Of the House of Fraser and the United Kingdoms Department Store Industry - Case Study Example

Case study of the House of Fraser and the United Kingdom’s department store industry A Strategic Group Map of the United Kingdom Department Store Industry The Department Store Industry in the United Kingdom is comprised of key players like Marks and Spencer, John Lewis, Debenhams, Harrods and the House of Fraser. To make a Strategic Group Map of these key industry players it is highly important to understand its activities to augment retail sales in the period of recession. Marks and Spencer: It is noted that Marks and Spencer through its wide network of 685 department stores rules the retail industry in the United Kingdom. Marks and Spencer is known for its wide assortment of products starting from fashionable garments to limited collection of home and electrical accessories, which extends to the food sector. The company mainly gives offer on its garments and food products. It is observed, that the target group of Marks and Spencer mostly comes from the middle class market. In regards to the food sector, it governs the United Kingdom’s retail industry by acquiring a large market of ready to eat products. The food sector of Marks and Spencer helps in drawing a huge chunk of customers to its stores who also makes good purchases on garments. Thus, the food department of Marks and Spencer helps to augment the firm’s business in a dual fashion. Moreover, Marks and Spencer is also observed to sell private labels in its food products. It has increased its practice of private labeling to it clothing products as well. Before the advent of recession in the retail market of United Kingdom the sales of Marks and Spencer recorded a steep rise. However, an estimate made on May 2009 revealed that the company had incurred an annual lose in sales by 3.4 percent. In the light of the above fact the company carried on with some strict guidelines like closing down of stores, retrenching jobs, curbing marketing and capital expenditure and even the wage and pensions. It was found that the company had cut some 1200 jobs, closed around 30 underperforming stores and reduced capital and marketing expenditure by 400 pounds and 20 pounds respectively. The company in spite of its growing tension reports of good customer loyalty due to wide market coverage. (Case study of the House of Fraser and the United Kingdoms department store industry, N.D.) John Lewis: The John Lewis departments stores operate vide a partnership with its parent company John Lewis Partnership (JLP). Being a partnership company the permanent employees of John Lewis has a stake in the company’s ownership and profits. The John Lewis operates on 26 department stores with having a target market ranging from the middle to the higher class. It renders offer prices on all its products. It is observed, that John Lewis, which renders warranties on their products, charges a little more than its existing competitors. The John Lewis stores are characterized of having more saleable area as compared its competitors. Thus, they are able to present to the customers an increased array of commodities. The retail chain mostly focuses on Home ware and less on apparels. The employees working at John Levis are availed the opportunity to work for a longer duration than the industry average. Thus, they become specialized in customer care operations. The retail stores of John Lewis focus more on the sale of their private brands. However, for the period starting from January and extending to June 2009 the company had recorded a fall in sales by 20 percent in comparison to last year. (Case study of the House of Fraser and the United Kingdoms department store industry, N.D.) Debenhams: The Debenhams retail stores specializes more on the sale of fashion apparels than on selling of home ware. The retail company operating on a wide network of 144 stores mainly targets the middle class market by offering it products at affordable prices. The apparel sector at Debenhams is mainly stocked with high quality designer wear mainly into private labels. Private labels provide the brand identity for Debenhams accounting for 70 percent of its apparel sales. In chief contrast to its competitors, the company recorded a 0.2 percent increase in its sales in the first six months of 2009. However, the company was quoted saying that due to store furnishing activities the sale had been affected. (Case study of the House of Fraser and the United Kingdoms department store industry, N.D.) Harrods: The Harrods department stores in United Kingdom are known for its vast array of branded products sold to customers at affordable rates. The company boasts of its operating margin, which hovers around 10 percent and is considered the highest in the retail industry of United Kingdom. The Harrods stores in the retail industry of United Kingdom occupy a place of pride by operating on a 75,000 square feet area and having 300 departments. It boasts of its product customization and personalization practices. In the light of the recession, the management at Harrods had increased the brand assortments in the several departments like jewellery, luggage, home fashion and bicycles. Thus, the elite customer base needs being addressed the company recorded a rise