iceland expansion - · pdf filethe key objective of this report is to critically analyse the...

ICELAND MARKET ANALYSIS

MARKETING STRATEGYMARKETING PLANS

EXPANSION

December 2014

Declaration of academic integrity

Student Name: Edda Blumenstein

Programme of Study: MA Fashion, Enterprise and SocietyYear of Study: 1Module Title: Fashion Marketing & CommunicationsModule Code: DESN5308M

Supervisor: Edel Moore

For individual pieces of work

I promise that in the attached submission I have not presented or attempted to present anyone else’s work as my own except where I have explicitly so indicated. I understand that to do so would mean that I had committed plagiarism, the University’s definition of which is published. I know that if I commit plagiarism I can be expelled from the University and that it is my responsibility to be aware of the University’s regulations on plagiarism and their importance.

I reconfirm my consent to the University copying and distributing any or all of my work in any form and using third parties (who may be based outside the EU/EEA) to monitor breaches of regulations, to verify whether my work contains plagiarized material, and for quality assurance purposes.

I confirm that I have declared, in writing with support evidence, all mitigating circumstances to the Module Manager and the School General Office that may be relevant to the assessment of this piece of work and that I wish to have taken into account. I am aware of the schools policy on mitigation and procedures for the submis-sion of statements and evidence of mitigation. I am aware of the penalties imposed for the late submission of coursework.

Signature: Date: 18. December 2014

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Word count 4,489

The key objective of this report is to critically analyse the opportunity for River Island expansion to Iceland, identify key strategic imperatives for the franchisee to focus on in launching the brand in Iceland and a marketing strategy containing a detailed marketing implementation plan.

Sales are estimated to reach:

- £4,712,000 in 2016- £8,246,000 in 2017

It is estimated that 3% of sales will be invested in marketing in 2015, approximately £141,000.

Key Performance indicators are:

- Gross margin mininum: 40%- Inventory turnover: 9- Sell through: 65%

EXECUTIVE SUMMARY

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CONTENTS

Company ProfileP09

Market analysisP12

Conclusion P22

Marketing StrategyP24

Promotional plansP44

3 Year visionP54

Sales budget P57

AppendixP58

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“Aim to produce fashionable clothing for men and women on

a conscious budget”RiverIsland.com

COMPANY PROFILERiver Island is an established fashion brand and one of the most successful fashion retailers on the high street offering clothing, footwear and accessories collections for women, men and children. River Island as we know it today began trading in 1988 but the history of the retailer dates back to 1948 when Bernard Lewis and his brothers opened up a shop in London selling knitting wool. River Island is still a private company owned by the Lewis family with over 10.000 employees and led by Mr. Bernard Lewis. River Island headquarters are based in London.

River Island overall sales continued to grow in 2013 to £809,5 million (+3,8%). Despite the rise in sales Gross Profits declined by 10,5% to £125,3 million and Pre-Tax profit reached a total of £86,1 million, a decline of 7,7%. The reason for the decline in profits is due to £100 million Dividends Payable in 2013.

Almost everything is designed in-house at River Island, it operates a global supply chain network manufacturing its products throughout the world. The brand has one of the largest design teams on the High Street which makes it possible for River Island to have new fashion arriving in-store and online every single week. The prices are competitive, aimed for people that are aware of their fashion spending and budget.

The target audience is middle-market men and women aged 18-35. People who like River Island also tend to like Zara, Miss Selfridge, H&M, New Look, Topshop and Topman and describe it as stylish, cool, youthful, trendy and well made. River Island has 30% market share among 18-25 year olds and 32% among 15-17 year olds (2011).

River Island uses various promotional tools in their marketing approach. Recently the fashion retailer launched a new joint online advertising programme across UK, US and Australia to increase its brand awareness in international markets promoting all the product ranges. Year ending June 2013 it spent around 80% of the advertising budget on women wear and fashion (keynote). RI has a strong social media presence with over 3 million followers in total (Appendix 1). Other promotional tools include apps, newsletter, celebrity endorsement with Rihanna, bill-boards, posters and buses, RI Style Insider Magazine. RI also works with affiliates that can earn commission simply by linking to River Island from their own website.

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GROWTH & EXPANSIONRiver Island operates in a number of worldwide markets and has over 320 stores in 14 countries and the online shop distributes to over 100 countries. River Island stores are always similar in both decoration and layout all over the world.

To drive sales growth River Island is focusing on two key strategic areas, global expansion and Omni multi-channel retailing therefore in 2014 the retailer started working towards understand-ing the cross-channel behaviour of its shoppers to improve conversion across web, mobile, social and email to fully understand customer behaviour and how they behave in different markets.

As a part of River Island ongoing international expansion the fashion retailer has opened its first store in Scandinavia, in Stockholm Sweden, it has set up a country specific website in Australia and has intentions to enter the US market. The collaboration with Rihanna has been one part of the expansion program. For stores in the Middle East, Europe and the Far East River Island uses a franchise agreement with individuals and companies that have good retail experience.

