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Market Research Design Plan: Drop in Sales at Next Plc

In: Business and Management

Submitted By kabum
Words 3589
Pages 15
* 1. Introduction
Next PLC is a UK based public limited company. It fostered its name in 1986 from J Hepworth & Son which was a dowdy men's clothing chain established in Leeds in 1864 and became public in 1984 (Nexis® UK, 2009). Afterwards, the company bought Kendalls with 78-store women's clothing chain. George Davies who was hired by the chairman of retail group Storehouse Terence Conran positioned the company as a fashion type clothing provider with a mainstream price and came up with the word Next as up-to-date. Since then the company has expanded its business and bought Grattan (a British mail-order company) in 1986, retail chain Combined English Stores Group and the Dillons-Preedy chain of newsstands. In 1987 Next launched Childrenswear.. and it became one of the leading retail companies in the United Kingdom. Nowadays Next owns a significant number of retail shops in the UK and many franchise stores overseas (Nexis® UK 2009). The company specialises in stylish clothes, shoes and accessories for women, men, and children. Presently, the retail industry is going through many difficulties caused by a number of factors. These factors have both direct and indirect effects on Next PLC and led to a reduction in its market share. The goal of this study is to: 1. Examine Next´s relative decline in sales 2. Compare the strengths and weaknesses of the Next brand with its main competitors 3. Identify the benefits of Next clothing from the perspective of consumers

The first two objectives will be addressed in the literature review and the third objective will be dealt mainly in the methodology.
The literature review reflects previous academic and business researches regarding the topic in question. Methodology deals with clarifying which methods should be used and what data should be collected.

* 2. Literature Review
Nowadays, consumers in the UK´s clothing market have a bigger choice of retailers than they´ve ever had before. Next is the second largest clothing retailer among them. Next’s main target group of customers are aged from 25-44 years. For these, Next is the most favourite place to go shopping, as stated in Mintel´s Clothing Retailing Report (2009). Next´s main aim is to offer very stylish and fashionable products of high quality to their customers (Fame, 2009). However, its like-for-like sales decline is noticeable. Key Note (2009) claims, that Next Plc reported sales of £3,27bn in January 2009, whereas the previous year´s sales reached £3,33bn. So a small proportional decrease of 1,73% in their turnover is obvious. Whether this was caused by macro-environmental factors like, for instance, the 2008 economic crisis, socio-cultural changes, micro-environmental factors like tough competition, customers´ non-satisfaction or other factors, is a challenging task to examine. By using various textbooks, magazines, journals, newspapers, as well as reliable databases, e.g. Key Note, Mintel, FAME, the group will endeavour to identify and examine the reasons for Next´s drop in sales.
Price has become a dominant aspect for most of the UK´s retailers over the past 10 years, as deliveries of cheaper goods from the Far East made it easier for value retailers, such as Primark or Peacocks, to grow and cut off a bigger piece of the clothing retailing market share for them. As a result, intense competition between mid-market retailers (such as Next, its main competitors M&S and Debenhams) and these increasingly powerful value retailers created a challenging environment for Next´s sales (Mintel, 2009).

The following table presents the development of Next´s turnover “as share of clothing specialists´ sales in the UK, 2004-2008” (Mintel, 2009). It shows a gradual decline over time.