in sales by 9 percent in regards to the previous year. (Case study of the House of Fraser and the United Kingdoms department store industry, N.D.) House of Fraser: The House of Fraser one of the oldest department stores in United Kingdom specializes more on fashion apparels. However, the stores of the company contain a wide assortment of products from fashion to home ware to toiletries and extend to toys. The management at House of Fraser on its desire to create a high profile image to target a elite customer base is introducing brands through shop-in-shop activities. In the light of the previously mentioned activities the company wants to position itself as the house of brands. However, the company has a wide price spectrum addressing the needs of different customers coming from different classes. Moreover, the House of Fraser has shown an increase in the growth of sales by 16 percent during the close of 2009 as against the previous year. (Case study of the House of Fraser and the United Kingdoms department store industry, N.D.) Marks and Spencer House of Fraser Harrods MM Assortment John Lewis Debenhams Position at the time of recession Strategic Group Map for Retail Industries in United Kingdom A.2. The House of Fraser’s strategic group focuses more on targeting an elite customer base by introducing brands in its retail outlets through shop-in-shop activities. However, the company targets a large customer base by price penetration activities ranging from low to high prices. Thus, with an increased assortment of products the company helps at gaining customer attention, which has led to the increase of sales by 16 percent as against the previous year. (Case study of the House of Fraser and the United Kingdoms department store industry, N.D.) A.3. The House of Fraser by introducing the shop-in-shop concept has created hype for brand products amidst its private labels. It is found that the shop-in-shop concept introduced by House of Fraser makes it separate from its competitors. It helps customers in selecting a particular type of a product. Further, the retail chain through the competitive price mix ranging from 30 pounds to 170 pounds for Jeans and 20 pounds to 250 pounds for women knit wear targets a wide base of customers from all classes creating brand proliferation and increasing customer loyalty. (Case study of the House of Fraser and the United Kingdoms department store industry, N.D.) A.4. The competitive position for House of Fraser can be well analyzed through Porter’s Five Forces Model. The company rightly helps in meting the bargaining power of customers by making the adequate price mix in the apparel segment. However, the company spontaneously suffers from the threat of entrants for brands like Debenhams also offer branded products in the apparel segment to customers at affordable prices. Thus to counter the threat House of Fraser introduced the shop-in-shop concept to focus more on the brand segment and invite more elite customers. The company however faces increased bargaining from its supplier base for depending more on branded products. It is because the company fails to administer the prices of such products, which are previously set by the designer houses. Hence the company has to settle with a lower margin. Operating within the retail segment House of Fraser does not cater to the food segment, which is held by other retail firms like Marks and Spencer. The food segment can act as a substitute to customers while making their purchase decision. However, the company has both branded and non-branded products, which can meet the customers, demand while seeking substitutes. Finally, in terms of competitive rivalry in the retail industry House of Fraser stays high for presenting a wide array of products and other branded apparels all under one roof. Moreover, the price and brand selling tactics used by the firm help in bettering its position in the market. (Case study of the House of Fraser and the United Kingdoms department store industry, N.D.) A.5. The House of Fraser’s competitive position analyzed based on Porter’s Five Force’s Model signify that the company enjoys a better bargaining power of customers by rightly satisfying their needs. Moreover, the price and retail tactics used by the company by creating of price penetration schemes and shop-in-shop counters discourage other firms to go for such readily. Thus at least for a certain time period the company can enjoy the market position. However, the company also has to suffer some significant barriers in its trade. Owing to sales of increased brands the company loses its margins in the hands of suppliers as against other companies capitalizing on their operating margins. On the contrary, House of Fraser by efficiently producing before the customer a vast array of branded and non-branded products helps in meeting the need for substitutes. Thus customers are expected to be loyal to the company’s retail outlets. Finally for being able to create a profit mark in the period of recession it has managed to maintain its competitive position in the retail industry. (Case study of the House of Fraser and the United Kingdoms department store industry, N.D.) Reference Case study of the House of Fraser and the United Kingdoms department store industry. (N.D.) Read More