(More detailed information on River Island to be found in Appendix 1).

“The online channel is increasingly valuable to international consumers who want to buy

from brands outside their home country. We want to not only enable those shoppers to buy but also to make sure that the shopping experience they have is

entertaining, personalised and exciting.”

Josie Roscop, River Island marketing director

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MARKETICELAND ANALYSIS

INDUSTRY ANALYSISTHE FUTURE IN RETAIL

CONCLUSION

ANALYSIS

ICELAND ANALYSISIceland is the second largest island in Europe following Great Britain (40,000 square miles) but almost 80% of the country is uninhabited. Icelandic is the national language but English is the official second language taught in schools and is widely spoken and very well understood. Total population is almost 326.000 growing by 1,5% (Jan 2014) whereof 63% of the population lives in the capital region. In the capital region 50,4% of the population is female and 49,6% male, 28% of the population is aged 20-39.

Reykjavík is the capital city with 120,000 habitants, it is often described as a cosmopolitan small town, a modern society that ranks at the top for quality of life. Icelanders are very fashion conscious, they want to look good and dress well and choose quality products but seek competitive prices. Icelandic fashion design is unconventional and rebellious and the annual Reykjavík Fashion Festival creates a platform for designers to introduce their work locally and internationally. Among sponsors are Icelandair, Coca-Cola light, MAC makeup and Apple but no fashion brand has yet sponsored the event. Shops in Iceland sell international brands as well as local design and production. Shops are normally open from 10–18 during the week, Saturdays from 10-16 and closed on Sundays but shopping malls have extended opening hours and are also open on Sundays.

The currency in Iceland is the Icelandic króna and its value has been swift to change, the cur-rency rate is 1000 krónur equal to £5 (20.November 2014). Other currencies are not accepted in Iceland but all shops accept card payments. Clothes in Iceland carry high taxes since Iceland has one of the highest VAT in the world, 25,5% but corporate tax is one of the lowest in the world, only 20%. Custom tariffs, 15%, increase the price of imported goods compared to world prices. Transportation cost is approximately 10% (by ship) which is added to the purchase price before custom tariffs are calculated and added to the price. It has been argued that if taxes were removed and one third of Icelanders shopping would come back to Iceland, the governments income would increase substantially however there are no indicators of taxes on clothes to be eliminated in the near future. Tax Free refund, 15% of the retail price, is available for toursits with minimum purchase of ISK 4.000 (£20).

The financial crisis in 2008 had a serious negative impact on the Icelandic economy which went through a severe economic recession but a new positive era started in 2011.Purchasing power grew by 1,7% in 2013 being similar to 2005, it is very important to retail and needs to keep up with economic growth. Private consumption is still 12% less than what is was in 2007. Private consumption is increasing as purchasing power has increased.

VAT sales indicate that overall expenditure on clothing is still far below 2007, according to the Centre for Retail Studies the decline indicates that Icelanders stock up on clothes when travelling abroad and through online international shopping. There are signs that clothing shopping, espe-cially children’s clothes, is moving out of the country, but there is limited data available. Increase in packages from US and China especially indicates that online international shopping has in-creased, and the total amount spent on credit cards overseas has doubled 2008. It is estimated that private consumption will grow 3,3% from 2014-2016.

Social Factors

Political factors

Economical factors

Technological FactorsIcelanders are early adopters of emerging technologies and are the one of the highest computer and internet users in the world, much higher than both UK and US, with over 70% of the popu-lation is on Facebook. Despite the high per capita computer usage online stores have not grown as fast as in the UK and it is estimated that at the best it is half of what it is in the surrounding countries where online shopping is around 6%. Nevertheless the growth has been similar or up to 15% per year. According to a research by Statistics Iceland in 2013, 56% of Icelanders had shopped online over a period of 12 months as compared to 72% in other countries in Europe where it is highest. Research shows that women buy more of clothes while men buy more of elec-trical equipments online.

Globally it is estimated that 87% of people will be shopping online and 45% via mobile phones by 2020 (telegraph.co.uk). A research made by an Icelandic bedding design shop showed that 90% of its customers that shopped in the store had previously looked at the products online and made their purchase decision. The main reason for brick and mortar shops not operating an on-line shop is the cost associated with setting it up.

(More detailed information to be found in Appendix 2) P15P14

INDUSTRY ANALYSIS

There were 324 clothing shops in Iceland in 2013 (-2%*), 156 online shops (+11%) and 35 shoe and leather shops (-5%). Significant growth has been in online shops in Iceland which have dou-bled since 2008 when only 79 retailers were registered as online shops. Clothing sales account for 7% of overall retail sales which were £117,800,000 according to VAT records** in 2013 and 294 new retail businesses were registered.

