Asda is UK’s one of the fastest growing retailer selling its products at the lowest price for the past 11 years. As a division of Wal-Mart, the company recorded revenues of $31.2 billion during the financial year ended January 2010 (FY2010), a decrease of 8.2% over 2009. Currency exchange rate fluctuations during 2010 compared to 2009 negatively impacted Asda’s sales (Datamonitor, 2010).
Asda is not just one of the major food retailers. In 80’s it launched its fashion clothing brand ‘George’, which now aims to be the UK’s leading volume fashion retailer by 2011 (Asda Graduates).
When analysed, the core competences framework of Asda suggests the following:
Wide variety of market
A clear distinctive brand proposition that had a focus on a properly defined market – segment is a core competence that enabled Asda to enter retailing of food and non-food products. Asda provides products like food, apparel, toys, general merchandise and electrical; and services like insurances, online shopping and home delivery (Datamonitor, 2010).
Though faced by intense competition like Tesco, Asda has a strength that it is backed up with a strong support of Walmart. The rising demand of online shopping and private label goods, which Asda is already concentrating on, provides with an opportunity to Asda to stay strong in the competition (Datamonitor, 2010).
Lingerie – Introduction
Current position Vs Competitors: Mintel estimate that George is the fourth largest retailer of clothing in the United Kingdom, after Marks & Spencer, the Arcadia Group and Next (Mintel, 2010).
With the intense competition between brands and own-brands, brand ownership has changed. Customers now have more options and own label now takes a greater share in the lingerie market – 71% in 2006 (Mintel, 2007).
George – Lingerie
With more than 270 different products, lingerie is one of the biggest sub-sections at George – Asda.
George lingerie’s 7Ps are the following:
George offers a wide range of Bras, knickers and controlwears. Of the total lingerie product that George offers, almost 40% is a range of bras, 51% is knickers and 7% is its controlwears collection. The rest is other lingerie and thermalwears (Asda –Direct).
The lingerie collection sold under the brand “Michelle for George” is designed by lingerie supremo Michelle Mone – famous for inventing the world renowned Ultimo bra. This range offers luxurious underwear at fantastic supermarket prices (PR newswire).
The lingerie brand ‘Entice’ offers a range of glamorous underwear. George also offers a range of sports bras, T-shirt bras, post surgery bras, non-wired and underwired bras and small sized bras. Considering that the average bra size has increased to 34D (Mintel 2007), George offers all the bras in those sizes.
The range of knickers available is also available, with the respective bra, as a set, and is branded as ‘co-ordinating collection’ for the convenience of customers (Asda –Direct).
Following Asda’s mission and vision, George aims to offer good quality clothing at an affordable modest price. ‘Michelle for George’ being a premium range is an exception and its lingerie collection follows a higher price range. However, George offers pants from £1, set of its ‘Entice collection’ from £12 and the ‘Co-ordination collection’ from as low as £4 (Asda –Direct).
George offers its range of products in its over 3000 stores, and growing with atleast a store a month, spread over seven countries including UK, Canada, Brazil, Mexico, Argentina, Japan and the US (George jobs).
With its growing store footprint, Asda has now started to allocate more space to its lingerie departments and with this the lingerie section has been able to grow larger (Datamonitor, 2009).
The re-launch of the George label in late 2008 aimed to appeal more directly to its core shopper through simplified ranges, improved quality and better in-store graphics. Asda offers discount to encourage sales. They also have a review section on its website, where customers can write reviews the lingerie they purchased (Asda review).
Besides TV commercials Asda also run campaigns for its lingerie, for instance, Tickled Pink, Asda’s fund-raising campaign displayed singer Beverley Knight in pink lingerie set and £1 from the sale of each set, priced £10, was donated to breast cancer charities (Social shopping).
Consumers make judgments and deliver perceptions of the service based on the employees they interact with. Good service starts before a transaction takes place and goes on after its completion (Peel, 1990). George understands this and focuses on recruiting the right staff and training them to deliver an unrivalled experience to thousands of customers, everyday, in the challenging work environment (George – Manager).
George tries to keep its service efficient by assisting its customers with placing orders, payment options and varied delivery options. George offers secure servers for online shopping to assist its customers to order at their convenience, securely (Asda – Security).
