RETAIL THEORY AND PRACTICE

Posted: January 4th, 2023

RETAIL THEORY AND PRACTICE

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Retail Theory and Practice

Introduction to Retail

In general, wheel theory in the fashion industry, especially in retail marketing, is the most recurring concept regardless of changes in politics, new technologies, and competition in the market. New retailers in the market may have undergone numerous phases that include the entry period, when they offer apparels at meager costs due to limited facilities but have to increase prices after entrance into vulnerability phase (McArthur, Weaven, & Dant 2016). However, since it is easier for companies to enter the market, the process remains circular. In short, the wheel keeps on turning in that everyone, including people establishing small supermarkets and department stores, enters the market.

Introduction to the Company

Michael Kors Holding Limited is a global fast-growing fashion merchandise. The brand was established in 1981, and it featured unique designs, craftsmanship, as well as materials. The business started as a luxury sportswear design house, but the company ventured into the global footwear, accessories, and apparel market in approximately 74 countries. Over the years, the brand has been growing, and currently, it is dealing with handbags, eyewear, jewelry, small leather goods, footwear, as well as watches. Michael Kors, the founder of the company, was born and bred in Long Island, where he studied fashion and design at the Fashion Institute of Technology (Askinasi 2019). However, he dropped out of school after two semesters to operate at Lothar’s boutique, where he had the chance to design his collections. They were accepted by the consumers and sparked an interest in him to start his enterprise. 

The firm became successful, and it started selling in high-end retailers like Saks Fifth Avenue and Bergdorf Goodman. Kors’ winning combination includes his persuasive sales technique as well as the simple, elegantly tailored clothing. He traveled to major parts of the world for small shows, and he was convinced to let the daunting fashion editor Anna Wintour to view his collections. Afterward, the company won countless awards despite humble beginnings. However, it went bankrupt in 1991, and after getting its feet, the line was launched, and it was lower-priced. In 2014, the designer reached billionaire status, but currently, his estimated worth is $600 million (Askinasi 2019). Kors was the creative director of Celine, a French Fashion House, a position he held for six years. However, the company was incorporated in 2002, and its segments comprise wholesale, retail, as well as licensing.

PESTLE Analysis

It is a framework that is useful in analyzing and monitoring the macro-environment factors impacting a company. It includes the political, social, economic, environmental, technological, and legal aspects  affecting the external environment of Michael Kors Holdings Limitedc(Gupta 2013). Consequently, any shifts in the macro-environment influence not only the firm but also other players in the textile industry directly. Also, they touch the competitive advantage of the organization or profit levels. PESTLE analysis gives valuable insight into the operating concerns of Michael Kors Holdings is facing in the macro-environment instead of competing forces.

Political factors that might change the company are diverse, and they vary from a sudden shift in the existing political regime to civil unrest. Success in such a dynamic industry across different countries can be achieved by diversifying systematic risks of the political environment. Some of the factors to be considered are political stability, the integrity of politicians, and the chances of them engaging in corrupt practices since the repercussion may lead to their resignation (Gupta, 2013). It is the political stability that has made Michael Kors thrive. Besides, the laws the country enforces, in particular, business also have an effect. For instance, the Brexit vote led to a revision of both immigration and import laws. It impacted the cost of production. 

Economic factors include those that are related to the country’s economy, such as foreign exchange rate, inflation rate, and GDP among others. The economy of the UK is stable, which influences the firm positively. However, the high-interest rates have an impacted-on borrowing and investing in the company in the UK. Tax inflations have changed personal spending habits because there is less disposable income. This situation involves the sales of the company. Additionally, the higher price of cotton has increased the production cost, thereby impacting the profitability of the company (Loeb 2014). Also, it is essential to note the stability of the currency because the unstable currency discourages internal investors.

The social factors affecting the company are a direct reflection of the society the firm operates in. They include culture, attitudes, beliefs, norms, and values that the majority of the population holds. These aspects play a significant role in the way marketing will be conducted. Class distribution is essential for Michael Kors to promote highly-priced premium products (Hendriksz 2015). Also, a culture of purchasing trendy outfits affects the business because they need to be up to date. Consumers have become co-workers in the fashion industry.

Technology is changing various industries across the world. Innovative products have shifted the norms of an entire industry, and some of the technological factors affecting Michael Kors include the technological advancement of its competitors. The corporation has utilized technology to its advantage. For instance, it drives a lot of sales through social media, which is risky because it is short-term (Timberlake 2012). The company has a sound delivery system that it monitors after the customer order in real-time. However, more research on product innovation is needed to transform initial offers and compete successfully with other brands such as Skate Spade.

Environmental factors affect the profitability of a firm because various markets have distinct environment standards.  Aspects such as climate change, recycling, waste management, air and water pollution regulation, and attitudes towards “green” products significantly impact the success of the business (Loeb 2014). The fashion industry is the leading environmental pollutant, and applying ecological theory, Michael Kors should conserve the environment. Furthermore, legal frameworks in a country need to be considered because the organization’s policies are inadequate to protect the entity and its employees. Some of the statutory factors include the intellectual property law protecting the ideas and patents of the company. If there is data loss, the corporation loses its competitive edge.