Clothing stores in Iceland compete with international stores, especially in the UK and US. One main reason is that children’s clothes in UK do not carry VAT as they do in Iceland and are therefore much cheaper. As an example children’s clothing has 40% higher official fees than in the UKIt is therefore a very competitive environment. Research shows that 30-45% of all cloth-ing shopping is abroad and H&M has estimated 22% marketshare in Iceland, This makes H&M by far the largest fashion retailer in Iceland despite the fact that H&M has no brick and mortar shop in Iceland. In 2013, on average, 37% of Icelanders shopped in H&M for a total of £160. Local store that comes closest to H&M have 9% marketshare, other shops have 5% marketshare or less (svth.is).

Market size and competiton

Market growth

Prospects for retail in Iceland is considered to be good and catching up after the financial cri-sis in 2008 however fashion shopping, clothing and shoes has yet to reach previous status. It is however slowly growing and has increased year to date by 5,2% compared to 2013. Most increase was in October when clothing sales increased by 13% and shoe sales by 11,5%. It is expected that christmas shopping will exceed previous years and sales are estimated to grow by 4%. Prices for clothes declined 1,7% in October and prices for shoes declined by 2,3% (svth.is).

Enormous increase in tourism has had very positive effect on retail. The number of tourism has almost doubled since 2006 and continues to grow each year. In 2013, 807.349 tourists visited Iceland which is 20% increase from previous year. Tourist credit card expenditure was 90 billion ISK compared to 74,3 billion in 2012 whereof the biggest spending is on clothing or 3,1 billion ISK, resulting in 10% growth in fashion retail turnover from tourism 2012-2013.

*All % growth/decline compared with 2012/previous year**All numbers are according to VAT reports and should only be used as an indication of the market size as they only cover shops that are registered from beginning as shoe or clothing shops and therefore do not include clothes sold in hypermarkets.

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Competitors

It can be argued that international fashion brands are the most successful business model in Iceland since all the largest shops are international brands. Hagar, NTC and Bestseller are the three leading retailers in the fashion market in Iceland. Hagar operates 56 stores within 6 retail chains, its fashion stores include Karen Millen, Dorothy Perkins, Warehouse, Zara, Topshop, Evans and Debenhams. These shops are located in Smáralind and Kringlan. NTC operates 12 fashion shops and has over 130 brands in total which include Paul Smith, DKNY, G-Star, Diesel, French Connection, Converse and Hummel. NTC has shops in Smáralind, Kringlan and Laugavegur. NTC became the first of the three leading retailers to open an online shop which was launched on December 13, one online shop for all of its brick and mortar stores and brands.Bestseller is a family owned company, it has over 3.000 stores in 38 countries all over the world. The owners of Bestseller Iceland operate the shops Vila, Jack og Jones, Outfitters Nation, Name it, Selected and Vero Moda, 11 stores in total located in Smaralind and Kringlan. Their mission is to give Icelanders the opportunity to shop quality fashion clothing at a good price as well as offering good and loyal services. Skor.is is the largest shoe shop in Iceland with eleven different brick and mortar shops combined in one online shop.

The three leading fashion retailers are owned by financially strong individuals and corporations that have substantial operational efficiency, transportation and import and high bargaining pow-er due to their size as well as years of experience in the fashion market in Iceland (Appendix 3).

Results from an online market research from 1,200 Icelandic consumers supports that a large proportion of the Icelandic nation buys fashion clothing abroad, or 54% compared to 33% in Iceland. The favorite shops mentioned are Zara, Vero Moda, Topshop, Sautján, Vila, Lindex and Debenhams. From the sample, 57% know the brand River Island and 30% claim to have shopped in the store. Majority of the sample is interested in River Island opening in Iceland (72%) and 48% are likely to shop, 45% want to shop in-store whereas 50% want to shop both online and in-store (Appendix 4).

There are two shopping malls in Iceland, Kringlan and Smáralind. Kringlan, opened in 1987 in Reykjavik and is the largest shopping mall in Iceland in terms of number of shops with over 180 shops and restaurants. Smáralind, opened in 2001 in Kópavogur, and has over 100 shops and restaurants. Kringlan has plans to expand its housing in the near future. Laugavegur is the shopping street in Reykjavik, a home to various fashion shops, mainly tourist-, outdoor- and Icelandic design shops, restaurants and bars.

Distribution

Fylgstu með á Facebook Lindex Iceland

Celebrating with great prices from

3 995,-

LindexIS-8sep-210x297-mag.indd 1 2014-08-20 16:37

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THE FUTURE IN RETAILOnline visibility is becoming more important than ever before as 61% of global internet users research for products online and the leading source for product information is the retails website and customers are more likely to visit a local store if the retailer provides in-store product availability information. Search engine optimisation is critical as 44% of online shoppers begin by using a search engine (hubspot.com).

Omni-channel retailing is becoming the key thing in fashion retailing, it creates a unified experience for consumers and drives business growth. Consumers are demanding a more seamless shopping experiences through all available shopping channels, i.e. mobile internet devices, computers, bricks-and-mortar, television, catalog and so on, and they expect more personal relationships with brands. Multi-channel retailing only works if all channels and systems connect and communicate cohesively together. This form of retailing is yet to emerge in Iceland.