Asda was at an advantage with the larger stores than its rivals. In its bigger stores, Asda is following a Wal-Mart strategy of increasing the sales area by removing stockroom space and increasing the non-foods sales area. Massively increasing non-food sales is an area that Asda Wal-Mart has pioneered, leaving other supermarkets running to catch up.
The products in George’s lingerie section can be classified with the help of BCG matrix (data is assumed considering the points stated in Mintel report) (Mintel, 2007).
- Stars: Michelle for George, Co-ordinating Collection and Entice Collection.
- Cash cows: Bras, Knickers.
- Dogs: Thermals, characters collection.
- Question: post surgery bras, smaller bras, and controlwears.
A careful consideration of the macro-environment, done below, will provide George to make a strategic consideration for its lingerie section.
Lingerie sector can face challenges in a country like UK, which has people of different religion. Considering the nature of content used by the lingerie, and if not delivered sensitively, it may convey a wrong message and may upset people. For instance, one of the campaigns by Ann Summers for its range of products offended the Muslim community in the UK and the company had to face heavy criticism for its action (Independent – website).
The economic factors influence demand, costs, prices and profits. The lingerie market is a dynamic sector. With recession, the market has slowed in 2006 to almost 2% with a value of 1,525 million (Mintel, 2007); however the underwear market bounced back in 2010, with sales increasing 1% to £2.6 billion (Mintel, 2011). An intense competition has lowered the value growth in the last couple of years. Consequently, women are buying more items but at lower price. TGI data shows that women are now spending £20 – £49, compared to the previous year’s £20, on lingerie.
Social / Cultural factors:
Mintel indicates the following facts:
Current trend in demographic changes such as an 11% increase in ABC1 since 2002 i.e. 50% of the total population, means more working and fashion-conscious 20 to 34 years old women. This is good news for the lingerie industry as these women are more likely to be fashion conscious.
The population of women is getting larger in size. This means that bigger sizes of underwear will be in demand and is worth concentrating on.
Recently, the British Medical Association has recommended that bra fitting be available on the NHS, as 70% of women wear a wrong size of bra. The right size of bra is being treated as a health issue and it can cause pain and discomfort in breast, neck and shoulder.
To add, cosmetic surgery to enhance the breast size is becoming popular. Mintel report says that in 2005 alone more than 600,000 women have enhanced their breast size by 21% to 28%.
All this indicate that since women care about their figures, then there is a great potential for the lingerie sector (Mintel, 2007).
The technology in the lingerie industry has been developing way beyond once imaginable. Though most innovations are bra-focussed, there are few that concentrate on fabric innovation to eliminate VPL (visible pant lace) to which the only option is thong.
There have been innovations to design microfibres to make bras invisible under clothing. A new technology has introduced a lightweight titanium memory heat-sensitive chip for sports bra, which flexes the bra with the body to provide a perfect support to women while exercising.
Some future potential promises high tech bras with integrated MP3 players. A solar powered bikini has been designed already, which can charge an iPod, and this bikini can be worn in water as well. Research by Invista has initiated the development of bra that anticipates the external temperature change and change to prevent the embarrassing VNO (visible nipple outline) (Mintel 2007).
Many lingerie companies have started to acknowledge their responsibility towards society. The use of fair trade and organic cotton tops this list. Anything made from Bamboo is appreciated by the environment caring organizations. Fabrics made from bamboo can be as soft as cotton and some lingerie companies like Hanro and Chantelle have even incorporated it (Mintel 2007).
Lingerie sector should consider that there is a thin line between promoting Lingerie and ‘Erotic retailing’. Erotic retailing regards the products and images that are sexually arousing, though not pornographic (Kent, 2006). Erotic retailing to teenagers, which is one of George’s target markets, is prohibited in the UK and George should be careful that by no means of communication does it convey the message of selling sex to the underage.
Industry Analysis: Porter’s five forces:
Threat of new entrants
Lingerie and underwear specialists like Ann Summers and La Senza are facing competitions from non-specialist like George. However, Primark is posing threat. While Asda as a grocer is a expanding its space to accommodate more lingerie, Tesco is following suit. Other house of brands like Marks & Spencers, Arcadia Group, Debenhams and House of Fraser were also listed in the key retailer of lingerie (Datamonitor, 2009).
Majority of these brands have aggressive operational tactics in product development, promotional activity and better distribution. This acts as a barrier to new entrants as it would mean a large capital and highly developed supply chain. Asda is backed up by Walmart, and if Asda pioneers in Lingerie market with George, then it will only make things difficult for a new entrant.
