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Consumers in a Global Market: Chapter 7 Global Fashion Retailing and Tourism
Terms in this set (92)
Zara is now bigger than Gap
The most noticeable thing about Inditex is its business model. The retailer is based on "virtual" vertical integration, he said, in that it has total control of the production process - from loom to shopfloor - but does not own all of the production assets.
The advantage of this integrated process is that it gives Zara speed and flexibility.
Zara has also been clever in its positioning in the markets in which it operates.
Outside of Spain, and particularly in the UK, it is based on more premium prices. Partly to compensate for higher distribution and rental costs, prices can be up to 40 per cent higher. Zara's positioning as an aspirational brand in the UK has the added benefit of giving the perception of clear water between itself and mass-market fast-fashion rivals such as New Look or H &M.
The collated list of Zara's strengths read:
affordable, fashion-forward, changes frequently, big stores, easy layout, no pushy staff. "It is not a name to be embarrassed about when you say 'it's from Zara'," said one.
"The key words for Zara are:
safe, conservative, chic and grown-up," said one fashionista.
However, its positioning as an aspirational player has not translated well everywhere. Example:
Shoppers in US are more resistant to Zara. The company's store presence in the US market reflects this. Inditex has only 29 stores in the US while H&M, for example, has 150 stores.
"It tends to work best in less developed retail economies like Spain and Italy where there are lower degrees of concentration of multiple retailers.
REASON FOR GLOBAL EXPANSION: The global marketplace is rapidly changing due to
unprecedented technological advancement, accelerating globalization, escalating competition, and heightened consumer expectations.
Many apparel retailers pay special attention to global expansion for several reasons:
(1) domestic market saturation, (2) global consumer demands for brand with "global image," and (3) outsourcing for price competition in global marketplaces.
def. the u.s. market saturation
The United States is confronted with more retail establishments than the consumer market can possibly support. Still new stores continue to open, while other retail businesses are closing their doors because of economic failure. U.S. apparel companies are recognizing a potential of entering foreign markets in order for future expansion.
The highly advanced American consumer market is at a much more saturated level compared to developing countries around the world..
consumers' expenditure on apparel and service was static, indicating 0.7% of change rate between 2007 and 2008. In 2009, Americans spent almost $326 billion on clothing and footwear, which was lowest ever in U.S. history, at only 2.98%.
The main reasons for the shift away from apparel spending are:
(a) shifts in demographics, (b) better selection of clothing at lower price and higher quality than before, and (c) the increase in spending of non-apparel goods for lifestyle changes.
.For instance, as the largest consumer group, "baby boomers" They are:
baby boomers; spending more on apparel, but they are spending even more on other products. Their priorities are shifting from clothes to insurance, retirement, and college educations for their children, vacations, and other types of personal spending
Another reason apparel's share of total spending has been declining is that
lately consumers of all ages are renovating their lifestyle, buying new ones that need new furnishings, electronics and flat screen TVs. According to NPD Fashion world, what American women's chief spending interests were health and fitness (75%), followed by electronics and computers (71%), home furnishings (68%), and fashion (49%).
def. Global Consumer Demand for Brand with Global Image
Challenged by a maturing domestic retail environment and an aging consumer market, some U.S. brands and retailers are pursuing international expansion into new or growth oriented market like Asia markets.
However, U.S. companies and retailers are challenged to develop strong global brands that also resonate with
the tastes, needs, buying habits, and shopping preferences of consumers in foreign market.
Still, U.S. brands are well-known like:
Calvin Klein, Ralph Loren, Guess, Tommy Hilfiger, etc.) and especially popular in the casual wear market (Goldsmith, Kim, Flynn, and Kim, 2005).
Japanese younger consumers (Generation Ys) particularly are:
fashion conscious and prefer name brands. European luxury brands and U.S. apparel brands (e.g., Calvin Klein, The Gap, Polo) have attracted young Japanese consumers.
The opportunities in India are huge.
India is rising of new consumer class with a Western world experience. Overall sales expected to grow 36% by 2008 as middle class sees dramatic expansion.