A new study by Campaignlive.com has identified that women born between 1980-1995 are becoming more demanding and expect to have personal relationships with brands, the research shows that 95% of women feel that brands should “adapt to my needs” (Lerner, 2014).

Resource scarcity is becoming a bigger threat to the fashion industry and is estimated to bring considerable changes over the next 15 years. Fashion brands needs to take action as the demand for resources increases, Nike, M&S, Puma, H&M, Levi’s and Mango have already started the journey towards a less hazardous future (Forum for the future & The Guardian).

“Companies need to be seeding innovation and new ideas now in order to thrive in a resource constrained world. ”

Hannah Jones, Vice President Sustainable Business and Innovation Nike Inc.

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CONCLUSION OF ANALYSISStrengths and weakness analysis takes into account how the marketing mix is compared to key competitors and the analysis of opportunities and threats evaluates factors in the external environment that can benefit and/or influence River Island operation in Iceland.

- One of the most successful fashion retailer on the high street - In-house designer team- Globally well know brand- 300 stores internationally- World wide ethical policy- Corporate social responsibility- Financial growth and stability- Global supply chain network- Seamless shopping experience - Broad fashion range- Family owned company- International advertising program - Strong online presence

Strenghts- to build on -

- Three leading retailers in the fashion market - Leading retailers local economies of scale- Lack of local market experinece and knowledge- Competitive market- Leading retailers brick and mortar distribution

Weaknesses- to be solved -

- OMNI channel seamless shopping experience- Online shop- Fashion retail growth from Icelanders and tourism- Growing population- Growing retail space in Kringlan- RVK fashion festival- Low corporate tax- Purchasing power and private consumption increasing- Growth in online shopping- Engage with customers- Test market- Franchise agreements- Local affiliates - Online marketing- High computer and internet usage

Opportunities- to exploit -

- The Icelandic krona- Icealanders stocking up on clothes abroad- High VAT- Tariffs- Tax on children’s clothes- Internet global shopping availability- H&M

Threats- to be aware of -

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MARKETINGSEGMENTATION

TARGETINGPOSITIONING

DIFFERENTIATIONCUSTOMER PROFILE

STRATEGY

Segmentation

Targeting

PositioningProvide customers with a seamless shopping experience through OMNI

multi channel approach

Unique selling point

For fashion lovers, men and women, aged 18-35, who want stylish and fashionable clothing, footwear and accessories at affordable prices. River Island is the only high street fashion retailer in Iceland that offers a seamless shopping experience accross multiple channels unlike other fashion shops in Iceland. River Island Iceland is the only fashion retailer in Iceland that engages with customers and support their needs in their quest for a complete head to toe look.

Love fashion - Love River Island

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Local and International Key Competitors

POSITIONING MAP

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1. Offer customers to personalise and design their own fashion items,

online and in store.

3. Free returns on online orders in-store or by mail.

DIFFERENTIATION

2. Children’s Apple Ipad play area for busy moms to shop and increase

opportunity for top of mind

4. Eco-Friendly collection for men, women and kids, using organic and

renewable fibres

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CUSTOMER PROFILEFor fashion lovers, men and women aged 18-35, who want stylish and fashionable clothing, foot-wear and accessories at affordable prices for themselves and their children.

The River Island customer is confident, successful, ambitious and fashion conscious and chooses a very stylish everyday loook over traditional fashion clothing.

Married or single, the River Island customer, spends a considerable amount on overall appear-ance, body, hair, makeup and fashion clothing and want to be noticed for a great head-to-toe look in every occasion, wether it is for work, school or leisure.

The River Island customer is an early adaptor of new fashion trends, not a trendsetter, and wants value for money.

The River Island customer is independent and brand loyal with relatively high self-esteem.

“Our customers love us for our great going-out looks, amazing denim and fabulous shoes and bags, as well as being the perfect place to pick

up everything you could need to get a complete head-to-toe look. ”

RiverIsland.com

Fashionista, working towards a successful career. Single or in a relationship, no children. Uses fashion to express herself and get noticed. Early adopter of new trends. Goes to the gym regularly and watches youtube makeup and haristyle videos as she is concerned with her head to toe look.

Women 18-35 yrs

Photos: Pinterest

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Student or working on a career. Confident and successful. High user of social media and apps, is fashion-able but maskulin. Trend aware and early adaptor of new technology

Men 18-35 yrsDevoted to her career and mother-hood. Successful, confident and fashionable, early adaptor of new trends. Financially independent. For her everyday and every occasion is an opportunity to be fashionable.

Successful mom 30+

Enjoy dressing up and go shopping for new clothes with their parents.

