Situation analysis: Australian Fashion Industry Essay Example

Introduction

The Australian fashion industry is one of the most promising industries in Australia and this makes it attractive for investment. However, businesses operating in this industry are affected by both micro and macro environment factors, some of which the businesses have little or no control over. This report provides a situational analysis of the Australian fashion industry focusing on childrenwear with a view of understanding the prevailing market situation.

Industry Overview

The Australian fashion industry comprising of apparel and footwear has been recording positive growth in recent years. Childrenwear is one of the fastest growing apparel and footwear categories according to 2016 Euromonitor International report, which growth projected at 2% in the coming years. According to Euromonitor International (2017b) report, childrenwear recorded 5% growth in value in 2016 compared to the previous year surpassing the 4% projection. The report also indicates that girls’ apparel category accounted for the largest market share accounting for about 41% of the retail sales value in 2016 followed closely by boys’ apparel category that accounted for 39% of sales (Euromonitor International, 2017b). Babies and toddlers accounted for the least sales value at 20% (Euromonitor International, 2017b).

Macro Environmental Factors

PESTEL Analysis

Political Factors

The political situation in Australia has a huge impact on businesses. Australia enjoys political stability and this creates favorable climate for businesses. The government of Australia has strong support for fashion industry and this increases the ease of doing business in this industry (IBISWorld, 2017).

Economic Factors

The economic condition has an impact on fashion market through its impact on consumer purchasing power. Although Australia’s economic growth has been sluggish since the recent global financial crisis, the economy is now recording positive growth as the country recorded about 2.5% growth in 2016 with per capita GDP expanding to US$47,389 (Heritage, 2017). The growth in economy implies increasing purchasing power of Aussies which is good for businesses. The country has also been recording improved standards of living coupled with the strengthening of the dollar both of which creates a favorable business climate. However, high unemployment rate at 6.3% in 2016 (Heritage, 2017) is a threat to businesses as this population lacks enough disposable income to spend on fashion items. High cost of labor and electricity is a concern for businesses.

Social Factors

Australians have become more health and environment conscious and prefer eco-friendly fashion items. Birth rate was projected to fall to 12.87 per 1,000 in 2021 down from 13.23 per 1,000 in 2016 and this implies that population of children is falling in the country (Euromonitor International, 2017b). However, fall is compensated by increased immigration, which supports childrenwear industry. Additionally, the aging Australian population is expected to support the growth of childrenwear in the future with parents willing to spend more on children on buying the highest quality fashionable items, according to the Euromonitor International (2017b) report.

Technological Factors

There is a growing trend towards online shopping as more and more Aussies embrace online retailing. With the Internet propagation, most Aussies use mobile devices, to communicate through social media and e-mailing and this forces fashion brands to adapt to this technological trend in their marketing.

Environmental Factors

There is a growing environmental activism in Australia from pressure groups. Australia is also a signatory to the global environmental agreements, such as the Kyoto Protocol, thus has legislated laws requiring companies to adopt sustainable business practices (IBISWorld, 2017). Additionally, Australians have become more environment conscious and want to identify with environment-friendly brands.

Legal Factors

Fashion retailers must comply with the Australian Consumer Law, such as the Trade Practices Act 1974, competition laws, the Textile Regulation (EU) No 1007/2011 on fiber, environmental laws, tax laws and employment laws (IBISWorld, 2017).

Competitor Analysis

Competition in the Australian childrenwear fashion industry is intense as there are many large and well-established brands that compete for the market share. However, competition in this industry is monopolistic as there are many payers that offer similar childrenwear apparel and footwear. As such, differentiation is important in order to achieve a competitive advantage. In 2016, Country Road was the market leader in Australian childrenwear fashion market with 6% market share. The other major players that control a significant market share in childrenwear include Zara, H&M, Uniqlo, and Topshop/Topman (Euromonitor International, 2017a). Competition is based on product quality while price plays little role as most of these fashion items are premium priced. The existing players derive their competitive advantage from the fact that they enjoy economies of scale and strong brand awareness as most of them have been in the industry for more than a decade in addition to having strong financial footing.

Customer Analysis

Targeting is an important marketing activity that marketers must do right to succeed in a market. Targeting is a process involving identifying a specific market to serve. The target market for the company will be children from newborns to 12 years of age. Australian parents want to procure for their children high quality, eco-friendly, and stylish apparel and footwear items. This target market is chosen because of the growth being recorded in this market segment.

SWOT Analysis

References

Euromonitor International. (2017a). Apparel and footwear in Australia. Retrieved from http://www.euromonitor.com/apparel-and-footwear-in-australia/report

Euromonitor International. (2017b). Childrenswear in Australia. Retrieved from http://www.euromonitor.com/childrenswear-in-australia/report

Heritage. (2017). Australia economy. Retrieved from http://www.heritage.org/index/country/australia

IBISWorld. (2017). Clothing retailing in Australia. Retrieved from https://www.ibisworld.com.au/industry-trends/market-research-reports/retail-trade/other-store-based-retailing/clothing-retailing.html