Bargaining Power of Suppliers
This force represents the power of suppliers that can be influenced by major lingerie brands. This consolidates further leading positions of stores like Asda, Tesco and others in negotiating better promotional prices from suppliers that small individual chains are unable to match (Ritz, 2005).
The raw material, usually fabrics, is used in small quantity for an individual unit; therefore the UK based suppliers are also threatened by the growing ability of large retailers to source their products from other countries at cheaper deals. The relationship with sellers can have similar effects, influencing their margins, in constraining the strategic freedom of the company. The profit margins for supermarket chains and suppliers are reduced by competitive rivalry.
Bargaining Power of Customers
Porter explained that switching cost lowers when more products become standardized or undifferentiated, and hence, more power is yielded to buyers (Porter, 1980). After restoring its market position Asda engaged in an aggressive price war for market share using its ‘every day low prices’ marketing line. In 2001 Asda slashed prices by £52 million and announced the first of 400 ‘Smart Price’ products based on Wal-Mart’s new £450m budget brand. In the first five years since being bought by Wal-Mart, Asda’s grocery market share has increased from 13% to over 16% without acquiring any new stores (Grocery Today).
In 2002, Asda added 5,000 new general merchandise lines to our range taking the total number of non-food lines up to 12,000. Sales growth in non-food items has risen by over 25 per cent since we have expanded the general merchandise range. Concentration on continuing low prices, rather than a series of promotions backed by expensive advertising, is what has helped Asda to retain its customers.
Threat of Substitutes
General substitution is able to reduce demand for a particular product, as there is a threat of consumers switching to the alternatives (Porter, 1980). In the lingerie industry, this is often caused by the new trends as lingerie is a sub-category of fashion industry. As we have seen earlier that the customer has recently shifted to the non-specialist brands like George and Primark, there are now indications of consumers returning to higher quality lingerie (Mintel, 2007). When the per capita income rises then the customers will not buying more expensive lingerie than they do now. It will be a good strategic option for George to launch more premium brands when this happens.
Bargaining Power of Competitors
As it was mentioned earlier, there has been a recent shift in the buying behaviour of the customers. This has resulted in innovation and development of the non-specialist brands. If the specialist dominant market leader responds to this by re-pricing and re-focusing on the value then the customers may pretty much go back to buying them. This is one aspect that George should consider.
The emotional appeal to the lingerie is strong as wearing nice lingerie has a positive feelgood factor and Mintel report suggests that 57% of women cite this as a purchase motivation. To add, the increasing number of people having holidays is increasing. This is also a top motivation factor to buy lingerie. And more consumers are buying lingerie in the £20 – £40 range, which means that the women are now ready to spend more on lingerie (Mintel, 2007). All these factors provide a good opportunity for George, which has been re-launched and is backed up by the support of strong brand name of Asda and Walmart (Datamonitor, 2010).
Consumers are increasingly confident about buying online, and Asda has launched a separate website exclusively for George. This provides as a key channel to reach a wider audience.
The lingerie sector is a mature sector and is crowded with competitors. Though this provides the customers with choices and broad price architecture, but then the customer may feel overwhelmed with choices and may make it hard to find what they are looking for.
George has introduced a range of sizes and prices, but there is nothing unique to it, which is a notable weakness due to the above mentioned reasons. George does not have a collection of nighties and have a limited collection of bikinies.
More than 50% women buy lingerie as just a replacement and almost 70% women wear incorrect sizes of bra. George has a wide range of sizes and it can use it as an opportunity if it can educate women about the right sizes and the health hazards of wearing wrong sizes, as mentioned in the previous sections (Mintel, 2007).
Intense competition has led to a lower value growth and deflation however the volumes sales has grown as women are now buying more items at lower prices. George, being a unit of Asda – Walmart, has been famous for value products at low price. If this is well communicated then it can definitely raise sales (Mintel, 2007).
Though the slow economy has been a boon to George, it is also the biggest threat of all. As discussed earlier, the rising economy might shift the buying behaviour pattern to the more premium brands, if George is not ready to offer accordingly. The other big threat is the intense competition (Datamonitor, 2010).
Value Chain Analysis
Asda, being a clone of Walmart and George uses Walmart’s leading market position and economies of scope as key bargaining powers to achieve low costs from its suppliers.