Changes within the Microenvironment

The microenvironment comprises various factors. All of them influence the accessibility of resources and their use, which affects people and businesses (Kokemuller 2019). Comprehending these aspects helps to plan, prepare, develop a long-term business strategy. Micro-environmental elements include suppliers, customers, distribution channels, competitors, and the public. Nowadays, rivalry is everywhere in each industry, particularly in the textile sector. As a result, there is a huge impact on the profit margins of a company because of the high level of competition, especially when the market share is small. Despite the limited space, various businesses are fighting to win market share, saturating the opportunities of market growth. Besides, standing out in a market is challenging, and firms use different innovative strategies to attract customers. Also, competition forces organizations to keep updating their marketing strategies to ensure they appeals to their customers. 

Michael Kors, like any other great corporations, has a number of competitors. According to Loeb (2014), the most significant ones are Kate Spade and Coach. The clothing industry is faced with stiff rivalry, and the company has been facing challenges to attract customers. According to Brown (2015), consumers are skeptical about designs that suit the norms and cultures of their societies. However, Michael Kors is struggling with declining sales after a combination of its two opponents, which is the merger between Kate Spade and Coach (Wong 2017). The merger created a powerhouse that pressurizes Michael Kors Holdings Limited since both organizations are competing in a handbag market that is declining. However, the colorful and whimsical styles of Kate Spade give Coach a competitive advantage for young consumers (Wong 2017). Consequently, Michael Kors is disadvantaged because when there are three players in the market which are reduced to two, the third player is definitely disadvantaged.

Furthermore, the merger between the two companies took place when Michael Kors had a difficult time and was staging its turnaround plan. It was trying to market itself as low-priced merchandise, which can be bought at off-price stores, for instance, T.J. Maxx (Wong 2017). Also, new designs were being introduced by the corporation to attract consumers. However, Coach can improve Kate Spade’s handbags while maintaining its price, something that is challenging to Michael Kors’ market position. Improving the quality of the product will attract higher value from the clients who can pay full prices (Wong 2017). Besides, the firm has been depending on departmental stores, outlets, as well as off-price channels sales. The sales from departmental stores are approximately 46 percent in comparison with half of that at Kate Spade, which needs to be cut off for the enterprise to regain its footing (Wong 2017). It is a strategy that Kate Spade and Coach have been using for years. 

Strategies and Tactics

Returning Michael Kors Holdings Limited to its competitive position requires changes to be made both to macro-environmental and micro-environmental factors. The main objective is to win back the consumers with experiences. Michael Kors’ problems are centered around its brand identity because the brand no longer delivers the status that made individuals purchase its products. One of the macron-environmental factors the company can delve on to attract more buyers is technology. Even though the organization is known for continuous changes in innovation in new lines, fabric choices and designs are evolving each day. It is essential to not only introduce new products but also develop goods that are innovative as well as distinct from the direct competition (Hendriksz 2015). Innovations in the industry are copied as soon as they are implemented, which needs continuous research.

Moreover, the tech-savvy company is leading in social media rankings. However, it needs to be cautious with social media marketing as it comes with a price. The hype acts as a mirror image of the challenges the firm is facing. Continued pushing of sales through social media can spike sales for a short period because people’s interest fades, and they are starting looking for some trending items. Besides, the organization should dwell on men’s wear because women’s clothes are widespread in the market. The men’s market can be tapped because more affluent males are paying attention to fashion. Brands such as luxury bags will boost sluggish sales. However, the company must note the future of men’s wear before the market is saturated (Hendriksz 2015). Additionally, there can be personalized recommendations in mobile applications whereby people can easily browse what products can interest them. Also, the availability of the upper-range collection can be limited to ensure the feeling of uniqueness. This strategy will make the consumers believe they are buying an exclusive product, and it is in demand.

Pointedly, investing in customer experience is crucial in turning around the company. For instance, the Kors Connect initiative allows sales associates to augment in-store collection with the available products online. Buyers behaviors in shopping vary, and some want to see the real commodity before deciding to buy it. However, the revenue that is generated from retail partners can be cut to approximately by selling departmental stores that have no traffic. Besides, through advertisements and new products such as Bancroft handbags, the firm may attract more clients and ensure customer loyalty.

Markedly, a pricing strategy should be implemented. Ultra-premium label products should be created, featuring high quality and small quantities to increase the prices of the items. Also, it will attract desired customers who can purchase these goods. Based on the wheel of retailing theory, a low-priced retailer should be careful to avoid additional costs on the existing format instead of opening up a new store with premium products. However, this concept describes the evolution of distribution patterns, indicating the vulnerability in the innovative strategy (McArthur, Weaven, & Dant 2016). Furthermore, Michael Kors needs to avoid discounting even if it means temporary losses because selling products at a lower price can damage the identity brand of the company as the low-priced store. According to Wong (2014), improving the quality of the product will attract higher value from the buyers who can pay full prices. Also, retailers are not restricted to the selling price of the product as it is part of the market mix. The set price depends on the perspective of the consumer, which varies from one person to another. However, the placement strategy can be complimenting this pricing technique. By not giving discounts on the product, the clients will perceive its value as top-tier rather than a bargainable item. Discounts dilute the quality of the brand.