What are some of the global companies in India?
There are an increasing number of global companies, such as Tommy Hilfiger, Hugo Boss, Zegna, Marks & Spencer, Lacoste, Levi's, Pepe Jeans, and Bennetton in India.
In terms of marketing, Hugo Boss doesn't
modify their offers in pricing, style or design for the local consumer.
In India, Hugo Boss realized:
that their customers in India really want to have same product they purchase on Fifth Avenue in New York.
China is also tremendous potential market for global expansion in the future.
Cities like Beijing and Shanghai have undergone remarkable change, becoming cosmopolitan, international cities of great importance. One of the European labels, Giorgio Armani, opens a giant store in Hong Kong's Central district and planned four mainland stores in Beijing and Shanghai
Outsourcing for Price Competition
Because apparel production is a labor intensive system, apparel producers need to create competitive production. With global trade in textiles and apparel, many firms are shifting their interests to developing countries in relocating production for saving costs and rising productivity. Production location needs to be highly mobile and extremely responsive to wage differentials. Manufacturers can reduce product costs, while consumers can benefit from an estimated savings of $24.4 billion in shopping costs due to lower retail prices.
Growth in China's large and modern textile and apparel industry helped take up some of the slack in export growth rates caused by:
fewer shipments of electronics to the U.S. and the European Union.
Some smaller and poorer economies dependent on textile and apparel exports, such as Bangladesh and Cambodia, registered strong export-led growth performance. For example,
hourly apparel labor cost of USA is USD $10.12 whereas it is only USD $0.30 in Bangladesh. In 1991 the number of employees in the ready-made garment sector of Bangladesh was 582,000 and it rose to 1,404,000 in 1998. In the USA, however, was 1,106.0 thousand in the apparel industry and in 1998 it declined to 765.8 thousand of workers. In 2006, economic growth in Bangladesh led by knitwear is forecast to grow by 6 %, up from last year's 5.4%
E Market Environments
With advances in information technology like the Internet, everything has been changed in lifestyle, consumer and market exchanges around the world. The World Wide Web is one of the most significant transformations in the retail history. In the United States, the Internet retail venue has grown. It has the highest annual market sales growth at 50.1%, compared to TV home/catalog with 6.1% and standard retail stores at 3.6%.
From the retailer perspectives, selling on the Web offers retailers several advantages including:
(a)Internet is always open; (b) web offers a broad potential market, but niche markets also can be easily accessed; (c) offers businesses new opportunities for growth; (d) can help extend brand awareness nationally and globally; (e) data mining and management, now possible with technology, creates a new intimacy with customers; (f) cost reduction in store leasing, staffing, operating, and data collection (g)web site can expand geographic and demographic markets without geographic constraints.
From the customer perspectives, the online shopping environment maximizes overall shopping benefits as well as minimizing shopping costs:
(a) convenience with the hassle-free shopping, 24-hour accessibility, easy ordering and payment, incentive programs, quick-response for ordering, and service offering; (b) a wider selection for comparison-shopping; (c) offer lower prices for a variety of quality can promote sales; and (d) customer can save time and energy for shopping by direct on-line contact with the vendor, detailed loading information, but options for shipping and handling fees may affect the overall consumer cost.
Online Consumers want to feel and touch
Consumers who are hesitant to purchase from online shopping venues may want to "feel and touch" their products when making a decision to purchase. There are several limitations in online retailing for apparel products.
Many textiles and apparel industries present challenges to implementing electronic commerce.
The accuracy of color, design, style, size, and trial are the most important issue on online shopping for clothing product. The accuracy of color on the Web is of particular concern to consumers. 88 percent of consumers prefer to shop at the Internet site that could guarantee "true and accurate" color.
Another issue is that online purchases depend on garment type.
Consumers have highly preference of buying basic garment online, because basic garments are quite familiar and fairly same across brands, which makes the buyer less hesitant to purchase them. However, e-retailer, such as Victoria Secret, is improving virtual technique for "sight unseen."
What is an e-retailer that has improved virtual technique?
There is no standard sizing for consumers to base their apparel purchases from. True.
