Apparel Market

Report

Introduction

In today’s developing technology, online apparel market is increasing rapidly with the change in customer demand and fashionable market trend. Currently, the online market is highly competitive for a business firm because there are many sellers of the same product who can provide the product across the national boundary (Hollensen, 2017). This study will compare the competitive advantages and strategies of Zalando’s and Asos’ and also evaluated then in this report. The main purpose of the study is to discuss and evaluate the criteria that can be selected by Zalando to develop the market in different countries by the use of online market. In addition to this, this report also discussed the pros and cons of investment in Zalando and Asos by some investors given in the case study of Zalando. Overall, this study will help in evaluating the investment opportunity for both the international firms i.e., Zalando and Asos in new target market.

Compare and evaluate Zalando’s and Asos’ key competitive advantages and strategies

Zalando is a retail firm which provides the clothing and footwear for men, women and children in the online market. The major competitors of the firm are Amazon, Asos, etc. who also sale same kind of products online to the different customers (Firnkorn and Müller, 2012). In context to it, both the companies will be evaluated on set of parameters that help in identifying which company is performing well in its business. The selected parameters are total turnover of the both the companies such as turnover, growth, net profits, employees, rate of return, countries and products, etc. These all parameters also help in determining that how efficiently companies are achieving the competitive advantages and strategies in the high competitive environment of online apparel market.

The marketing strategy of the company is extremely effective so according to the annual report of year 2012-13 it is identified that the total turnover of the company was 1150 million Euros. But, the turnover of Asos was only 920 million Euros that was competitively less to Zalando. On the other side, it can also be defined that the growth of Zalando was positive and increased with 125% while Asos has the growth in one year is only 39%. In the comparison of Zalando and Asos, it is evaluated that the organization got a net loss of 90 million Euros in this year (Marchi et al., 2013). But, at the same time, Asos earned net profit after taxes with the amount of 66 million Euros.

But in the comparison of the last year’s financial data, it is analyzed that net loss of Zalando was increased with 50% while the net profit of Asos is increased with the percentage of 19. Both Zalando and Asos are also compared with the number of employees who are working in the company and evaluated that Zalando has approx 2000 employees but Asos has approx 1360 employees. The number of products are also much high of Zalando as comparison of number of products provided by Asos where Zalando has 150,000 products of 1500 different brands. On the other side, Asos provides 65,000 products of approximately 800 different brands cover the internet market selling (McGrath, 2013). The most competitive advantage for the organization is that Zalando has their business in more than 14 counties according to the current scenario. But, in concern to Asos, it is analyzed that it has their business in 9 counties (Asos, 2018). In respect to this, it is also stated that Zalando is increasing its market share as it is operating its business in large numbers of countries in order to target the large number of customer segment easily and efficiently. So, it can be said that Zalando has competitive advantage there is no completion with Asos in Switzerland, Poland, Sweden, Denmark, Netherlands, Belgium and Norway.

In addition to this, it is also evaluated that there are many customer who has become the loyal customer of the company because it is estimated that 60% of total customers of Zalando have return to purchase the products again (Lieber and Syverson, 2012). But, in concern to Asos, it is estimated that only 50% of total customers have come to purchase the product in the stores of Asos. So, this comparison evaluates that Zalando has the competitive advantage of the loyal customer and provides the high satisfaction to the customer. Moreover, the Ander Holch Povlsen is an investor of this industry who has 10% stake in Zalando and 27.5% stake of Asos. So, it can be said that Asos has to pay much amount of the profit to Ander Holch Povlsen which is competitively much high than Zalando.

At the same time, Zalando also promotes their products by the use of offline marketing that is highly beneficial for the company. But, in concern to the advertising of Asos, it is only based on the online marketing and only the people who use internet can watch the advertisement (Kim and Min, 2015). Thus, the offline advertisement provides a good competitive advantage to Zalando where the people who do not use internet that can also know about the organization. So, it can be said that the offline marketing provides good market awareness whereas the Asos has lower brand awareness in the market. It is highly beneficial for Zalando to use the marketing through offline sources because the competitor do not uses it. In addition, the technological improvement that has been recently done by Zalando is also highly beneficial for the organization. This technological improvement will be an effective strategy for competing Asos in the world of online apparel market (Firnkorn and Müller, 2012). Furthermore, the strategy for worldwide expiation is also very effective that is used by Zalando and also provided competition in the industry. This strategy is also improving the competition level in the industry because in the global world, there are many organizations which provide online products for customers.

Evaluate the criteria that used for Zalando’s selection of new markets outside its current 14 countries

Zalando is one of the largest online apparel international firms which offer its customers with high number of international brands. Zalando is focusing to target a new geographical market for which proper set of criteria is developed in order to evaluate that selected target market will provide the profit and increase its brand name around the world. There is a proper set of criteria which every organization need to follow while selecting a new market in addition to existing target market. In concern to this, Zalando main’ objective or goal is to target the large market share by targeting the large numbers of customers. This criteria help in evaluating the geographical market situation and condition of the selected country. For evaluating the new market, there is a need to follow a proper process in order to identify the threats or challenges which company might face while entering to a new market.