Source: Company Accounts and Annual Report/Mintel (2009)
However, it is not only the threat of competitors which created this challenging environment leading to the decrease of Next´s sales, there are also other factors. One of them is the credit crunch which brought global economy into recession in 2008. This recession caused several negative effects to many retailers. This calamity made a number of consumers unemployed and generally people started to save money during this difficult period of time. Consumers cut down their expenditure on buying clothes rather than on buying other things, e.g. food, which is naturally more important for living. The weaker spending power should continue over 2010 (Mintel, 2009).
Another important factor worth mentioning is the impact of fluctuating exchange rates. Decline in the value of sterling makes imports of Next´s clothing more expensive and thus causes rise in their prices, which happened in August 2009. The majority of Next´s clothes, which are sold in UK, is delivered from Asia and bought in dollars (Finch, 2008).
Next applied a strategy of decreasing its “opening price points” during the economic downturn, and in order not to damage its brand image, it didn´t offer wholesale discounts. However, as argued by Mintel´s researchers, during the economic recession many people have changed their shopping habits, especially those consumers aged 25-54 (the majority of these customers belong to Next´s target group), who switched to value retailers. In many cases consumers´ behaviour during the recession can be characterised by a few important aspects - “spending less, shopping around more, not buying at full price, buying more from value or less expensive retailers“ (Mintel, 2009). This is what Next´s Chief Executive Simon Wolfson stated as well: “Consumers have reined back their spending in the face of rising bills and the economic downturn“ (Finch, 2008). It is therefore suggested that despite Next´s aim to lower their prices, some customers have turned away to other retailers offering bargains.
Simon Wolfson expressed himself:
"The outlook for consumer demand in 2009 is mixed. On the upside, lower interest rates and falling fuel and food bills are likely to increase the amount available for discretionary spending at some point during the year. On the downside, rising unemployment will reduce earnings and falling house prices may encourage people to save more" (Finch, 2008).

Mintel´s researchers stated in their report Clothing Retailing – UK (2009), that Next´s “price-quality-style equation, though improved, seems at times lacking“. This could be an appreciable fact which, from the customers´ point of view, contributed to the drop in Next’s sales over the recession.
Next´s main clothing rivals are Debenhams and M&S. Although M&S appears as the strongest brand in the market, it is overcome by Next´s style and fashionability and Debenhams aims to catch up with Next´s style (Mintel, 2009). Supermarkets (in particular ASDA, Tesco) nowadays „account for more clothing sales than any other type of outlet” (Key Note, 2009). Their share of the clothing market grew from 10% in 2000 to 23% in 2008. The probability that this growing trend will continue in the future is very high. ASDA became an important competitor for Next, fighting for increased market share, offering stylish, modern, and relatively cheap clothes under their brand George, as seen on their website.
The strengths and weaknesses of Next, M&S and Debenhams are as follows: M&S possesses a strong brand which stands for high quality at reasonable prices and aims to strengthen its position in overseas markets; a drop in sales in the UK and not a very strong cash position are its weaknesses (Datamonitor, 2008b). Debenhams´s strengths are its balanced brand mix and value-added services (wedding/VIP baby/free professional shopping services); these are its valuable means of differentiation. On the other hand, its weaknesses include high level of debt and an insufficient number of male customers (Datamonitor, 2008a). Next´s aims to gain a higher market share and widen the range of its strengths through strengthening its position overseas and offering better customer service than it offered over the past years. Next´s main weakness is in the value of its credit ratings which decreased (Datamonitor, 2008c).
Mintel´s researchers examined the perception of various attributes of these brands from the consumer perspective in 2009. Interesting results occurred (see Appendix), as these might have a strong connection with the drop in Next´s sales. The group chose 5 attributes to compare that seem to play the most important role for customers to make their decision which brand to select for their purchase. These are good value, high quality, distinctive image, innovation and pride. Next takes the second place in good value after M&S. Consistent high-quality is lead by M&S, followed by Next and Debenhams. When it comes to image, M&S is rated highest, Next takesthe second position and Debenhams is third. According to Mintel (2009), the most innovative brand is Next followed by M&S and Debenhams. Pride is highest for M&S, then for Next and Debenhams.
Next positions itself at the high end of the market, according to the Chief Executive of Next Wolfson (2008). Its strategy of positioning itself as a highly fashionable brand is followed by a feeder strategy of positioning itself as a lifestyle brand through offering home goods in their stores, not only on-line any more. Despite competitors such as M&S and IKEA, the Next brand could help to differentiate these home goods and they could bring a rise in sales. * * 3 Methodology proposals
3.1 Introduction
In this part of the project, the group focuses on the main task which is the research design. Firstly, the instrumentation is introduced. It presents a range of qualitative and quantitative methods selected for the research design. Secondly, the sampling plan section which covers the sample of population for the project is established. Thirdly, the reliability and validity are discussed. Finally, the data analysis is considered.
3.2 Instrumentation
As outlined briefly in the introduction, this research based project examines the reasons behind the decline of Next´s market share in the retail sector by examining Next PLC relative decline in sales, comparing strengths and weaknesses of the Brand with its main competitors and identifying the benefits of Next clothing from the perspective of consumers. The first two objectives were already addressed in the Literature review. This part of the research deals with the third objective- the benefits of Next clothing from the perspective of consumers. Both quantitative and qualitative methods are used in Mintel´s market approach, and secondary data are used to inform(?) the primary data collection (I don´t understand the sense of this part?). The secondary data are collected from sources such as Mintel, Key Note, Fame, newspapers, and primary data are established by designing Likert scale interval questionnaire. The qualitative research is based solely on primary data. A. Use of qualitative research (B. should be before 3.3 Sampling plan, it is confusing!!!)
According to Raymond (1993, p. 23) qualitative data arise as words, statement, commentary or narrative, and may be spoken or they may be written. As Proctor (2005) states, qualitative research analyses the attitude, feeling and motivation of consumers, concerning a product, service or advertisement. This qualitative research involves both direct and indirect question to determine the truth of the answers given and consequently the result of the research.
Direct questions: a. Depth interview:
According to Baines and Chansarkar (2002, p. 65) depth interviews “allow detailed exploration of research problem [and are a] good technique to use for gaining insights into specific populations’. The objective of in-depth interview is to probe the respondent’s answers in order to indentify underlying reasons and motivation. A semi-structured type of depth interview is used. Within the depth interview projective technique is also used. b. Projective technique:
Projective techniques are useful as they allow respondents to project their feelings (Webb, 1999). In other words, sentence completing techniques are used and can be used as a structured-indirect way of investigating the why situation.
Examples of sentence completion: * Next PLC is ………………………………. * Next PLC services is ……………………… * I go to Next PLC when……………………. * I would go to Next PLC if…………………. * Next PLC are not good for …………………