Kids 0-12 yrs

Photos: Pinterest

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shop mens

shop kids

shop mini

shop women

Photos: RiverIsland.com P37P36

LOVER RIVER ISLAND - LOVE THE PLANET

“At River Island we try really hard to bring new and

original fashion to you, with design at the heart of

absolutely everything we do.”

RiverIsland.com

It is equally important to RI to be profitable and responsible. River Island supports ethical trading and is committed to preserve the planet’s resources by using renewable energy sources, biodegradable materials and reduced product packaging whenever possible.

In addition to River Island current product range the fashion retailer will introduce and organic, eco-friendly collection for men, women and children in Iceland as a test market before global launch. The range will be made of organic materials sustainably sourced from environmentally friendly sources like organic cotton and fabrics made with fibers from Icelandic seaweed. The range will be highly fashionable and it is estimated that prices will be 15-20% higher to begin with.

Customers will also be offered the opportunity to personalise their fashion items, changing colours and fabrics. The delivery for personalised items will be around 4 weeks and 20% more expensive.

Photo: Pinterest P39P38

PRICING STRATEGYRiver Island in Iceland will follow the fashion retailers pricing strategy which is to offer competi-tive prices for people that are aware of their fashion spending and budget.

Cost based pricing is mainly used in the retail industry in Iceland to cover 10% transportation cost, 15% tarriffs and 25,5% VAT. Average markup is around 2,5. River Island Iceland aim is 2,2 markup and over 40% gross margin.

Wholesale price from River Island UK £10.00 Transportation cost 10% £1.00Tariffs 15% £1.50Wholesale price Iceland £12.50 Mark-up 2,2 £15.00 Shelf price £27.50 Input tax 25,5% of wholesprice Iceland £3.19 Output tax 25,5% of shelf price £7.01Taxes to be paid £3.83 Gross margin £11.18 41%

Prices will also be used as a marketing tool offering promotional discounts, seasonal discounts and special discounts, i.e. for university students. There is also opportunity to offer discount with the purchase of lifestyle magazines for a limited time. Discounts on cost related to home delivery will also be offered occasionally.

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Touch screens for browsing product range

Touch Screen Fitting Rooms

Social media in store displays

In store online ordering and payment

FLAGSHIP STOREThe first River Island flagship store will open in 2016 in Kringlan shopping mall selling the whole product range. The second store is planned to open in 2017 selling the men and women collection. The flagship store will be designed to offer consumer with a seamless shopping expe-rience, the OMNI multi channel approach. The store in Iceland will be used as a test market to test what works and what doesn’t before River Island invests in the technology and equipment needed all over the world. The product range will be beautifully presented and each category will have a dedicated area with a touch screen to browse for and shop the latest styles. There will aslo be a iPad area for children to play so parents can enjoy browsing and shopping, thus creating an enjoyable shopping experience for the whole family.

The online store will provide customers with information on in store availability, offer free click and collect as well as home delivery at reasonable prices.

As Iceland will be a test market for River Island the IT costs will be covered by the fasion retailer but the franchisee will pay the investment back over the next 10 years.

Provide customers with a consistent seamless shopping experience to grow loyal userbase and increase purchase frequency.

1. Strategy

To drive business growth by seamlessly connecting all channels using an integrated IT system to improve the customers’ overall shopping experience.

2. Objectives

- Social Media in store displays featuring customers FB posts, tweets and pins #MittRiverIceland- Free wifi for customers to scan products for detailed information, style ideas - Local River Island app promoting new products and special offers.- Staff held mobile point of sell devices and self service kiosks- Touch screens for customers to browse for head-to-toe style ideas, full product range and for click and collect shopping- Virtual manequins and touch screen dressing rooms

3. Tools

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PROMOTIONALSTRATEGIC IMPERATIVES

MARKETING CALENDAR3 YEAR VISIONSALES BUDGET

PLANS

STRATEGIC IMPERATIVE #1Build brand awareness & trial

Strategy:

1. Integrated marketing communication2. Create excitement around flagship store opening3. Build a long term competitive position4. Create a strong, positive and unique image in the mind of the target group

Magazines & newspapersMAN magasín & Nýtt Líf are lifestyle magazines tar-geted towards womenFréttablaðið is the most read newspaper in Iceland, distributed free to every home in the Reykjavik areaHús og hýbíli is a magazine on Icelandic design

Online & BlogTrendnet.is is a popular fashion & design blog.

Pjatt.is is a combination of an online lifestyle magasine and blog.

Tiska.is is an online lifestyle magazine dedicated to fash-ion and cosmetics

Social MediaFacebook, Instagram, Youtube and Pinterest are the most used social media. Twitter is mainly used by men interested in football and IT.

TV and Radio


There are 2 big TV channels in Iceland, RÚV and Stöð 2. RÚV is free for the whole nation whereas Stöð 2 is a subscription channel.