Fit calculators can help consumer choose their right size.
Advancements in technology are aiding in offsetting these barriers in online retailing.
E-apparel retailers are trying to adopt virtual dressing room for their consumers. Virtual 3D viewing options are also included, offering the consumer a multitude of angles to perceive from. In addition, many apparel retailers implement web-based videos and Flash to present products via online with more advanced visual cues.
Advancements in technology:
back & front, zoom in and out, provides coordinating accessories, alternate view of apparel on model, different color options
Internation Retailing in E Markets:
With advances in technology, geographic distance may not be a barrier for online retailing. It is possible to deliver promotional message regarding apparel brands via the Internet across nations. An adoption of effective e-tailing strategies could build strong brands for the internationalization of apparel retailing.
Ralph Lauren's "Merchantainment" Online
The company went online. Today, the Ralph Lauren brand is expanding as Polo.com continues to grow and the company launches new concepts. Now, they are expanding to global markets such as Europe (The U.K., Deutschland, France, and Italy), Asia-pacific (Japan, Korea, New Zealand, Australia), and South America (Chile).
Polo.com is an extension of Ralph Lauren's other retail businesses.
The company created a website with the Ralph Lauren sensibility, lifestyle and clothing, providing customer an in-store experience.
The concept of "Merchantainment" for the Polo.com
is the blending of merchandising and entertainment .The site has been very successful and is a great way to extend the brand.
One of the things they launched on Polo.com is the "make your own polo shirt."
Soon, you'll be able to pick the stripes and dots for you Ralph Lauren ties. It gives consumers an opportunity to choose and gives them better access to what they are looking for.
Examples of global retailers with global expansion to e-markets over the world.
DOLCE & GABBANA(1. Italian 2. English 3. Spanish 4.German 5. French) and BURBERRY (1. UK 2. USA 3. Rest of Europe 4. Rest of World" )
Lifestyle branding for Home Furnishings:
currently there is a consumer trend more of a focus on draping the home. This is due to the aging of the dominant consumer demographic: the baby boomers.
Baby boomers demographic:
They have a higher disposable income due to a smaller household and higher salaries. Nesting in clothing and home furnishings is common. They are quality-conscious and often go for the convenience of the "total look" offered by retailers across all product lines; apparel, home furnishings, etc.
Currently, consumers not only want brand name clothing, they also really want the lifestyle.
Therefore, many apparel retailers are shifting their interests to lifestyle retailing with their own brand image.
What is lifestyle retailing?
is a phenomenon of cross-branding that exists when the same designer or brand name is carried by multiple product categories (i.e., apparel, home furnishing, toiletries, cars) to capitalize on the fashion appeal and perceived image of the original branded product.
What is an example of lifestyle retailing?
For example, the Ralph Lauren brand is one of highly successful global brands in brand extensions
The retailing of home furnishings is ourspacing the growth of retailing fashion apparel. The trend is popular while retailers are more focused on developing lifestyle brands. A lot of designers (Ralph Lauren, Missoni, Versace, and Etro) are expanding their presence to home furnishings because :
they offer something that many longtime furniture companies do not: a famous name and a recognizable aesthetic sensibility to match (Martin, 2006). Retailers also will be able to encourage the cross-shopping of brands to extend consumer loyalty behavior in other product markets.
Globalization of Tourism"
Accelerating globalization and advances in information technologies rapidly increase global business opportunities by decreasing constraints associated with national boundaries. As the world is more integrated, tourism industry has seen significant growth. Now, tourism is a global business! It is optimistic that tourism industry changes global economy and integrate with retail industries.
For many countries, tourism is the biggest money-maker and strongest sector in increasing global economy.
The travel industry is the number one source of foreign exchange earnings for the United States. The U.S. tourism industry is one of largest service exports with billions of money spent by international visitors in the U.S. and spent outside the U.S. by domestic travelers.
Recently, tourism also has become a rising industry with the greatest vitality in
Asia pacific region's economic development.