Distribution channels and supplies involve the reach of raw materials as well as customers. Michael Kors Holdings Limited is bound to a sound distribution channel that will reach consumers with ease (Brown 2015). Delivery to clients is essential for their satisfaction. People are informed of their shipped product from the beginning to ensure their satisfaction throughout the process.

Recommendations

More companies nowadays can adapt to the fast-changing environment since systematic change is institutionalized. The ever-shifting social identity and relationships in society can be recognized with the increasing demand for products that are evolving. There is a need to keep developing and improving the quality of goods because customer preferences change faster. It does not imply changing the whole product each season but adding some new attractive and innovative elements. The challenge in translating the in-store experience is the primary reason why the fashion industry is slow in the e-commerce sector (Blázquez 2014). Almost every consumer is choosing multichannel buying experiences prompting retailers to facilitate the best transition between the two. The best approach is focusing on coming up with a second to none customer experience in all channels.

Moreover, retailers should provide a seamless experience to consumers who transition from online to in-store experiences. They can cease pitting their channels against each other if they can create this online/offline process. Also, the main problem in the fashion industry is ever-changing trends. Customers are the co-creators of fashion nowadays as opposed to the old days. Michael Kors has suffered blow with its products, and it is the reason why it lost its competitive edge to Coach and Skate with its colorful and whimsical styles for the younger generation (Wong 2017). To be a step ahead, the firm needs to invest in innovation and forecasting (Timberlake 2012). This procedure will help face competition from both fast-moving fashion trends and other rivals.

Conclusion

Michael Kors is a company that continues to thrive despite the unfavorable conditions. The high level of competition from other brands has impacted the firm because of their colorful and whimsical products, which attract young people. The corporation can cope up with Coach in the market share if the changes such as introducing new designs are implemented. While differentiating its products in the market, several steps need to be taken to ensure its growth. High priced products can be created in limited amounts for a particular class of customers. Besides, delving into men’s fashion will push the business forward because the market is not yet saturated as compared to women’s cloth-line.

Reference List

Askinasi, R 2019, How fashion icon Michael Kors turned a small boutique in his mom’s basement into a $5.78 billion global fashion company (CPRI). Available from: https://www.pulse.com.gh/bi/strategy/how-fashion-icon-michael-kors-turned-a-small-boutique-in-his-moms-basement-into-a/twvfrcw. [26 November 2019].

Blázquez, M 2014, ‘Fashionshopping in multichannel retail: The role of technology in enhancing the customer experience’, International Journal of Electronic Commerce, vol. 18, no. 4, pp. 97-116. Available from: https://pdfs.semanticscholar.org/d3a8/5f5f0848d32c0c118c4d9429cd3d05ef6022.pdf?_ga=2.133576590.1076221865.1574848529-1635917449.1532614500. [26 November 2019].

Brown, A 2015, ‘Impact of the macro and micro economic environment on business strategy: a case study on Lonmin Platinum’ (Doctoral dissertation). Available from: http://wiredspace.wits.ac.za/jspui/bitstream/10539/20087/2/MSc%20Research%20REPORT%20Brown_880070%203%20July%202015_CORRECTED%20final%2015%20October%202015.pdf. [26 November 2019].

Gupta, A 2013, ‘Environment & PEST analysis: An approach to the external business environment’, International Journal of Modern Social Sciences, vol. 2, no. 1, pp. 34-43. Available from: https://pdfs.semanticscholar.org/d9d2/86c5a903a91d4e5e6cff565f186f91383a02.pdf. [26 November 2019].

Hendriksz, V 2015, How Michael Kors can change its current direction. Available from: https://fashionunited.uk/news/business/how-michael-kors-can-change-its-current-direction/2015121818785. [26 November 2019].

Kokemuller, N 2019, Six Microenvironmental factors that affect businesses. Available from: https://smallbusiness.chron.com/six-microenvironmental-factors-affect-businesses-78023.html. [26 November 2019].

Loeb, W 2014, The bag wars: Coach, Michael Kors, and Kate Spade. Available from: https://www.forbes.com/sites/walterloeb/2014/06/27/the-bag-wars-coach-michael-kors-and-kate-spade/#5c65460d5860. [26 November 2019].

McArthur, E, Weaven, S, & Dant, R 2016, ‘The evolution of retailing: a meta review of the literature’, Journal of Micromarketing, vol. 36, no. 3, pp. 272-286. Available from: https://core.ac.uk/download/pdf/143905871.pdf. [26 November 2019].

Timberlake, C 2012, Michael Kors brand takes on Coach in U.S. luxury market. Available from: http://www.bloomberg.com/news/articles/2012-03- 16/Michael-Kors-brand-takes-on-coach-in-u-s-luxury-market. [26 November 2019].

Wong, S 2017, Michael Kors faces tougher market after Coach-Kate Spade merger. Available from: https://www.businessoffashion.com/articles/news-analysis/michael-kors-faces-tougher-market-after-coach-kate-spade-merger. [26 November 2019].