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Topshop Pricing Strategy and Marketing Plan – Report Example

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Updated: May 5th, 2020

Introduction

Topshop is a private limited entity which operates within the UK retail and fashion industry. The firm was established in 1964 and its headquarters are situated at London, UK. In its operation the firm deals with provision of a variety of apparels such as footwear, makeup, shoes and accessories (Yahoo Finance 2012).

To attain an optimal market position, Topshop has incorporated a unique strategy which entails product differentiation. The firm has achieved this by integrating the concept of exclusivity and uniqueness. Topshop achieves this by engaging in innovative and creative designing.

As a result, Topshop is able to develop fashion products which are sufficiently differentiated. Its differentiation effectiveness has enabled Topshop to attain an optimal market position in the fashion industry despite the intense competition from firms such as ZARA and H&M. Additionally, commitment to innovation and creativity has enabled Topshop to align itself with changes in the fashion industry (Yahoo Finance 2012).

In an effort to understand the external and internal environment with regard to Topshop, this paper details a comprehensive market audit of the firm. The audit is undertaken by incorporating macro and micro environment analysis models such as the PESTLE analysis, the Porters’ five forces and the SWOT analysis. An internal analysis of the firm is also conducted by evaluating the marketing mix strategies adopted by the firm.

Marketing mix

The success of a firm in marketing its products and services is dependent on the effectiveness with which it has incorporated its marketing strategies (Kotter & Schlesinger 2008).The marketing strategies have to take into account a number of variables such as the product, promotion, price and distribution.

Product strategy

Topshop has incorporated product diversification as its product strategy. The firm deals in product lines which are composed of a wide range of apparels and accessories in accordance with the customers’ needs. In its operation, Topshop is focused at ensuring that its products are of high quality, style and convenience. Some of the firm’s main product lines include mainline, boutique, and unique (Topshop 2012).

One of the main challenges in the apparels industry emanates from its dynamic nature. The rate of change in the industry is very high. To cope with this issue, Topshop is focused at attaining a high level of creativity and innovation. This has significantly contributed towards the firm’s capability in introducing new products to the market.

To ensure that the value of its products is not diluted by over-introduction of new products, Topship ensures that only a few pieces of a particular product line are introduced. For example, the firm may only introduce only 300 pieces of a new product which are stocked in specific flagship stores. This strategy is unique in that it contributes towards positioning its products being exclusive, prestigious and scarce (Topshop 2012).

Pricing strategy

In their purchasing process, consumers are very conscious of product prices. Firms use pricing strategy to communicate the value of their product. In its marketing process, Topshop has adopted premium pricing strategy. The strategy is aimed at communicating the high quality of the firm’s apparels and accessories.

Over the years, customers have associated Topshop’s products with value. This has played an important role in the firm’s effort to incorporate premium pricing. Topshop’s premium pricing strategy has succeeded as a result of the unique nature and high quality of its products.

Promotion strategy

Creating sufficient market awareness is one of Topshop’s goal marketing objectives. To achieve this, Topshop has adopted Integrated Marketing Communication (IMC) strategy. The strategy is constituted of various marketing communication techniques such as advertising, sales promotion and public relations.

In its advertising strategy, Topshop uses both emerging and traditional marketing communication mediums such as print media. For example, when introducing new products to the market, the firm advertises through mediums such as the local dailies in the UK.

Additionally, Topshop also engages in outdoor advertising for example by decorating its vans with its products and unique messages aimed at creating market awareness. Below is an example of some of the firms that the firm utilizes.

Topshop outdoor advertising by decorating its van.

Source: (Topshop 2012). Web.

To create a strong brand relationship, Topshop contracts renowned celebrities to endorse its products. When opening its stores in New York, Topshop contracted Kate Moss, a renowned British model, Jennifer Lopez and Jay Z [renowned music artists] to attend the grand opening (Topshop 2012). Their attendance presented an opportunity for the firm to create market awareness. This is due to the fact that the media would sufficiently publicize the event hence creating brand awareness.

Topshop’s management team appreciates the role of information communication technologies in creating market awareness. Consequently, the firm has designed an official website through which it posts its products. Additionally, Topshop also promotes its products through emerging social communication networks such as Facebook. By using social networking sites, Topshop has successfully created a sufficient online community.