Another phenomenon of international tourists' arrivals gains momentum by:
creating 2.5 million new jobs worldwide in 2006, to total 297 million jobs
In addition, according to a new report from the UN World Tourism Organization, global tourism was expected to rebound strongly in 2010 after:
: the credit crisis and swine flu produced "one of the most difficult years" for the industry. The organization predicted growth of between 3 and 4 percent in 2010 after a fourth-quarter recovery in 2009.
WHAT FUELS GLOBAL TOURISM ?: Nature of Multi-component Industry
Most definitions of the tourism industry focus on the service that number different industries, such as the travel agency (e.g., airline), hotels and catering, retailing (e.g., souvenir shops, restaurants) and entertainment (e.g., cultural activities, concession stands), provide to tourists; The nature of multiple component industry is increasing their profits.
Democratization of Travel
The globalization trend has had a positive effect on the tourism industry. Clearly, technological innovation made it possible to visit any countries from people's home.
The global transportation infrastructure is rapidly becoming a seamless interconnected pathway to all parts of the world. The increase popularity of democracy has opened many doors to other countries.
Old and newly democratized countries are declaring freedom to travel a basic human right.
The concept of travel is changing from "a worthy undertaking" to an " enjoyable one,"
while lifestyles are becoming more hectic and work-oriented. Tourism is shifting from mass market to niche market related to sensory or experiential leisure.
The adventure tourism with sensory leisure is growing, reflecting an increase interests towards escapism in more developed countries.
For example, about 10% of the domestic travel market in the United States consists of adventure travel.
Baby Boomers and Retiree
Lifestyle shifts of aging demographics have also motivated changes within the travel industry. International tourism companies pay a special attention to the aging population as well as the fast growing group of travelers (Generation X).
By 2010, the baby boomer and retiree demographic were predicted to:
increase in total U.S. population from 21 to 27%. The estimated number of babyboomers in the U.S. is 74,900,000.. Baby boomers are retiring with a lot of money to travel.. Their households also are smaller with fewer children to feed and educate. They often travel frequently to foreign lands for business and return eagerly for pleasure.
In fact, baby boomers are the top purchasers of:
hotel rooms around the world. For instance, the average American visitor to Britain is about 50 to 60, which increases Britain tourism markets
In Japan, Baby boomers are taking the country's outbound travel. Also, high-yield Australian and New Zealand baby boomers spend AU$200-AU$300 per person, per day. Also, German Baby boomer travelers to the Asia Pacific require flexibility, as they prefer to create their own holiday packages.
Baby boomer segment in the travel market will continue to grow over the coming decades around the world. Here are similar grouped countries of shaping demographics
" Japan has the largest and most affluent Baby Boomer market." ;
"The over-40 segment in Hong Kong, Chinese Taipei and Korea (ROK) is climbing the fastest." ; "1% of China's 200 million Baby Boomers have a "reasonable sum of money and time."
High-School and College-age Young People
Travel among high-school and college-age youth are increasing. They are often associated with "social tourism" or "foreign exchange" educational programs.
These programs introduce:
the youth of the world to the pleasure, excitement, and adventure of tourism. Similar programs have been put into place in Third World countries, as the awareness of the importance of globalization increases.
The growing awareness of socio -cultural and environmental issues is fueling a demand for specialized services that deliver unique, responsible services that are not damaging to the environment.
Cultural or ecotourism is defined as
"purposeful travel to natural areas to understand the cultural history of the environment maintaining ecosystem."
What are people doing in ecotourism?
They are traveling into foreign lands conscientiously observing the natural benefits.
economic opportunities that make the conservation of natural resources financially beneficial to the inhabitants of the host region.
What are some countries that are the leading sources of foreign exchange?
Many countries, such as Kenya, Costa Rica, Ecuador and Nepal, are the leading source of foreign exchange. Hawaii is one of important ecotourism destinations in foreign exchange sources in the United States.
The Hawaii Ecotourism Association (HEA):
is considering genuine ecotourism in Hawaii, developing Hawaii's natural environments, cultural heritage and local communities.
