UK’s clothing, footwear and accessories online store: NEXT PLC -vs- Other competitors

Author: Iloka Benneth Chiemelie
Published: 28th March 2017

Industry analysis

No doubt, the UK clothing, footwear and accessories marketing is giant in terms of value as it is presently estimated to be worth over £50 billion, with growth projection for 2015 to 2020 being a forecasted increase of 4.5% per annum (PWC, 2016). This leave an open and vast opportunities for established brands such as Next to capitalize on this financial fortunes and enhance their performance. In general, the industry has witnessed a steady growth between to 2009 to 2015, with the menswear and womenswear the most prominent performers (PWC, 2016).  It is also forecasted that menswear will outgrow other categories as a result of huge investments made by the industry players within this category. Incremental growth is also expected in the womenswear category and this will be driven by niche ranges that include: plus-size, petite, tall and maternity wears (PWC, 2016).

The online channel is expected to continue reaping havoc on the conventional stores’ market share with a forecasted increase of 29% (PWC, 2016) of the industry’s market share by 2020 as demonstrated in the figure below. Major players in the industry determine this shift at the moment and much changes are not expected, however as new entrants and smaller once verge for a competitive edge, it is expected that the online store will witness a higher boom in the near future (PWC, 2016).

Figure 1: UK’s clothing, footwear and accessories online store to account for 29% of industry by 2020

Source as adapted from: verdict (2015) (as quoted in PWC, 2016).

The rise in market growth is expected to be powered by an increasing volume of disposal income, improved consumers’ confidence and an increase in consumer sub-segments (PWC, 2016).  Essentially, this will be supported by deflation of clothing prices, a shift towards experience based expenditure, and innovation by the clothing retailers (PWC, 2016).

Critical discussion of the NEXT’s competitive advantage among the direct competitors

NEXT has successfully positioned itself as a premium brand and it does come with a competitive edge. This is as the UK “premium lifestyle” clothing market has been estimated to worth over £2.7 billion and expected to continue it surge as illustrated in the figure below. This surge is projected to be between 6.6% per annum between 2014 and 2020 (PWC, 2016).  Thus, this presents the company with an amazing competitive edge over its competitors following established market positioning and brand image.

Figure 2: Estimated growth of UK’s premium clothing, footwears and accessories

Source as adapted from: PWC (2016)

The company has a reliable and sustainable online sales platform and this enhances overall competitive advantage. This is most special with the forecasted increased on online sales as it will help the company towards it’s’ push for sustainability.

Probable industry scenario facing NEXT

The projected increase in market growth is expected to be driven mainly by inflation due to high volume. As companies in the industry fight for competitive edge, they will likely reduce their prices and gain higher order in the process – forcing price competition within the industry; which will eventually result to n even lesser prices as companies fight to sale off huge stock deposits. This is expected from 2018 (PWC, 2016) and it is a big issue for NEXT as it will have direct negative impact on their financial performance when compared with previous years. 

Figure 2: Market growth will be driven mainly by inflation

Source as adapted from: Verdict (2015) (as quoted in PWC, 2016).

The UK street retailers are also looking to innovate their position in search of new sources of growth. Such innovations have seen these retailers extent into new categories, opening new fascia, developing new concepts, extending new channels and forming new partnerships (PWC, 2016). All these innovations does pose huge competitive threat to NEXT as it implies that the company will have to battle these new innovations in order to force growth within its sphere.

In recent months, arguments have also emerged that “BREXIT” will have direct impact on UK’s business as successful implementation will block all forms of free movement from Euro zone members, removes all forms of free movement of goods and reduced tariffs when exporting within the Euro zone, and also increase price value of products (as the pounds, not the euro will become official trade money) (Broad, 2016). Thus, these issues will result to competitors (at least with the Euro zone) being offered higher competitive advantage and it is something that NEXT needs to look into.

Reference

PWC (2016). The UK “premium lifestyle” clothing, footwear and accessories market. Available at: https://www.pwc.co.uk/assets/pdf/uk-premium-lifestyle-market.pdf [Accessed on: 14^th August 2016).

Broad, M. (2016). What impact would Grexit have on the UK? BBC News. Available at: http://www.bbc.com/news/business-33165580 [Accessed on: 14^th August 2016).