3.3 Sampling plan
According to Proctor (2005) sampling is very important for market research as it gives valuable information, about different characters of the population by questioning only a selected sample of people. Sampling is used to reduce the huge number of potential customers to the target population which the researcher is able to work with, and it is also used to reduce the cost involved in the survey. The target population for Next PLC is both men and women aged 25-44 years and ranged from middle class to lower middle class. A random-stratified sample will be used by dividing the population into different parts. Random stratified sampling involves dividing the population into subgroups (it repeats itself) based on variables known about those subgroups, and then taking a simple random sample of each subgroup (Proctor, 2005). This research uses this method by dividing the target population into age, geography, gender and social classes.
Figure no 2: The target population. Age group: 25-44.
(http://www.nomisweb.co.uk, 19.11.2009) Regions | Manchester | Cardiff | Bedford | Birmingham | Gender | M | F | M | F | M | F | M | F | AB | 65285 | 12509 | 13734 | 21624 | 6593 | 6660 | 30284 | 19048 | C1 | 15872 | 15317 | 13889 | 23786 | 6533 | 6760 | 37328 | 23921 | C2 | 8719 | 6939 | 5919 | 16128 | 3613 | 3431 | 23221 | 13008 | D | 6619 | 7263 | 7263 | 5527 | 3598 | 3689 | 174479 | 19261 | E | 5803 | 5388 | 7548 | 7852 | 916 | 985 | 13383 | 8797 |
AB. Higher and intermediate managerial/administrative/professional
C1. Supervisory clerical junior managerial/administrative/professional
C2. Skilled manual workers
D. Semi-skilled and unskilled manual workers
E. On state benefit unemployed or lowest grade workers

