Executive Summary
This business plan provides an analysis of a key business opportunity available to high street retailer, River Island. The plan identifies and evaluates the past needs of British fashion consumers, how they have developed and their impact on retailers, there is recognition of the decrease in demand for disposable fashion and investigation into competitor brands and ranges who are responding to the market.
The plan discusses the different pricing strategies that River Island can use to differentiate the collection from their existing product offering and to a different consumer base. There is also investigation into the company’s opportunity to penetrate the market and win a share of the British manufactured garment industry. The plan offers consideration of corporate social responsibility, the impact of fashion products on the environment, ethical sourcing and the effect of British manufacture on the UK economy and particularly the individual communities, as well as suggestions of promotional marketing techniques that could be adopted by the brand to evoke excitement within the customer base.

Business Plan

The Business Opportunity
River Island is established as one of the biggest British fashion retailers on the high street and is becoming one of the UK’s key retail exports. There are almost 300 River Island stores across the globe, including Europe, Asia and the Middle East, thus the brand represents a unique and original, British style internationally. The brand is a fast fashion retailer, reacting almost instantly to trends, however SWOT analysis has shown that this may be weakness of the brand (See Appendix 1). The fast fashion trend of rushing runway styles to store in a matter of weeks was amplified by the recession. As disposable income was minimal, the allure of cheap disposable clothing was increased and one of the easiest ways for retailers to maintain sales was to decrease garment quality enabling them to compete on price. Over the past few years, however, there has been a decrease in demand for garments that compromise quality to for up-to-the-minute trend, and the novelty of fast fashion has exhausted itself, posing threat to River Island (See Appendix 1). A market matrix has shown that the quality of garments sold by River Island is average, with competitors outdoing the brand on quality and value (See Appendix 2). The generation of fast-fashion consumers has seemingly graduated to a philosophy of quality rather than quantity, leaving an opportunity for retailers to produce high quality, well-priced clothing. In 2011 American shoppers bought 19.4 billion garments, a 5.3% decrease from the previous year, however the value of sales rose almost 5% to $283.7 billion, signifying that consumers accepted higher garment prices (Maheshwari, 2012). This would suggest that high quality garments has become an area of the fashion industry with growth potential, and one that can be taken advantage of by River Island through the introduction of a range of high fashion garments and fashionable basics, made with British fabrics and workmanship. The range would coincide with the British heritage of the brand, allowing for amplified representation of British style in international territories. The range could also act as a buffer in case of impact on sales following the change in consumer’s needs.
Market Analysis
The Consumer
The target market of Born British would posses both similarities and differences from the average River Island consumer, females in their late teens to late twenties, because of the higher price point. A higher price requires consumers to have a higher level of disposable income thus would likely attract an older audience. The main interest of the market would remain as the fashion industry however the occupations of the individual may be at a higher level, in managerial positions, allowing for higher priced items to be purchased comfortably. The location of the consumer would most likely be in affluent areas and a city where incomes are higher and there is close proximity to the collection is. The Born British consumer may seek quality items and offer loyalty to brands that can provide the best products as opposed to returning as a consumer to brands which provide convenience, which 40.7% of consumers say is likely to keep them loyal (Retail Week, 2014). River Island has a well-established and loyal customer base, however many of the brand’s customers also buy from other high street brands, meaning that differentiating from competitors is increasingly important to maintain and generate sales.
Competitors
One of River Island’s main competitors is fellow British brand, Topshop. Similarly to River Island, Topshop are furthering their global expansion and continually aim to represent British style across the globe. As Topshop already have over 140 stores in international territories, it is important that River Island offers consumers a unique product and experience that distinguishes them from other brands and persuades the consumer to purchase. Born British will impact upon the customer because of its high fashion and trend focussed designs however the range will also provide added value because of its high quality. Unlike River Island, Topshop has an existing range of sub-brands at different market levels, enabling them to attract a wide audience of customers from different market segments. Topshop Unique, a higher positioned sub-brand, is the only high street collection to be shown at London Fashion Week. Although not all the range is made in Britain, almost half of the collection is. Another British manufactured range is M&S Best Of British, a collection in partnership with the British Fashion Council to premier UK design talent and workmanship. Dissimilarly to Topshop Unique and River Island Born British, the range caters for males and females. M&S have stated that overall the clothing market grew in value, but slowed in terms of volume, as shoppers were more measured in their spending (M&S Corporate, 2014) (See Appendix 3). Although M&S tend to target a more mature consumer, their identification and reaction to changes in consumer’s needs positions them as a competitor for the Born British collection, as they are one of the only brands offering the customer the high quality product that is in demand.