Advantage of ecotourism includes:
(a) ecotourism saves habitat; (b) ecotourism maintain rain forests; (c) ecotourism create employments; (d) ecotourism is a way to earn foreign exchange.
Global Tourism and Shopping
Tourism is one of the fastest growing industries while retailing is becoming competitive and matured market in the world. shopping is becoming a major activity during the trips, because partly the setting for shopping is much more leisure and entertainment oriented.
So what are retailers doing?
They are changing their retail concepts to entertainment retailing by integrating other hospitality businesses, such as restaurants, hotels, and entertainments
approximately 63% of travelers included shopping during their trips in the United States.
What is cross border shopping?
Is a considered a subcategory of out shopping. ; when an individual travels from their country of residence to a neighboring country for the purpose of shopping.
In particular, there are high volumes of cross-border travel and shopping activities between neighboring countries
(e.g., Canada-USA, Denmark-Germany, The Republic of Ireland-Northern Ireland) because of geographic proximity with a condition for same-day automobile trips to a neighboring country.
Cross-border traveling is increasingly related to retail destinations in:
North America (e.g., Canada, U.S.), Europe (e.g., France, U.K., Ireland), and Asia (e.g., Japan, Korea).
What are some examples?
UK consumers travel to France (31%), Spain (29%), and the USA (19%) and purchase goods and service during their holiday. The most purchased items by UK residents on cross-border trips are alcohol (53%), Gift/souvenirs (45%), Hotel /travel (36%), clothes (36%), and food (35%)
In case of North America, Canadian tourism in the United States concentrates their activities on:
(a) shopping - 69%, (b) sightseeing - 62%, (c) cultural performance - 51%, (d) museum and other related attractions - 44%, and (e) festivals and fairs - 23%.
The Canadian dollar hovering around USD $0.84:
-its highest value in more than a decade-these shoppers are getting a better and better bargain buying American.
For cross-border shoppers in North America, when there are Sunday store closing in Canada:
, Canadians find the convenience of Sunday shopping in U.S. stores attractive and cross border shopping increased.
An Ontario study found 74% of their province's consumers who cross-border shopped on Sunday would:
shop at home if stores were open that day. Obviously, increasing total expenditures during cross-border shopping trips is crucial to improving retail revenues in border zone markets.
def. entertainment retailing
refers to a retail concept focusing on hedonic aspects to fulfill consumer demand for hedonic experiences, such as, sensory, novelty, enjoyment, diversion. This is a strategy that businesses are using in order to enhance the total consumption experience.
Nordstrom boasts over ___ brands with a presence in __American states and __ European boutique locations.
Tourism shoppers are demanding for more hedonic consumption experiences. What does this mean?
They are motivating an increase focus on the entertainment value of retailing.
For tourism shoppers, many retailers are providing the combination of:
hospitality and merchandise services.
International travelers want to purchase foreign products or brand during their trips.
In fact, some travel package might include a tour of shopping districts in the destination.
Retailers can have a good opportunity to increase their retail revenue by:
integrating into hospitality businesses (e.g., souvenir shop, restaurant, coffee-shops, and hotels).
Fashion retailers provide:
special events or exhibits, coffee-shops or eateries, or extraordinary interior design or architecture in their retail setting.
An example of this:
There are restaurants at Nordstrom department stores that are retail destinations for domestic as well as international tourists. ; Old Navy's Torpedo restaurants; Espresso bars at Eddie Bauer; and Starbucks Coffee at Barnes & Noble.
______ _______ ______ shops in Las Vegas is considered a premier destination for domestic and international tourists.
Caesars Palace Forum
Las Vegas is the tourist attraction that promotes shopping in every venue.
Caesars Palace is expanding its Roman -themed shopping mall. The Forum Shops has shopping and entertainment destinations for domestic and international visitors. More stuff include fashion brands such as Valentino and MAC's, and many restaurants such as Joe's Seafood.
The Carrousel du Louvre in Paris is a:
is a shopping center with many shops and a "food court" with many restaurants. Most of the shops and stores cater to tourists, selling perfume, clothing, stationary, coffee pots, art objects, toys, films, records, a live theater, etc.
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