George is regularly invited to share learning’s with organizations like International Supply Chain and Logistics Conference, held in Dusseldorf in 2009 and Supply Chain Risk Management Conference held at Rotterdam in 2008. They train their supplier and colleagues, audit production sites and hold supplier forum and factory development programmes to being supplier and factories together and share best practices (George CSR).
All factories used for George production are ethically audited by an independent third party auditor before they are signed off to use for production. Once the audits are conducted a risk assessment process is carried out and factories are graded by team of 140 colleagues within the Walmart ethical standards department for an approval of production (George CSR).
Marketing and sales
Asda-branded Credit Card, provided by Santander, offers a ‘point scheme’ which can be earned on all spending. In 2008, s a CSR activity, George embarked on a packaging reduction programme that has so far reduced our hanging packaging by 1200 tons of plastic a year. For 2010, they plan to reduce the usage of plastic by 18% (George CSR).
Being a part of Asda and supported by Walmart, George has been pursuing a strategy to achieve cost leadership, yet delivering quality. George’s value indicates that they care for quality, style and value and put their customers first, everyday (George CSR).
From the different analysis done above, George should employ the following strategic options
Product development: Diversification
Johnson and Scholes (2003) consider demand for new products and services at the expense of established provision due to the changes in the business environment. Ansoff’s matrix also suggests that a product development strategy has to be considered for existing markets by the management level of a company for the new products developed.
We have seen above and have analysed the various kind of lingerie market which can be high potential. For instance, concentrating on bras with large cup sizes, and be ready with the premium range to welcome a rise in economy are some of the things George should consider.
We have seen that George does not sell any innovated lingerie and only stocks what is generic to the market. George should innovate to make its presence felt to range of audience.
Women are getting more educated about lingerie and its benefits and health hazards of wrong bra sizes. There are store like Ann Summers, who focus only on lingerie. Tesco have opened Direct and Metro stores to penetrate the market and compete with the existing local small scale operations (Ritz, 2005). George should consider all this and experiment by opening only George stores, or even better, lingerie specialized stores. This will, not only make women more brand conscious, but also will enhance the image and the sales will sustain with changing trends and economy.
Wal-Mart sells the George brand in the United States, Canada and Japan already (George.com). Countries like Brazil, Russia, India and China are good potential market worth considering as their economy was least affected by recession. Entering these markets, by its own or as an international alliance with the local retailers, can serve as a key growth driver and can be considered as a suggested strategic option.
Objective for George for 2011
The year 2010 had a challenging economic environment, however the underwear market did better than its previous year and was valued £2.57 Billion. Only 1 million women did cut-back on the underwear purchase as opposed to 3 million men (Mintel, March 2010).
Growth of 1% was expected for 2010 and further growth of 5% up to 2014. It achieved what was expected in 2010. Mintel forecasted a rise in sales by 1.6% in 2011 (Mintel, March 2010).
If this is the industry forecast then George should aim for a rise in its sales by atleast 2%.
This should be divided over the 4 quarters, aiming to achieve atleast 1.2% in the first 2 quarters, considering that summer falls in these 2 quarters and sales are higher then. George can depend on the Christmas sales to achieve the remaining 0.8%. If George is able to achieve this then it will be better than the industry average and should have an upper hand for the coming years.
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Asda review: http://reviews.asda.com/1440-en_gb/01357/lingerie-reviews/category.htm – 16th March 2011
George – CSR: http://direct.asda.com/null/ETHICAL_RESPONSIBILITY,default,pg.html – accessed on 18th March 2011
George – Manager: http://www.george.jobs/what_can_i_do/managers/one.html – Accessed on 15th March 2011
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Greenpeace – Tuna: Tuna example: http://www.greenpeace.org.uk/media/press-releases/tinned-tuna-giants-go-shark-friendly-20110309?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+greenpeaceukpr+%28Greenpeace+UK+-+Press+Releases%29 – Accessed on 12th March 2011
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PR newswire: – http://www.prnewswire.co.uk/cgi/news/release?id=122396 accessed on 15th march 2011
Social Shopping: http://www.socialshopping.com/George/promotions/Beverley-Knight-supports-ASDAs-Tickled-Pink-campaign-201010110123/ – 16th March 2011
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Datamonitor: UK Lingerie & Underwear Retailing 2009 – 10th February 2009
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Miltel: Underwear –
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