Distribution strategy

Upon developing products and services, it is paramount for firms to ensure that customers easily access them. Firms achieve this achieve this by incorporating both direct and indirect distribution methods. Topshop has established a number of outlets in the UK to enhance product accessibility.

The outlets are effectively positioned to improve customer accessibility. Topshop has also adopted online marketing. Customers can be able to purchase Topshop’s products online. Online distribution has been effective in ensuring that Topshop markets its products to a wide number of potential customers.

Market Environment Analysis

Macro-environment analysis

Firms do not operate in a vacuum but are affected by changes occurring in the macro-environment. Some of the macro-environment factors affecting firm’s operation include political, economic, technological, social, and legal factors

PESTLE analysis of the UK Apparels and accessories industry

Political environment

Over the past decades, the UK government has ensured a high level of political stability. This has played a critical role in promoting investment within the country. Most investors are increasingly considering investing in the UK.

The country’s political stability has enabled the UK to be a member of different trading blocs such as the European Union, the G-20 and the Organizational for Economic Co-operation Development. By being a member of such trading blocs, the UK government has been able to provide investors with an opportunity to market their products to a large number of customers. For example, firms such as Topshop can be able to export their products into the member states more cost effectively.

This is well illustrated by the fact that the UK has entered into free-trade agreements with other countries such as Norway, Liechtenstein and Switzerland. The economic integration between the UK and other countries presents an opportunity for Topshop to access raw materials member countries cost effectively.

Economic environment

The 2007/2008 global economic recession adversely affected most world economies as a result of the high rate of globalization that is currently being experienced (Gilligan and Hird 2008).

The UK was not shielded from the effects of the recession. Consequently, most economic sectors such as the apparels and accessories were adversely affected.

The UK has not fully recovered from the 2008 economic recession. The recession made most consumers to adjust their consumption behavior as a result of decline in their purchasing power. Decline in consumers’ purchasing power emanated from increment in the in the level of unemployment. Approximately 580,000 jobs were lost between 2008 and 2010 in the UK (Bell and Blanchflower 2010).

The recession has made consumers to increasingly focus on consumption of necessities rather than luxuries. During this period, a significant proportion of UK consumers considered fashion products such as apparels and other accessories as luxuries than necessities.

Currently, the firm’s operations will also be affected by the prevailing euro zone sovereign debt crisis. As a result of the crisis, the UK has experienced an increment in the rate of unemployment to 11.2% in 2012 (Cha 2012). It is estimated that the non-food retail sector in the UK will experience the lowest growth as a result of the recession. During 2012, the sector will decline with a margin of 0.5% (Verdict 2012).

The recession and the sovereign debt crisis have made consumers unable to purchase highly prices products such as fashion products (Verdict 2012). Therefore, there is a high probability of Topshop experiencing a decline in its sale revenue due to reduction in the consumer’s purchasing power. The economic recession has led to an increment in the degree of uncertainty amongst consumers. This is depicted by the rapid rate at which the consumers’ have reduced the rate of consumption (This Money 2012).

Social environment

Firms operations are affected by the prevailing social trends. Currently consumers have increasingly become conscious of fashion. This presents an opportunity for Topshop to exploit by designing high quality, unique and valuable fashion products. To align itself with the prevailing social trends with regard to fashion, Topshop undertakes extensive innovation and designing.

Technological environment

Topshop can benefit from the numerous innovations with regard to social networking technology. For example, the firm can exploit the social tools such as Facebook, Twitter, Tout and You Tube to interact with its customers. Through these social networking sites, the firm will be able to derive a sufficient volume of market information. Such information can be an important source of market intelligence for the firm.

Legal environment

Firstly, the government has eliminated all taxes on firms that venture in such zones. Additionally, the government issues a 5-year tax holiday to firms that invest in such zones. Incorporation of tax holidays has played a critical role in improving the attractiveness of the zones to investors. By investing in such economic zones, Topshop can be able to attain high profitability (Delloite 2011).

Competitive analysis: Porter’s five forces

Threat of entry

The UK high end retail market is characterized by a high threat of entry emanating from entry of large retail chains such as supermarkets. Supermarkets are increasingly diversifying their product range by including diverse apparels and accessories. This presents a major challenge for the firm (Key Note 2001).

