Macro Environment UK Retail Market

 

Demand for clothing in the UK has declined dramatically since Covid-19, with consumer spending estimated to have fallen by 28% to 42.5 billion GBP, down from 59.3 billion GBP in 2019

 

 

UK Sportswear Market

predicted to grow by 20.9% to 6.7 billion GBP by 2023 (Global Data, 2019), bigger surge

in demand during pandemic (Sender, 2020).

 

A PESTLE analysis has been conducted (see Appendix

A)  to better understand the sportswear retail market, specifically in the United Kingdom. These factors are both direct and indirect which allows companies to better assess threats and opportunities in the market (Frue, 2018).

Looking deeper into social and technology factors (see detailed analysis in Appendix

1)  it is clear impacts from Covid-19 are disrupting the industry. Covid-19 has shifted consumer behaviour with people

forced to stay home (State of Fashion 2021, 2020). Customers want to feel part of a community and stay connected during a time everyone is staying home.

 

àThis presents an opportunity for sports retailers drive demand for their product and create brand loyalty. This will be done digitally: Stand out brands will need to find a way to integrate human touch onto their online channels to help people feel connected (Business of Fashion, 2020).

 

65.5% of 55+ sports shoppers exercise at least a few times a week but have the lowest spend per head due to few retailers catering to their needs. They have average higher disposable income meaning they may be more willing to spend on higher priced/premium items (Global Data, 2019).

 

à There is also opportunity in the sportswear market to target mature consumers. 65.5% of 55+ sports shoppers exercise at least a few times a week. Many top UK retailers like JD sports and Sports Direct target the younger trend driven consumer.

Porter’s Five Forces assesses the market using the current and potential competitors, suppliers, and buyers’ power to determine attractiveness and profitability. It can aid companies with marketing, pricing, and strategic decisions (Posner, 2015).

 

In the sportswear market the threat of new entrants is moderate/high. There are low barriers to entry for creating digital platforms to sell on, but higher barriers on the high street as there are many established brands. Besides competition from established sports brands, fast fashion brands have begun to create their own sportswear and athleisure ranges in recent years (Global Data, 2019). There is high competitive rivalry and high threat of substitute. Buyers can price compare easily, and retail/wholesale partners have strong negotiation power with brands. The power of the supplier depends on the size of the brand: Large brands like Nike and Adidas have a lot of power compared to new entrant brands

Under Armour Internal Analysis

 

Mission statement: to make all athlete’s better through passion, design, and the relentless pursuit of innovation.Vision: to inspire you with performance solutions you never knew you need and can’t imagine living without (Our Brand, 2020) Under Armour are becoming a bigger force in the market; they should take back control by streamlining their third part distribution networks and invest into their own stores and online operations to drive direct sales (Global Data, 2019).

 

Based on the VRIOS analysis and Bowmen’s clock analysis (see appendix 3) Under Armour aims to differentiate themselves through marketing and selling high performance sportswear over lifestyle or athleisure product.

 

Its core competencies is on Performance technology is embedded into their product and reflected in their continuous investment into marketing for the ‘focused performer’. The Connected Fitness app is also an added value to their brand. Competitive Advantage can only be achieved if they tackle the limited number of fabric and process patterns compared to competitors like Nike and Adidas who also offer high performance sportswear. Nike and Adidas also have greater resources and stronger brand recognition than Under Armour (Under Armour, 2020).

Strategic groups are organizations within the same industry or sector with similar strategic characteristics, following similar strategies or competing on related bases (Johnson, 2013).

Under Armour sits in the specialized/premium sportswear brand strategic group with competitors like Asics, Slazenger, Sweaty Betty, and Lululemon. These brands have a narrower customer base and specialize in different areas of sportswear in which Under Armour is high intensity performance: ‘the focused performer’. Their products are based more on function and performance over trends in the market.

 

Under Armour is stocked in both Sports Direct and JD Sports. Competition comes from how much floor space and store placement against other competitors they receive from these retailers. Nike has been focusing on direct-to-consumer sales as an integral part of their strategy to mitigate risk with retail partners and take control of their brand image. They aim to use customer data more effectively to increase share of its own stores and online channels. They plan to slowly phase out share of products in third party vendors (Global Data, 2019).

Based on analysis of Under Armour’s value chain (see appendix 5, 6) it can be deduced they meet critical ISSF’s to gain competitive advantage in the sportswear market. They offer attractive products focused on performance. They saw a gap in marketing and actively increased it to compete with other key players in the market.

 

They have strong celebrity endorsements like Dwayne Johnson and NBA star Stephen Curry who promote their product through sport. They have increased their digital marketing spend to increased awareness and customer engagement which is a great way to add value especially when consumers are shopping online and working out at home due to Covid-19 (PESTEL). Their Connected Fitness app which has over 50 million monthly active users (Under Armour, 2020) is a strong way to reach consumers and helps them stay in the centre of the consumer’s life, one of their values (Our Brand, 2020).

 

One area Under Armour lacks in creating value in its value chain is all their products are produced by unaffiliated manufacturers. They currently have 37 primary contract manufactures across 15 countries (Under Armour, 2020). Vertical integration, which can include ownership of factories, could increase Under Armour’s value chain by giving them more control over their product. Under Armour aims to differentiate themselves through marketing and selling high performance sportswear over lifestyle or athleisure product. One potential drawback is Under Armour own’s a limited number of fabric and process patterns compared to competitors like Nike and Adidas who also offer high performance sportswear.