Key activities

1. Launch party for Press and Public2. PR, Press kit & Fashion Blog3. Advertising campaign: TV, Print, Internet, Radio, Outdoor, PPC4. Social Media5. Google Search Engine Optimisation6. Sponsor Reykavik Fashion Festival 7. Style guide on screens in-store, shop the style8. Pop Up store occasionally in Akureyri (the largest city on the country side)

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STRATEGIC IMPERATIVE #2Build a loyal userbase


Strategy:

1. Create top of mind for RI2. Lead the high street fashion in Iceland through OMNI multichannel sales approach3. Increase RI financial performance

Key activities

1. Local website with online shop and information on availability in store2. Social Media: Primary: Facebook and Instagram, Secondary: Pinterest and Youtube3. Newsletter4. Loyalty program5. Local affiliates 6. Engage with customer by offering custom made clothes7. Eco friendly collection

Social Media: Authentic brand voice

Key focus on facebook for older customers and Instagram for younger customers:

1. Build audience2. Engage with customers through conversations about fashion3. Amplify through posts, ads and sponsored stories:- Awards and competitions, seasonal, blogs and Press coverage, recruiting Brand Advocates (Effective Sam-pling), conversation starters, tricky questions, custom tabs and apps

Local #RiverIslandverslun #mittRiverIsland #RIisland

Objectives:- Facebook + 20.000 friends

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Biker Stígvél með keðjum

riverisland.is Hresstu upp á stílinn með þessum geggjuðu stígvélum #mittRiverIsland #TrendRiverIsland #Vetrartíska

STRATEGIC IMPERATIVE #3Sales promotions

Strategy:

1. Encourage the target group to buy more often and more each time2. Create excitement for new product arrivals3. Relevant frequency building promotions

Key activities

1. Opening offers2. Newsletter3. Fancy Fridays: weekly offers4. Style Insider: Buy the look of the week5. Free home delivery for a limited time6. Seasonal offers and discounts7. Free click and collect


Newsletter Key objective:

Engage with and create value for club members through;

- Events- Special offers, weekly and monthly specials- Pre-sale invitations- Style inspiration ideas- Surprise treats to loyal customers- Happy Birthday gifts

Thank you for shopping at River Island

Fancy Fridays are all about having fun and getting ready for the weekend

Engage with and create value for club members through;

- Free hair and makeup- Style advice- DJ

New arrivals

Style ideas

Seasonal

FRÍ HEIMSENDING ALLA HELGINAWWW.RIVERISLAND.IS

Special offers

Nýjar vörur voru að lenda

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#RILovesFridays #RIFancyFriday#RILPartyFriday

MARKETING CALENDAR 2015

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Marketing cost £141,000

3 YEAR VISIONThe road to £8,2 million revenue

1. Negotiate franchise agreement for Iceland with River Island2. Apply for retail space at Kringlan, Iceland largest shopping mall

3. Prepare online shop for local adjustment4. Start PR and Marketing to create interest and anticipation among

consumers

4% marketshare / £4,712,000

River Island Flagship store opens inKringlan and online shop

River Island Women - Men - Girls & Boys - Mini

7% marketshare / £8,246,000

River Island opens Women & Men store

in Smáralind

2017

2016

2015

Offer new and orig-inal fashion and

design to Icelandic men and

women at competi-tive prices

Integrated marketing & sales

approach that drives mutual profitability

VISIONMISSION

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SALES BUDGET

- Gross margin mininum: 40%- Inventory turnover: 9- Sell through: 65%- Marketing cost max 3% (of sales)

Key Performance Indicators

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APPENDIX 1: COMPANY PROFILERiver Island supports ethical trading and is a member of the Ethical Trading Initiative (ETI) (see appendix) as it is equally important to RI to be profitable and responsible. The objective is to im-prove workers rights and working conditions in the countries they produce. River Island suppli-ers are committed by contract to the companies World Wide Ethical Policy where violation can lead to termination of contracts and future relationships.

River Island is committed to preserve the planet’s resources by using renewable energy sources, biodegradable materials and reduced product packaging whenever possible. River Island also contributes funding towards improved recycling facilities for electrical and electronic equipment in the UK and is a member of the Distributor Take Back Scheme. Furthermore, River Island supports various charities and organisations working to improve communities across the UK by providing them with unrestricted funding.

River Island has 6 open directorships, 4 retired directorships and a total of 10.393 employees (2013). Mr. Bernard Lewis has been Director for nearly 23 years, since 1991, other Company Directors are; Mr Clive Robert Lewis, Mr Simon Lewis, Mr Benjamin Joseph Lewis, Fashion Director is Mrs Vanessa Jane Lewis and Retail Director is Mr Richard Edward Bradbury. The founding principle of the fashion retailers Corporate Social Responsibility is to build long term relationships with employees.

River Island Key ETI Base Code principles are:Employment is freely chosen.Freedom of association and the right to collective bargaining are respected. Working conditions are safe and hygienic.Child labour shall not be used.Living wages are paid.Working hours are not excessive.No discrimination is practised.Regular employment is provided. No harsh or inhumane treatment is allowed.

