
Next has in recent years continued to reduce its average selling price of its clothing by around 6% this has been a result of tight cost controls and improved 'buyer margins, thanks to advances in sourcing and the weakness of the dollar'. Next continues to try and pass production costs onto the customer but does not want to enter a price war and price cuts are not expected for 06 as the market is expected to toughen.
8.4 Brand Image
The American Marketing association defines a brand as a 'name, term, symbol, or design, or combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors'. However Klein (2001) disagrees and believes that brands are more than this as they can 'conjure a feeling'
Next over the years has managed to build a brand image that consumers feel they can trust and one they relate with being reasonably priced and good quality. Consumers feel they can rely on these characteristics throughout the product range so even as Next continues to develop its range and enter new markets the same characteristics will be applied.
8.5 Advertising
Next would not appear to be one of the more aggressive advertisers in the retail sector but instead rely on their products to sell them selves.
8.6 Shelf Space
With Next's ever-increasing product range it places a great deal of importance on maximising the space available. It is important that as much of the product range is made available whilst maintaining that the shop has an easy flow for consumers. Next does this by displaying large quantities of its range against the walls using a two tier railing system whereby similar products can be displayed above and below each other. This also makes it easier for the consumer to view. Shelf space is also maximised as compared to competitors very little space is given to displays.
9.0 Conclusions and Recommendations
It is hard to argue that Next PLC is anything but extremely successful however it is important that continuous improvements are made in order to maintain their current success in such a fast changing environment. Below are some recommendations based on the author's research;
Despite Next's continued success a continued criticism is that product ranges are not up to date fashion and are often uninspiring and although it is important to realise that these ranges clearly work for Next it is important to evaluate areas for improvement.
Next clearly has a broad demographic appeal sitting in the mainstream mass market and the emphasis is on safe wearable products that will last more than one season however from the research the men's casual wear section has area for improvement, as the collection is considered to be to narrow and having changed little from year to year therefore missing some major fashion trends.
With male consumers becoming increasingly fashion conscious it is important that Next focuses on producing not only a wider range but is also seen as changing its styles in order to keep up with fashion trends.
It has become apparent from the research that Next doesn't perform as well in the age category 15-24 as all other areas and this is because this age group are much more concerned with up to the minute fashion. Next could consider in both the Men and Women's ranges bringing in a more fashion and specialised section alongside its standard range. This could be done by employing a young respected fashion designer or designers and getting them to design the range and also with the option of adding their name to the collection to offer some credibility. This range would offer up to the minute fashion and would help appeal to a younger market segment than many of Next's current ranges.
As although Next continues to perform well it is only necessary to look at M&S to appreciate how quickly things can change. Being more fashion conscious in areas will help Next appeal to younger consumers and hopefully prevent a situation like M&S where consumer's perception quickly changed and ranges were seen out of date and for the older generation.
From the research it became apparent that Next's store layouts were very uninspiring compared to many competitors. This could be due to the restrictions of space and Next's extensive product range. It is also possible to see from the study carried out by BMRB on behalf of Mintel that Next doesn't perform as well in the 15-24 category as all the other areas and the uninspiring layouts could be contributing to this.
More emphasis could be placed on in store displays to promote new products and add life to certain product ranges very much in line with that of Top Shop and Miss Selfridges. Again this could help appeal to the younger generation and is also a useful promotional tool.
With the vast majority of Next's consumers being well off or above (See Appendices)
and with Next's current strong brand name and an area for possible expansion and improvement of their product range could be a luxury section. They could start of initially offering a small selection in their larger stores as a trial run. The luxury clothing could initially focus on formal wear where changing fashion trends are less relevant and the focus is predominantly on quality.
David Keens in an interview states that the company has a small and successful overseas operation however does not see this as an area for growth as it does not see it's products in line with European consumer trends. Therefore Next should consider moving into the Scandinavian market in which one of its main rivals H & M operates. 'Next's functional and clean image may appeal in Scandinavia' (Mintel Clothing Report 2004)
0.0 Reference List
Dibb, S. (2001) 'New millennium new segments,
McGoldrick, P. (2002) Retail Marketing,
Kotler, P. (2000) Prentice Hall International, Inc, Marketing Management
Levy, Michael and Barton A. Weitz (1995), Retail Management, 2nd ed., Chicago: Irwin.
Rosenbloom, B. (1981) Retail Marketing, Random House, New York.
www.brc.org.uk/rsi04.asp?iCat=395&sCat=CONSUMER+RESEARCH
www.mintel.com
www.next.co.uk
www.snapdata.com/athens/index.php?module=display&rep_id=uk060015
1.0 Appendices
Which clothing specialist consumers have bought clothing from for themselves, in the last 12 months, by gender, age and socio-economic group, April 2005
Based on: 1,991 adults aged 15+
Next (incl. Directory)
New Look
Top Shop/Top Man
River Island
Dorothy Perkins
Gap
Burton
%
%
%
%
%
%
%
All
25
3
2
1
0
8
7
Men
23
2
1
1
8
3
Women
27
23
2
2
8
8
5-19
28
31
40
32
9
3
3
20-24
36
29
38
32
6
7
4
25-34
43
5
7
8
1
7
9
35-44
35
6
8
9
0
9
7
45-54
21
0
5
7
0
6
5
55-64
3
6
3
3
6
2
4
65+
8
2
2
2
5
3
Wealthy Achievers Urban Prosperity
31
9
1
3
9
1
5
Comfortably Off
28
5
3
3
1
0
9
Comfortably Off
26
3
3
2
0
6
8
Moderate Means
7
6
3
1
0
5
6
Hard Pressed
3
4
7
5
8
4
4