The process for evaluating the new selected target markets is developing a new list of criteria for potential new markets then eliminating the less attractive target market and then from that selecting a most attractive market (Sebald and Jacob, 2018). By following this process, evaluation process will become easier for comparing the three attractive countries where Zalando can enter and operates its business in an efficient manner. Now, the new attractive target market of Zalando will be selected on the basis of

In simple words, for deciding which new market to enter, firms need to analyze that geographical market in advance for which there is a requirement of proper set of criteria which includes logistics, market size, market growth and infrastructure facility and so on. In context to it,   ranking list is prepared for three attractive countries which are selected as new target market for Zalando. In respect to this, the countries will be ranked on the basis of number wise i.e., 1 for excellent, 2 for good and 3 for ineffective.

Ranking list of the three most attractive countries:

CriteriaCountry
JapanNorth America (USA)Australia
Development of GDP growth rate211
Market Size122
Infrastructure facility322
Customer segments211
Competitive intensity232
Political risks322
Growth of Market121
Logistics333
Total 151615

From the above ranking list, it can be determined easily that North America (USA) country is best suitable for Zalando to target a new market segment efficiently and effectively because this country is meeting all criteria in a positive manner. The rank is set or given on the basis of criteria such as for country Japan, market growth is ranked as 1 because there is high growth ratio in retail business whereas for USA, market growth is ranked 2 because in North America market is saturate and also for country Australia, market growth is ranked as 1 as there is high growth rate in retail shopping.

In addition to this, it is also identified hat infrastructure facility of country North America i.e., USA is very effective because there international firms are using high tech technology and knowledge in order to develop in a competitive environment or market. In contrast to above, it is also found that Japan infrastructure facility is less effective in comparison to Australia as this country also uses high level technology to develop its infrastructure services (Kotabe and Helsen, 2008). The market size of Japan is actually more attractive in comparison to Australia and North America (USA). The ranking is provided to the country in such a manner i.e., Japan is given 1, for Australia, it is 3 and for North America, market size id ranked as 2.

In addition to this, logistics is other criteria which help in examining or evaluating the geographical stability of the new markets which are selected. The logistics services in every country are not that effective as it is identified because logistics services require a well stable economic condition in order to improve the delivery services on time. On the other hand, it is also determined that GDP growth rate of selected countries i.e., Japan, USA and Australia is different from each other. While analyzing the develop of GDP growth rate, it is identified that Japan GDP rate is 1.0% whereas USA GDP growth rate is 1.6% and Australia GDP growth rate is 2.8% (Trading Economics, 2018). In comparison to USA, Australia, GDP growth rate is actually higher and this state clearly that Australia is using infrastructure facility is such a manner that market is growing rapidly as well as international firms are reaching to selected customer segment efficiently.

Pros and cons for Anders Holch Povlsen and Bestseller, regarding the investments in Zalando and Asos

There are some pros and cons for Anders Holch Povlsen and Bestseller which they might face regarding the investments in the Zalando and Asos. The investment is one of the major essential factor which helps in developing and improving the firm financial situation in a better manner as well as help in development of business too. The pros i.e., advantage for shareholders for making investment in Zalando is that company is operating its business presently in 14 countries successfully (Zalando, 2018). While evaluating the performance in current 14 countries, it is identified that company is consistently improving and developing its market share by providing customers with fashionable products on time without any delay.

In addition to this, it is also identified that in year 2015, company successfully targeted a large numbers of customers i.e., 3 millions new customers with existing customers too. In concern to this, it is clearly stated that company is providing its customers with the best quality of products and also providing effective delivery services on time to customers (Ghauri and Cateora 2014). This increase in customer attraction towards the brand name is because of increase in customer satisfaction level. Moreover, while studying and analyzing the Zalando financial performance, it is clearly observed that company is continuously developing its business and increasing its sales as company revenue growth is increasing rapidly i.e., in 2015, revenue generated was 2.96 euro million whereas in 2016, revenue generated is 3.6 million euro.

(Source: statista, 2018)

This revenue growth figures clearly demonstrates that company is rapidly achieving its organizational goals and objectives by meeting all customers’ requirements and targeting required target market. In addition to this, it is also studied that Zalando also provides its investors with a high return on investment i.e., 60% of high rate of return. In contrast to it, Asos Company also focuses on providing its investor with 50 % of high return rate of return on investment. This analysis clearly defines that there is an advantage to an investor that they have an opportunity to invest in the firms to achieve high rate of return.

The advantage of investing the large amount of the investment in Asos Company is that this company is also operating its business in 9 different counties currently. Asos is UK largest online fashion site which provide its customers with the unique and trendy apparels. In other words, Asos, provides its customers with most fashionable products and also aware them about the new fashionable market trend which is going or trending in the market successfully. Nowadays, it is very much observed that mainly youngsters are following each changing fashionable trend attractively and quickly because they want to adopt the new trend first and look different.