The Start-Up Plan
River Island is one of the most easily accessible names on the high street. The brand has a variety of points of contact with consumers including their stores, of which there is almost 300, their e-commerce website and mobile application. The high volume of garments stocked by River Island also allows for easy accessibility of the brand’s products. Luxury brands use limitation of stock to increase their exclusive status, (Kapferer, 1997:82) stated “luxury goods should be desired by all but only consumed by the happy few”, Berry (1994) argues that the image of exclusivity is a gambit to increase consumption, a strategy that can be employed by River Island to coincide with the higher price point of the Born British collection. When considering the location and number of stores that should stock the collection, strategic planning is paramount, enabling ensured availability in optimum places (See Appendix 4). River Island’s largest, flagship superstore at Marble Arch, Oxford Street, the country’s top shopping region, is the first key location in which the collection will be available, along with a second superstore in the country’s top shopping centre, Westfield Stratford City. The Born British collection will also be available in Manchester’s two largest shopping centres, The Trafford Centre and The Arndale Centre, both of which house River Island superstores. The Trafford Centre was ranked as the country’s third best shopping centre (Retail Week, No Date) and Manchester as the sixth best shopping region. The fifth and sixth superstores to stock the collection will be River Island’s newly opened stores in the fourth and seventh best shopping cities, Leeds and Liverpool. The final stockist will be the River Island superstore in Glasgow, the UK’s second best shopping region (Mail Online, No Date). London has the highest gross disposable household income nationwide, with Glasgow following close behind (See Appendix 4) (ONS, 2012). The consumer’s level of disposable income may impact the collection’s sales, as consumer spending is influenced by income, and increases with wealth. This means that the high to medium level of disposable income of consumers in the cities selected to supply the Born British collection may increase the sales (Doms, 2011). There will also be a limited amount of the range available online, however the ability to shop the collection online will be offered primarily as an incentive to subscribers of the email newsletter, maintaining the collection’s exclusivity and acting as a form of consumer retention. Following a 24-hour period, the collection will then become available to the mass market online, including the international consumer from any of the 100 countries River Island ships to (River Island, No Date).
Range launch
Coinciding with the beginning of autumn, the return of students to universities and the retail lead up Christmas, the Born British range will launch in mid-October however the promotion of the collection will begin in July, allowing around 10 weeks to create excitement amongst consumers. River Island have an extensive following on a variety of social media platforms including Facebook, Twitter and Instagram and can utilise these platforms to create anticipation of the range with an extensive audience, in a time efficient and cost effective manner. For example, River Island could host a competition across their social media platforms, such as asking their followers to tweet or post a picture of their favourite thing about being British, using the hashtag #BornBritish, and awarding the winner an item from the collection, before the launch date. By promoting the collection through social media, it allows River Island to continually build upon the excitement for the collection with minimal risk, because of the low overheads involved in social media marketing.
Costing
It is inevitable that the cost price of garments within the collection will be high, because of the use of high quality British fabrics and workmanship. American retailers tend to source products from countries with low cost material and labour similarly to many brands on the British high street. American Apparel, however, is famous for the vertically integrated company structure, designing, producing and marketing all products in the USA, similarly to the structure that Born British with undertake within the UK. The gross profit margin used by American Apparel falls between 45% and 55%, averaging at 52.95% in the 4th Quarter of 2014 (Y Charts, 2014). The Born British range will operate at a similar gross profit margin, of between 55% and 60%, depending on the nature of the product and whether it is a high fashion or core product. Core products will have a sales period of 10 weeks and will operate at a gross profit margin of 55%, whereas trend-based products will have a more limited availability period of 6 weeks and a higher gross profit margin of 58%, as demonstrated by the range plan (See Appendix 4).