To establish the right sampling size for this research the team has used the formula and the Krejcle table. The formula is as follows. S = X²NP (1 - P) ÷ d² (N - 1) +X²P (1 - P)
S = required sample size
X² = the table value of chi-square for 1 degree of freedom at the desired confidence level (3.841)
N = the population size
P = the population proportion (assumed to be .50 since this would provided the maximum sample size) D = the degree of accuracy expressed as a proportion
(Lecture 7, Sampling design, slide no 30, Proctor, 2005)
“Since the parameter must be measured for each sub-group, the size of the sample for each sub-group must be sufficiently large to permit a reasonable estimation” (The Research Advisors, 2006, page number?). Each sub-group is treated as a population.Then the Krejcle and Morgan table is used to determine the recommended sample size for each sub-group. The table uses confidence of 95 percent and confidence interval of 5 (units?). The confidence level says how sure one can be as it is expressed as a percentage and represents how often the true percentage of the population, who would pick an answer, lies within the confidence interval. The confidence interval calculations assume a genuine random sample of the relevant population.

Figure no 3: The Krejcle and Morgan table is used to determine the sample size from the given population (lecture note – which one?). Regions | Manchester | Cardiff | Bedford | Birmingham | Gender | M | F | M | F | M | F | M | F | AB | 382 | 373 | 374 | 377 | 363 | 363 | 379 | 377 | C1 | 375 | 375 | 374 | 378 | 363 | 364 | 380 | 378 | C2 | 368 | 364 | 361 | 375 | 347 | 346 | 378 | 373 | D | 363 | 365 | 365 | 359 | 347 | 348 | 383 | 377 | E | 360 | 359 | 366 | 366 | 271 | 277 | 373 | 368 |

B. Use of quantitative research
According to Raymond (1993, p. 23) quantitative data arise as numbers, and they are a result of the process of measurement. (Proctor, 2005)?Why Proctor here? The quantitative part of this research is based on primary likert using questionnaire (word order, does not make sense). It would be interesting to know the method Mintel used to obtain these data, however this information of Mintel´s measurement technique used was not provided. .
Likert scale interval
The scale is named after Rensis Likert, who published a report describing its use in 1932. Likert scale is used to measure attitudes, preferences, and subjective reactions. According to Proctor (2003, p. 167) ”in the Likert method a serious of statement is provided and the interviewees are required to rate each statement on the basis of the strength of their personal feelings toward it.“ This method will be used to identify how consumers perceive the brand. The attributes of Next´s clothes used below reflect what the Brand claims and compares with its consumer´s perception.
Please tick the appropriate box to indicate your level of agreement with the statement
Where: 1 = strongly disagree, 2 = disagree, 3 = neither disagree nor agree, 4 = agree, 5 = strongly agree,
6 = I do not know Topic | 1 | 2 | 3 | 4 | 5 | 6 | Comments/ suggestions | Next plc is one of the most attractive stores in town | | | | | | | | Next plc clothes are well designed | | | | | | | | Next PLC have got a look to suit me | | | | | | | |

