The External Environmental Analysis of the Family Clothing Stores

The external environmental analysis covered in this report can influence the apparel industry. The segments which have been covered related to family clothing industry are demographic, political, economic, global, technological and socio-cultural segment. Considering the demographic segment, the majority of the buyers belong to the age below 30, as they tend to be more attracted to fashion. The age and gender differences tend to have an impact on the family clothing industry. The analysis of the economic segment revealed that the apparel industry has been growing in the region of the United States; however it is also subjected to fluctuation. The inflation rate has impacted the industry and it should be controlled in order to improve profitability. The political/legal segment highlighted that protests by the labors against the employer can have a negative influence on family clothing stores. The use of child labor also influences the industry negatively. Moreover, certain political figures have shaped the fashion trends and this can be considered a noteworthy point. The socio-cultural segment is dependent on the opinions and values of the public. It seems to have a significant impact on the retail industry. It has been observed that in the US, jeans and shirts tend to be common among teenagers and people younger than 30. Therefore, the retailers aim to put a discount on these products in order to attract the audience. Moreover, people are also focused on buying online clothing instead of going to the shop. The technological segment is critical to be considered. The e-commerce business is growing at a rapid rate worldwide and also in the US. The retailers need to focus on PPC and social media marketing for the purpose of increasing customers. The global segment seems to have a negative impact on the clothing industry of the US in terms of production. This is due to the high labor cost and it restricts the companies to produce in the US due to higher costs.

General Environmental Analysis

The focus of this external environmental analysis is the retail industry, particularly Family Clothing Stores. Different subjects have been covered on a domestic level, however, a few global projects are also considered. It is critical to note that every segment of the analysis may be related to each other and possess overlapping aspects. A summary will be provided at the end of the report, describing the association between the segments. The segments which have been covered are economic, demographic, socio-cultural, political/legal, global and technological.

Demographic Segment

The United States has been turning into a multicultural state and it would significantly impact the retail industry, particularly family clothing stores. Hill & Lee (2012) pertinently pointed out that Asian and Hispanic children who were born in the 2000s and late 1990s will make up around 25% of the population of US. The cultural impact of their language, food, and music will attempt to shape the environment of shopping. It is a noteworthy point to consider that due to demographic age gaps, there are 2 distinct shopping nations. One is the financially conservative (older than 50) and other is the optimistic outlook (financial) of the under the 30s. These can be considered 2 different marketing challenges.

Figure 1 U.S sales of apparel industry (source: Mehrjoo & Pasek, 2016)

The above figure indicates that the apparel industry has been generating revenue in the US. This aspect highlights that people of different ages are interested in buying clothing from stores and online. The majority of the buyers belong to the age below 30, as they tend to be more attracted to fashion. Hill & Lee (2012) explored that various clothing manufacturing companies tend to target girls in the teenage years with their new fashion lines, such as shirts, jeans, and other apparel. In the United States, the clothing lines are often promoted in August and July, before the commencement of the school or college. The competition seems to be high in the US, as there are numerous stores and they compete with each other on prices. Further, the clothing retailers tend to focus on meeting the lifestyle requirements of the customers. They aim to run different marketing campaigns and that also includes pay-per-click (PPC) marketing, as a number of teenagers use the internet for buying products and services (Şen, 2008).

Economic Segment

According to Hodges & Link (2018), revenue generated within the Apparel industry is approximately US$325,720m in the year 2018. It is predicted that the market would annually grow by 2.5%. The apparel industry has a tremendous variety of product, short product life, unpredictable and volatile demand, and inflexible and long supply processes. It can be said that the apparel industry is one of the significant contributors to the economy of the United States. Nimon & Beghin (2017) indicated that the apparel market of the United States would be worth around $380 billion by the year 2025.

Figure 2 Apparel Industry and Inflation (source: Hodges & Link, 2018)

The above graph highlights that the rising prices in the industry of retail and apparel have led to an increase in inflation rates. In the region of the United States and the United Kingdom, the prices of the consumer have increased at a rapid pace since the year 2014. Hodges & Link (2018) indicated that inflation (annual) increased from 2% to 2.6% in April of 2016, which was due to an increase in the rising prices within the apparel industry. In the family clothing industry, the rising cost has spread across different items, specifically in women’s clothing. Becker & Nautz (2012) explored that the inflation rate may increase in the region of the United States, as it was revealed to be higher in the year 2018 as compared to the year 2017.