In 2009, the retail clothing market had an average gross profit margin of 48.46% (Browne, No Date), however because the Born British collection is a unique collection, and one of the only British produced ranges on the market, it allows River Island to utilise elements of market skimming pricing strategy, maximising profitability through high margins and limiting demand with high retail sales prices. The collection is also priced with elements of competitor-based strategy, ensuring that it is an appropriate price for the consumer base, yet competitive in comparison to rival brands (See Appendix 5). Due to differences in the consumers of River Island and M&S, pricing Born British at a slightly lower level than M&S’ Best Of British collection, River Island will target the younger consumer, further differentiating the collections from one another. By also pricing the collection marginally lower than the British-produced garments from Topshop Unique, the perceived value of the collection is raised.
The core products of the Born British range, a pair of 100% wool trousers and a basic t-shirt, available in four colours. The cost of the five core products makes up approximately 52% of total required budget for the range, and enables production of 1,693 garments, each of which have an availability period of 10 weeks. The rate of sale of basic t-shirts is the highest of all the range, forecasted at 5 per colour per week, thus each store would require 50 t-shirts for the selling period and the number of each coloured t-shirt produced by River Island would be 350 overall, with an extra 18 units as breaking stock. Working on 55% profit margin, with a cost price of £11.25 per unit, the retail selling price of each t-shirt is £25, comparing competitively to M&S’ offering of a basic top at £29.50. Each colour of t-shirt has the overall sales potential of £4,140 (See Appendix 4). The remaining four seasonal products, a dress, a shirt, a jumper and a skirt, balance the range and offer more trend-focussed pieces. The seasonal garments in the range each have a more limited availability period of 6 weeks and a rate of sale of 3 per style per week, meaning that the required number of each garment is only 18 per store overall. The mark-up on seasonal garments is also higher, with a 58% gross profit margin. The 100% cashmere jumper has a high cost price of £75.18, yet generates a £103.82 profit, and has a potential overall profit of £23,807. The Born British collection requires an overall budget of £56,160.93 and has a total retail worth of £129,329, provided that all garments are sold at full price. The variety of products in the range each has a different break-even point, however because of the reasonably high gross profit margin, the break-even point is low. For example, the number of skirts sold to equal the total revenue with the total costs is approximately 69 units (See Appendix 6)
Sales Phasing
The interest brought to the collection from the promotional campaign in the months prior to its launch aims to create a demand. To ensure that there is sufficient stock to cater for the initial demand, 60% of the seasonal stock will be allocated for the October launch and another 30% in the following two weeks. The phasing of seasonal stock is minimal because of the short availability period, thus 100% of stock would be in stores from half way through the fourth week. The short time of availability for the seasonal pieces in the range will effectively decrease the likelihood of having to utilise markdowns to sell the garments and clear stock, as they will remain on trend throughout the entire sales period (See Appendix 7). Similarly to how the seasonal stock is phased, the largest percentage of stock, 50%, will be available in stores from the launch date, with a second large portion, 30%, phased in within the third week. The longer availability period allows for a wider spread of the stock through phasing. The final 20% of stock will be phased in, in 10% portions, within the third week of November and the first week of December. The percentage of the final two amounts of stock phased into stores is smaller as the initial excitement of the range may have decreased, however demand will be more demand for core products, as opposed to short demand for high fashion garments. (See Appendix 8).
Legal – Corporate Social Responsibility and Ethical Trading
River Island’s commitment to corporate social responsibility and ethical trading has the opportunity to be strengthened by the Born British range. Similarly to many other high street retailers, River Island has previously come under fire regarding the conditions of their factories and their low profile in media relations about the subject, however the brand stated that “River Island adopts a rigorous approach and is constantly working with our buyers and suppliers to ensure they achieve the highest standards of ethical trading” (Moore, 2011). Although it is understood that production of garments is global necessarily, due to the differentiated of environments and their ability to grow crops such as cotton, British manufacture holds many advantages. By manufacturing garments in the UK, communities are supported and opportunities for employment and skills-development are offered as well as nurturing an industry sector that has declined rapidly. There is also a chance to develop the social responsibility of the fashion industry by minimising the carbon footprint of transportation of garments.