- Facebook is by far the biggest with 2,1 million followers- Instagram 650 thousand- Twitter 279 thousand- Google+ 180 thousand- Linkedin 23 thousand- Pinterest 22.614 thousand- Youtube 8 thousand(Figures taken on 18.11.2014 from RI own social media accounts)

Social Media Accounts

Financial analysisRiver Island overall sales continue to grow in 2013 to £809,5 million, or 3,8%. Despite the rise in sales Gross Profits declined by 10,5% to £125,3 million and Pre-Tax profit reached a total of £86,1 million, a decline of 7,7%. The reason for the decline in profits is due to £100 million Divi-dends Payable in 2013.

Other key financial results in 2013 compared to 2012 were:Net Assets/Worth £242,7 million (-9,7%)Cash £67,4 million (-24,18%)Current liabilities £301,5 million (2,9%)Current Assets £445 million (-4,1%)Inventory turnover in 2013 was 9,22 (-1,9%)

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APPENDIX 2: EXTERNAL ANALYSIS

Taxes in Iceland are charged by the state and the relevant districts. Taxpayers pay various subsidies and overall taxation and consumption is much higher than in countries like Ireland. Income tax is payed monthly by each employee, the tax steps are three, from 37% - 46% depending on total salary. Total tax credit is £220. Corporate tax is one of the lowest in the world, only 20% and VAT is 25,5% for most products, certain products only car-ry 7% tax. Foreign investors are encouraged to enter the country with new capital and create new employment opportunities. Exchange fluctuations and government tax increases has had negative impact on foreign investors that tend to seek a stable and predictable business environment.

Clothes in Iceland carry high taxes since Iceland has one of the highest VAT in the world. The elimination or reduction of taxes and custom tariffs on clothes would lower the prices and benefit everyone especially those with less income. Custom tariffs increase the price of imported goods compared to world prices. Transportation cost is approximately 10% (by ship) which is added to the purchase price before 15% custom tariffs are calcu-lated. A product that cost £100 to purchase, costs £126,5 when is has been shipped and cleared by customs in Iceland. The government continues to be pressured to lower the VAT and eliminate custom tariffs to strengthen local retail. It has been argued that if taxes were removed and one third of Icelanders shopping would come back to Iceland, the governments income would increase substantially. A free trade agreement went into force in July 2014 between Iceland and China to promote trade of i.e. goods and services by abolishing tariffs on imports and to enhance the economic ties between the countries.

Entering the ESB has been put on hold for the time being and it doesn’t look like the taxes on clothes will be eliminated in the near future.

Political & Legal Factors

Social Factors

Icelandic is the national language but English is the official second language taught in schools and is widely spo-ken and very well understood. Danish is the official third language but not widely spoken and fairly well under-stood. The Icelandic nations religion is Predominantly Christian. Overall quality of life in Iceland is considered to be good as 85% of Icelanders state that they have more positive than negative experiences during the day, compared to 76% i OECD. Employment rate is also higher, 80% of 15 to 64 in Iceland are employed compared to 65% of OECD employment average and working hours are less, 1 706 hours a year vs. 1 765 hours in OECD. Life expectancy is 82 years.

The capital city Reykjavík is often described as a cosmopolitan small town, a modern society that ranks at the top for quality of life. Icelanders are very fashion conscious, they want to look good and dress well and choose quality products but seek competitive prices. Icelandic fashion design is unconventional and rebellious and the annual Reykjavík Fashion Festival creates a platform for designers to introduce their work locally and interna-tionally. Among sponsors are Icelandair, Coca-Cola light, MAC makeup and Apple but no fashion brand has yet sponsored the event.

Economical FactorsThe financial crisis in 2008 when the Icelandic banking sector collapsed had a serious negative impact on the Icelandic economy which went through a severe economic recession and led to the government taking over the three commercial banks. A new positive era started in 2011 and the Icelandic Financial Crisis is referred to have ended on August 31 2011.

The currency in Iceland is the Icelandic króna as Iceland is not a member of the European Union (EU). It is man-aged by Seðlabanki Íslands and its value has been swift to change, the currency rate is 1000 krónur equal to £5 (20.November 2014). Other currencies are not accepted in Iceland but all shops accept card payments. Adopting the Euro has been a debate between Icelanders for some time and opinions are mixed. One of the advantages of adapting the Euro is that it might lower consumer prices and have positive effect on international trade. In July 2009, the Parliament narrowly voted to apply for EU membership.