Figure 3 Apparel industry growth (source: Nimon & Beghin, 2017)

From the above chart, it can be understood that the apparel industry has been growing since the year 2012. This can be considered a positive aspect since people under the age of 30 tend to shop a lot and may contribute to a rapid rise in the family clothing industry. Considering the survey worldwide, there has been an increase in the revenue generated by the apparel industry. It eventually benefits the economy of the countries, however, due to increased prices, there seems to be a risk of a rise in the inflation rate.

Political/Legal Segment

Numerous political and legal elements tend to influence small business within the apparel industry. It is significant to consider that this industry has been continuously impacted by problems including child labor laws and the rights of the workers. The union workers within the clothing industry may protest against the employers, particularly if the medical benefits or wages are not being provided. If there is a protest by the workers in the apparel industry, it eventually affects the production (Vollrath, Gehlhar & MacDonald, 2018). This may eventually lead to delays for different retailers in availing fall or spring fashions on the desired time. There are cases pertaining to child labor laws in which activists tend to picket the retailers for the unethical and illegal activities. The portrayal of the negative image by the media can affect the profit and sales of the retailers.

As per the study of Vollrath, Gehlhar & MacDonald (2018), the continuous political shifts within UK and US have impacted the fashion industry up to a certain extent. The US elections which were held recently also created a deep influence on the apparel industry. There seem to be numerous political events and issues that are unresolved and may lead to uncertainty and volatility in the upcoming years. The policies devised by government possess the capability to persuade the citizens to buy locally made items by increasing the tax on imports. Stone & Farnan (2018) pertinently pointed out that PETA (animal rights group) has actively focused on fighting against the unethical use of animal furs and skins within the apparel industry. These elements indicate that political influence seems to be moderate in the family clothing industry. It is a noteworthy point to consider that various political figures have attempted to impact the fashion trends. These include Ivanka and Melania Trump, Jackie Kennedy and Theresa May.

Socio-Cultural Segment

Socio-cultural refers to general values and perception from the population or citizens that can have an impact on the demand and change in the apparel industry. Values and opinions of the public tend to change over a period of time and it eventually leads to different effects and influences. Considering the apparel industry, a clothing manufacturer should focus on creating styles that aim to appeal to individuals belonging to different cultures. On the contrary, clothing retailers, wholesalers and manufacturers tend to avoid producing clothing items that do not fit with the societal norms (Stone & Farnan, 2018). The style which was worn around 90 years ago may not be popular in the modern era. It is critical to note that the aging population can significantly increase the demand for larger pants and jeans sizes, including loose or relaxed-fitting styles. Jeans, shirts, and skirts seem to be popular in different cities of the US. Most of the retailers put discount up to 30 to 40% on the shirts and jeans sales in order to attract young people. This strategy can significantly benefit the retailers.

Usually, the majority of individuals tend to become sedentary when they reach the 50s and 40s. The waistlines of consumers are subjected to expansion so they require bigger sizes and tailored clothes. It is a noteworthy point to consider that birth rate decrease in areas may lead to lesser demand for the clothes worn by babies. Phadnis & Fine (2017) highlighted that in the region of the United States, there has been an increase in the online-selling of clothing. This aspect indicates that consumers are more focused on searching online for clothing rather than going to the market. The apparel industry is subjected to change rapidly and social elements can continuously impact the future and current success. Considering the consumer behavior, apparel retailers are actively focusing on initiating online marketing campaigns, as a number of people search online for clothing products.

Technological Segment

Technological elements, which can influence the apparel industry include demand, availability of resources and production. The shortage of different materials, including leather, can force wholesale and retail clothing organizations to go for substituting leather products or sell more faux. With the rapid progress in technology, clothing companies should be focused on adding unique equipment, such as robots for speeding up the production process (Lane, 2018). The element of technology provides the opportunity to apparel businesses regarding the creation of brand awareness among the targeted audience. This includes the utilization of marketing techniques, such as PPC and social media marketing. These techniques enable the companies to interact with the consumer online and provide them with the desired product or service to purchase.

Figure 4 E-commerce apparel industry revenue (source: Phadnis & Fine, 2017)

The above figure represents the revenue generated by the e-commerce fashion industry. It has been analyzed that the use of e-commerce in the apparel industry can eventually boost the profitability of businesses in an effective way. The use of the internet by the consumers can eventually benefit the companies, as the social media and website seem to be a key element in interacting with the customers. It is predicted that e-commerce may increase the revenue of apparel companies up to $713billion by the year 2022 (Lane, 2018). One of the evident advantages of technology is that it has helped in the forecasting of fashion trend. Previously, tracking of fashion trends was quite a difficult task in the clothing industry. People had to travel a lot for collecting information and data regarding fashion trends. However, now fashion forecasting and analysis tends to be done regularly (Cheng & Lai, 2018). In the retail industry, unique software is being utilized, which help to make digital sketches of clothes and dresses. This aspect clearly indicates that technology can have a significant impact on the clothing industry.