References
Browne, C. (n.d.). What Is a Reasonable Profit Margin?. [online] Small Business - Chron. Available at: http://smallbusiness.chron.com/reasonable-profit-margin-17989.html [Accessed 17 Dec. 2014].
Doms, M. (2011). What Drives Consumer Spending? | Economics and Statistics Administration. [online] Esa.doc.gov. Available at: http://www.esa.doc.gov/Blog/2011/03/28/what-drives-consumer-spending [Accessed 16 Dec. 2014].
M&S Corporate, (2014). Strategic Report. [online] Available at: http://corporate.marksandspencer.com/media/fe827a51c3574257b5794bc754f6da56 [Accessed 16 Dec. 2014].
Maheshwari, S. (2012). Gap Gains With Zara Responding to Fast-Fashion Fatigue. [online] Business Week. Available at: http://www.businessweek.com/news/2012-11-08/gap-gains-with-zara-responding-to-fast-fashion-fatigue [Accessed 16 Dec. 2014].
Mail Online, (n.d.). Capital challenged for shopping city title. [online] Available at: http://www.dailymail.co.uk/news/article-29169/Capital-challenged-shopping-city-title.html [Accessed 16 Dec. 2014].
Moore, B. (2011). Has campaigning for an ethical fashion industry had any impact?. The Guardian. [online] Available at: http://www.theguardian.com/environment/green-living-blog/2011/nov/01/campaigning-ethical-fashion-industry [Accessed 18 Dec. 2014].
ONS, (2012). Growth in gross disposable household income increased in 2012 - ONS. [online] Available at: http://www.ons.gov.uk/ons/rel/regional-accounts/regional-household-income/spring-2014/sty-gdhi-2012.html [Accessed 16 Dec. 2014].
Kapferer, (1997:82) cited by Radon, A. (2012). Luxury Brand Exclusivity Strategies – An Illustration of a Cultural Collaboration. JBAR, 1(1).
Berry (1994) cited by Radon, A. (2012). Luxury Brand Exclusivity Strategies – An Illustration of a Cultural Collaboration. JBAR, 1(1).
Retail Week, (n.d.). Top 100 UK Shopping Centres | Retail Week. [online] Available at: http://www.retail-week.com/property/top-100-shopping-centres/ [Accessed 16 Dec. 2014].
River Island, (n.d.). River Island - Fashion Clothing for Women, Men, Boys and Girls. [online] Available at: http://www.riverisland.com/inside-river-island/about-us [Accessed 16 Dec. 2014].
The Consumer Executive Summary. (2014). [online] Retail Week. Available at: http://www.globalservices.bt.com/.../the_consumer_2014_executive_summary [Accessed 16 Dec. 2014].
Y Charts, (2014). American Apparel Gross Profit Margin (Quarterly) (APP). [online] Available at: http://ycharts.com/companies/APP/gross_profit_margin [Accessed 17 Dec. 2014].

Appendices

SWOT Analysis – River Island

Market Matrix – British high street brands

(M&S Corporate, 2014)

Shopping destination analysis

(ONS, 2012)

Range Plan – Born British

Competitor Benchmarking

Break Even Analysis

Seasonal Product Sales Phasing

Core Product Sales Phasing