3.4 Reliability and Validity
According to McDaniael and Gates (2006, p. 2), “Reliability is the degree to which measures are free from random error and therefore provide consistent data.” There are two types of reliability: test-retest reliability where the measurement is repeated using the same method in order to reveal if any random variation. The problem with test-retest approach is that it is difficult to gain the cooperation of respondents for a second testing and that the first measurement may mislead a person’s response to the second measurement.
”The difficulties encountered with the test-reset approach can be avoided by creating equivalent forms of a measurement Instrument“ (McDaniael and Gates, 2006, p.2). The problem with this is that it is very difficult to come up with two totally equivalent forms that are equivalent (repeating equivalent?), and that if it can be done, the possibility of achieving two types may not be worth the time and effort. (this sentence is confusing)
According to McDaniael and Gates (2006, p. 4) ”validity addresses the issue of whether what the researcher was trying to measure was actually measured.’’ There are two types of validity, content validity and face validity. Content validity attempts to measure how accurately an experiment represents what it is trying to measure. Face validity referrers to the ”degree to which a measurement seems to measure what it is supposed”(McDaniael and Gates,2006, p. 5). Face validity is a subjective measure of validity based on the judgment of the researcher; in other word it measures whether the test looks valid to the examinees who take it. The validity of this research will be tested by sending the questionnaire to a sample of potential respondents and then evaluate their responses for potential problems.
The limitation of this research is that it is not clear within the target audience who the existing customers of Next PLC are and who are their potential buyers. The researchers are not permitted to access the company’s database because of customers’ data protection. The company’s management who have legal access to the data could use it to reduce respondent errors. Further restrictions of response errors can be that respondents might give an answer that pleases the researcher, there is lack of knowledge of the product, customers want to give a socially acceptable answer or the impact of the interviewer effects the customers´ answers(Proctor, 2005).
To evaluate the reliability and validity of the project the following measurement is used: M = A + E
M = measurement
A = accuracy
E = errors-random or systematic * * * * * * * * * * * * * * * * * * * * * * * * * References * Some pages numbers in direct citations are not provided within this work because they come from on-line sources and these do not provide page numbers.
ASDA DIRECT WEBSITE (2009) George. [Online] Available at: http://direct.asda.com/george/clothing/10,default,sc.html [Accessed 26 November 2009]
DATAMONITOR (2008a) Debenhams plc. [Online] Business Premier Source Database. Available at: http://web.ebscohost.com [Accessed 26 November 2009]
DATAMONITOR (2008b) Marks and Spencer Group plc. [Online] Business Premier Source Database. Available at: http://web.ebscohost.com [Accessed 26 November 2009]
DATAMONITOR (2008c) Next plc. [Online] Business Premier Source Database. Available at: http://web.ebscohost.com [Accessed 26 November 2009]
FAME DATABASE (2009) Next plc. [Online] Available at: http://fame2.bvdep.com/version-20091029/Report.serv?seqnr=0&context=2NAZ92&_cid=40 [Accessed 26 November 2009]
FINCH, J. (2008) Fashion chain chief says hefty rise in clothing prices may be on the way. [Online] Guardian Newspapers Limited. Available at: http://www.guardian.co.uk/business/2008/nov/06/next-retail-price-increase-exchange-rate [Accessed 26 November 2009]
KEY NOTE DATABASE (2009) Clothing Retailing 2009. [Online] Available at: http://www.keynote.co.uk [Accessed 26 November 2009]
MINTEL DATABASE (2009) Clothing Retailing – UK – October 2009. [Online] Available at: http://academic.mintel.com [Accessed 26 November 2009]
WOLFSON, S. (2008) REG-Next PLC Final Results - Part 1. [Online] Available at: http://www.nextplc.co.uk/nextplc/newsevents/rns/rnsitem?id=1205910249nRNSS4234Q [Accessed 26 November 2009]
Appendix:
Figure 1: Attitudes towards the Next brand, September 2009

MINTEL DATABASE (2009) Clothing Retailing – UK – October 2009. [Online] Available at: http://academic.mintel.com [Accessed 26 November 2009]

Figure 2: Attitudes towards the Debenhams brand, September 2009
MINTEL DATABASE (2009) Clothing Retailing – UK – October 2009. [Online] Available at: http://academic.mintel.com [Accessed 26 November 2009]

Figure 3: Attitudes towards the Marks & Spencer brand, September 2009

MINTEL DATABASE (2009) Clothing Retailing – UK – October 2009. [Online] Available at: http://academic.mintel.com [Accessed 26 November 2009]

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