Purchasing power of the Icelandic nation since before the financial crisis has gone through highs and lows but in 2013 it grew by 1,7% and was similar to 2005. Private consumption is still 12% less than what is was in 2007. Pri-vate consumption is increasing as purchasing power has increased. Purchasing power is very important for retail and needs to keep up with economic growth which was 3,3% in 2013. Of overall expenses in Iceland housing is 40% and 10% goes towards buying clothes, furniture, electrical equipment and other household equipments. Rel-atively more is spent on clothes, 1,5% despite VSK sales indicating that sales are far below 2007. According to the Centre for Retail Studies the decline in relative overall expenditure for buying clothes indicates that Icelanders stock up on clothes when travelling abroad as well as online international shopping. There are signs that clothing shopping, especially children's clothes, is moving out of the country, but there is limited data available. Increase in packages from US and China especially indicates that online international shopping has increased. The total amount spent on credit cards overseas has doubled 2008. It is estimated that private consumption will grow 3,3% from 2014-2016.

Icelanders are early adopters of emerging technologies and are the one of the highest computer and internet us-ers in the world, much higher than both UK and US. Over 70% of the population is on Facebook. It is estimated that 20% of marketing budget in retail will be spent in social media. Despite the high per capita computer usage online stores have not grown as fast as in the UK and it is estimated that at the best it is half of what it is in the surrounding countries where online shopping is around 6%. Nevertheless the growth has been similar or up to 15% per year. According to a research by Statistics Iceland in 2013, 56% of Icelanders had shopped online over a period of 12 months as compared to 72% in other countries in Europe where it is highest. Research shows that women buy more of clothes while men buy more of electrical equipments online. Payments are mainly made electronically by either debit, credit cards and online bank transfers. Globally it is estimated that 87% of people will be shopping online and 45% via mobile phones by 2020 (telegraph.co.uk). A research made by an Icelandic bedding design shop showed that 90% of its customers that shopped in the store had previously looked at the products online and made their purchase decision. The main reason for brick and mortar shops not operating an online shop is the cost associated with building it.There is very little competition on google keywords for fashion items in Icelandic by local fashion retailers despite the fact that 61% of global internet users research products online and the leading source for product information is the retails website, 44% of online shoppers begin by using a search engine (no local data available) (hubspot.com).

Technological Factors

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The weather in Iceland is affected by the Gulf Stream and the East Greenland polar with the average temperature in January around 1,8 °C and in July around 11 °C. Time Zone is Greenwich Mean Time (GMT) throughout the year and Summer (Daylight-Saving) Time is not observed in Iceland. Transportation is mainly by car, bus, ship and airplane, there are no trains or tubes. Iceland has one international airport located in Keflavík.

In 2013, 23.700 were employed in retail which is 13,6% of the total workforce in Iceland (increase by 5,3%) and monthly salaries were approximately £2000 (increased by 3,7%). In the last 10 years retail space has increased by 35%, mainly from new shopping malls and large retail stores, but in 2013 office retail space grew mainly in the capital area with 30% of retail space is used by shopping malls.

The level of education is high in Iceland and every child should have equal opportunities for education which starts at the age of six and is mandatory until the age of 16. Furthermore 71% of 25-64 year olds have a high-school degree or equivalent and 99,9% of the nation is literate.

Iceland

The competitive analysis will focus on the large fashion retailers and brands in Iceland.

Competition within the industry - HighAs stated earlier there are 134 fashion shops, 156 online shops and 35 shoe & leather shops in Iceland and two key players on the market. The key players are financially strong with years of experience in the fashion industry but so far none of the key player have online presence offering online shopping or information on product range and availability in store for consumers. Travelling abroad for shopping is very popular among Icelanders as well as online shopping from international shops.

Threat of new entrants - LowThreat of new brick and mortar entrants isn’t considered to be very high as considerable capital is needed to found and operate a flagship fashion retail shop when all is included. There is threat from international online shops as already some shops like Alibaba offer free shipping to Iceland. However it is difficult for new entrants to imitate the original fashion designed and sold by River Island.

Substitute products - HighThe threat of substitute products is considered to be high as there are many brands competing in the fashion market in Iceland, both locally and internationally and consumers can therefore easily switch between brands and companies.

Bargaining power of suppliers - LowSince River Island is a large international organisation that operates a global supply chain network and sources products throughout the world RI can switch between suppliers resulting in the bargaining power of suppliers to be fairly low. River Island on the other hand is considered to have a high bargaining power towards its suppliers.

Bargaining power of customers - HighThere are many fashion retailers in Iceland that sell fashion products like Vero Moda, Lindex, TopShop, Zara and Gallery Sautján. Customers can therefore evaluate all that is available like products, price, quality, location and service and finally chose the shop that suit their current needs best. Customers have been sourcing for lower priced fashion items since the economic crisis which needs to be considered in the pricing strategy for River Island in Iceland. Bargaining power is therefore considered to be high.

APPENDIX 3: Strength of competitors

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APPENDIX 4: Market Research

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The markt research was conducted by Edda Blumenstein and distrib-uted on Facebook through various networks.

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Images in the report are mainly from riverisland.com and Pinterest

Photo: OMNI channel retailingVista. 2014. Omni-channel retailing is driving business growth. [Online]. [Accessed 8. December 2014]. Availa-ble from: http://www.vistasupport.com/news/omni-channel_retailing_is_driving_business_growth

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