Global Segment

Globalization refers to an inevitable phenomenon, which can have a great influence. The relationship between globalization and the apparel industry cannot be denied. One of the critical aspects that encourage clothing retailers to globalize the products is excessive competition. With the objective of increasing clients and profitability, clothing companies attempt to expand the business at the global level (Hines, 2012). This element can both positively and negatively influence the business. Considering the impact of globalization on the apparel industry of the US, by the year 2007, 95% of the apparel in the US was revealed to be imported from different countries. Only 2% of clothing which is bought in the US tends to be manufactured on its soil (Hines, 2012).

It is critical to note that most of the clothing companies do not focus on production in the US due to labor charges. A shirt produced in US cost around 185$, while a shirt made in China may cost around $15 (Thomassey, 2010). This difference restricts the clothing companies to produce in the US and they rather focus on targeting consumers from the United States. It can be said that globalization has negatively influenced the US in terms of apparel production (MacCarthy & Jayarathne, 2010). This aspect highlights that the government should focus on reducing labor cost, as it would eventually lead to more production in the country.

Summary

All six segments tend to have a major influence on the apparel industry. These have been discussed and the association between the segments can be observed. There seems to be an association between technological, socio-cultural and legal elements. With the changing opinion of people, the political and legal actions also change. Considering the socio-cultural factors, the clothing companies shift to new technology in order to increase the number of customers and improve profitability. The global segment can also be influenced by the changing laws and rules and the technology. For expanding global operations successfully, the clothing companies in the US need to utilize online platforms to attract investors regarding clothing production. Moreover, reducing labor cost would eventually improve the economy of the US, as it would attract companies to initiate clothing production plant in the country. Hence, it is critical to observe that the discussed segments also have an association with each other.

References

Becker, S. S., & Nautz, D. (2012). Inflation, price dispersion and market integration through the lens of a monetary search model. European Economic Review, 56(3), 624-634.

Cheng, P., Fu, Y., & Lai, K. K. (2018). Supply Chain Risk Management in the Apparel Industry. United Kingdom: Routledge.

Hill, J., & Lee, H. H. (2012). Young Generation Y consumers’ perceptions of sustainability in the apparel industry. Journal of Fashion Marketing and Management: An International Journal, 16(4), 477-491.

Hines, T. (2012). Globalization: an introduction to fashion markets and fashion marketing. In Fashion marketing: Contemporary issues (pp. 21-45). United Kingdom: Routledge.

Hodges, N. J., & Link, A. N. (2018). Prescriptions for Growth for US Textile and Apparel Firms. In Knowledge-Intensive Entrepreneurship (pp. 145-162). Springer, Cham.

Lane, H. T. (2018). Fashion industry: Resources for online research. College & Research Libraries News, 79(9), 516.

MacCarthy, B. L., & Jayarathne, P. G. S. A. (2010). Fast fashion: achieving global quick response (GQR) in the internationally dispersed clothing industry. In Innovative Quick Response Programs in Logistics and Supply Chain Management (pp. 37-60). Germany: Springer, Berlin, Heidelberg.

Mehrjoo, M., & Pasek, Z. J. (2016). Risk assessment for the supply chain of fast fashion apparel industry: a system dynamics framework. International Journal of Production Research, 54(1), 28-48.

Nimon, W., & Beghin, J. (2017). Ecolabels and international trade in the textile and apparel market. In Nontariff Measures and International Trade (pp. 321-326).

Phadnis, S. S., & Fine, C. H. (2017). End‐To‐End Supply Chain Strategies: A Parametric Study of the Apparel Industry. Production and Operations Management, 26(12), 2305-2322.

Şen, A. (2008). The US fashion industry: A supply chain review. International Journal of Production Economics, 114(2), 571-593.

Stone, E., & Farnan, S. A. (2018). The dynamics of fashion. Bloomsbury Publishing USA.

Thomassey, S. (2010). Sales forecasts in clothing industry: The key success factor of the supply chain management. International Journal of Production Economics, 128(2), 470-483.

Vollrath, T., Gehlhar, M., & MacDonald, S. (2018). The changing world network of trade in textiles and apparel. Aquaculture, 3.