In addition, Anders Holch Povlsen and Bestseller also have advantage of investing in Asos Company i.e., company target the large numbers of customers in different other countries also by providing the delivery shipping services for the fashionable products. The ASOS is offering its shipping services in more than 140 countries and this clearly states that company is successfully managing its delivery services and satisfying its customers with its products and services (Asos, 2018). However, investing in a Asos is also beneficial for the shareholder Anders Holch Povlsen and Bestseller because company is attaining its organizational goals and objectives efficiently and effectively.

On the other hand, cons or disadvantage of the investment in the company is that in both the brands, the profit margin is very low in comparison to other external brands. The investment decision to invest in fashion industry is very challenging for the shareholders or investors because in fashion industry there are more big players who are competing with each other in same market (Keegan and Green, 2011). This becomes a major disadvantage for the company who are upcoming or establishing their business in these new market like Zalando or Asos. The competition level in fashion industry is as high as it is observed in food industry because there are different varieties of apparels which are demanded by the country.

At the same time, investing in online apparel business is very risky because fashion trend changes with the change in the demand of customers and that lead to affect on the business of apparel because old-fashionable products are less demanded by the customers anymore. The old fashionable products are discarded by the companies by providing the different discount offers in order to clear the existing stock. In fashionable market, it is very difficult to sustain for a longer period because new entry in competitive market attracts the customers towards its products and services. In this case or situation, there is a high risk to invest in an organization of fashion industry where fashion changes every second or minute.

In the research study of Röllecke, et al. (2018) it is clearly stated that the other disadvantage of investing in this industry is that time because in this sector, long time is demanded to develop a huge network with the customer that company has to  work on. When a company decides to enter a new target market, then there is a major disadvantage of time and money. The financial stability of the business also needs to be strong enough in order to sustain in the competitive market for a longer period. While evaluating, it is also identified that Zalando is successfully growing in its market segment and attracting customers easily in comparison to Asos.

Moreover, there is other disadvantage for the investment is that it is usually seen that there are some risks related to political and economic risk which affects or develops the barriers for the new entrants as they are legal rules and regulations that exist in every geographical market and found to be different in every region (Hollensen, 2013). The different rules and regulations are some factors which develop risk for the upcoming business to sustain in competitive environment and this leads to influence the investors in negative manner. Thus, this evaluation process helped in investor Anders Holch Povlsen and Bestseller in making decision related to investment in the company Zalndo and Asos.

Conclusion

From the above study, it can be concluded easily that Zalando can efficiently target the North America (USA Country) by operating its business in that geographical market in order to reach different corners of areas where customers can also be targeted easily. This study helped in evaluating the competitive advantage and strategies of Zalando and Asos by comparing both the companies on different parameters such as turnover, growth, employees, net profits, rate of return and products, etc.  From the study, it can also be summarized easily that there is some advantages or disadvantages of investment for Anders Holch Povlsen and Bestseller (investor) in fashion industry (Zalando and Asos) such as competitiveness, high rate of return, change in market trend, etc. Howver, investment in Zalando will be beneficial for the company because it is operating more efficiently than Asos in other different countries and targeting more numbers of customers effectively.

References

Asos, 2018. About us. [Online] Available at: http://www.asos.com/ (Accessed: 8th February, 2018).

Education, London.

Firnkorn, J. and Müller, M., 2012. Selling mobility instead of cars: new business strategies of automakers and the impact on private vehicle holding. Business Strategy and the environment21(4), pp.264-280.

Ghauri, P and Cateora, P., 2014. International Marketing (4th Edition) London. McGraw –
Hill. This essential reading is available via Kortext.
Hollensen, S. 2013. Global Marketing, 6th Edition. Pearson Education, London.

Hollensen, S. 2017. Global Marketing. Seventh Edition, Pages 327-334, USA: Pearson.

Keegan, W. J. and Green, M. C., 2011. Global Marketing (6th edition). Pearson

Kim, S.K. and Min, S., 2015. Business model innovation performance: When does adding a new business model benefit an incumbent?. Strategic Entrepreneurship Journal9(1), pp.34-57.

Kotabe, M. and Helsen, K., 2008. Global Marketing Management (4th edition), Wiley,

Lieber, E. and Syverson, C., 2012. Online versus offline competition. The Oxford handbook of the digital economy, p.189.

London.

Marchi, V.D., Maria, E.D. and Micelli, S., 2013. Environmental strategies, upgrading and competitive advantage in global value chains. Business strategy and the environment22(1), pp.62-72.

McGrath, R.G., 2013. The end of competitive advantage: How to keep your strategy moving as fast as your business. Harvard Business Review Press.

Röllecke, F.J., Huchzermeier, A. and Schröder, D., 2018. Returning Customers: The Hidden Strategic Opportunity of Returns Management. California Management Review60(2), pp.176-203.

Sebald, A.K. and Jacob, F., 2018. Help welcome or not: Understanding consumer shopping motivation in curated fashion retailing. Journal of Retailing and Consumer Services40, pp.188-203.

Trading Economics. 2018. United States GDP Growth Rate. [Online] Available at: https://tradingeconomics.com/united-states/gdp-growth (Accessed: 8th February, 2018).

Zalando, 2018. About us. [Online] Available at: http://www.zalando.com/ (Accessed: 8th February, 2018).

Leave a Comment