The high rate of technological innovation especially the internet has made it possible for new entrants to venture the UK high end retail market. New entrants are using the internet to venture in the UK market by undertaking online marketing. To survive in an industry characterized by such a threat, it has become vital for Topshop to incorporate online marketing.

Threat of substitute

The large number of competitors in the UK fashion industry presents consumers with an opportunity to select from a wide range of products. During periods f economic recession consumers can easily access fashion products from supermarkets and other retail outlets.

Supplier bargaining power

The suppliers bargaining power is relatively low. Topshop mainly deals with its own branded apparels and accessories. Consequently, the firm is not mainly dependent on suppliers for its finished products. However, the firm outsources raw materials from different sources. For example, the firm accesses its supplies from different countries by importing. As a result of its global reputation, Topshop is able to negotiate for significant discounts.

Buyer bargaining power

The large number of industry players coupled with the fact that supermarkets are stocking diverse apparels has significantly increased the consumer’s bargaining power (Gilligan and Hird 2008). This arises from the fact that consumers can switch to other apparels and accessories product at a relatively low switching cost.

The high consumer bargaining power means that Topshop has to develop customer trust in order to sustain its sales growth. Additional, the firm has t ensure that it stocks high quality products. This will aid in developing the eve f customer loyalty. The figure below illustrates a summary the industry’s characteristic.

Degree of rivalry– The lucrative nature of the industry coupled with the large number of industry players has significantly increased the degree of rivalry in the UK fashion industry.

Topshop Degree of rivalry scheme.

Micro-environment analysis: SWOT analysis of Topshop

The chart below illustrates Topshop’s, strengths, weaknesses, opportunities and threats.

Strengths

Brand image– The firm has managed to nurture its brand image.

Creativity and innovation- Top shop is cognizant of the fact that its customers are fashion sensitive.

International brand-The firms’ products have been endorsed by celebrities.

Customer experience– The high quality of the firm’s products coupled with the in-store atmosphere developed enables the firm to deliver unique customer experience.

Weaknesses

High cost of operation –The firm has a large human resource base and store space which increases cost of operation.

Management challenges- The large size of the store and the numerous product lines presents a major challenge for the firm.

Opportunities

New market segments – Topshop can increase its sales revenue by targeting new customer categories such as the youth.

Collaborating with celebrities– The firm can improve its brand image by collaborating with renowned celebrities.

International expansion– Topshop can increase the volume of its sales revenue through international expansion.

Brand expansion– Expanding its product line y focusing on men clothing will increase the firm’s sales revenue.

Threats

Competition- The firm faces a major challenge emanating from increased international competition especially from the top designers and fashion icons such as Next Limited, Wearhouse, River Island, Unite Benton, ZARA and H& M.

Economic recession- Occurrence of a recession may affect the firm’s profitability due to decline in volume of sales.

Conclusion

From the above analysis, it is evident that Topshop has been very effective in its operation. Its success has arisen from adherence to quality, innovation, creativity and maintenance of product value. As a result, the firm has been able to attain a high level of customer satisfaction. Topshop has been successful in marketing its apparels and accessories products through formulation and implementation of effective marketing strategies.

As a result, the firm has been effective in positioning itself in the market. Despite this, the firm faces numerous challenges emanating from the external environment. To effectively position itself in the market, it is paramount for the firm to continuously conduct a comprehensive market audit. The audit will aid in formulation of effective marketing strategies thus enhancing its competitiveness.

Reference List

Bell, D. & Blanchflower, D. 2010, . Web.

Cha, A. 2012, European financial crisis has ripple effect on US businesses. Web.

Delloitte: Taxation and investment in United Kingdom 2011. Web.

Grundy, T. 2006, ‘Rethinking and re-inventing Michael Porter’s five forces model’, Strategic Change, vol. 15, pp. 213-229.

Gilligan, C. & Hird, M. 2008, International marketing: strategy and management, Taylor and Francis, New York.

Key Note: , 2001. Web.

Kotter, J. & Schlesinger, L. 2008, ‘Choosing strategies for change’, Harvard Business Review, vol. 2, pp. 130-150.

This Money: . Web.

Topshop: , 2012. Web.

Verdict: UK retail 2012 & beyond 2012. Web.

Yahoo Finance: Topshop company profile 2012. Web.

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