Market Measurement

It is important to be careful about how a market is measured. The following key marketing processes would be considered when we talk about Market Measurement: - Measuring market share - Measuring market size and growth Why is Market Share important? An important piece of research in the 1960's provided the basis for understanding the importance of market share - and emphasised the implications for marketing and business strategy. The Profit Impact of Market Strategy ("PIMS") analysis was developed at General Electric in the 1960's and is now maintained by the Strategic Planning Institute. The PIMS database provides evidence of the impact of various marketing strategies on business success. The most important factor to emerge from the PIMS data is the link between profitability and relative market share. PIMS found (and continues to find) a link between market share and the return a business makes on its investment. The higher the market share - the higher the return on investment. This is probably as a result of economies of scale. Economies of scale due to increasing market share are particularly evident in purchasing and the utilisation of fixed assets.

Buying advantage: An ability to use size to source product more cheaply is a clear advantage in an industry that faces rapidly declining consumer prices Volume advantage: As a low-margin business, retailers that can sell in high volumes are in the best position to gain market share Access to new products: The largest retailers typically have first-mover advantage in stocking new "in demand" products that have just been released. Advertising scale: As a price-led business, access to national advertising provides the ability to keep customers regularly informed of the latest product deals. This helps to reinforce customer perception of value, in addition to strengthening the brands. Access to retail property: With the continuing trend towards out-of-town, larger destination stores that offer a broader range of choice, and with restrictive planning laws limiting opportunities, the larger retailers have both the financial and operational capacity to secure such important new sites.

Market Share Definition Market share can be defined as the percentage of all sales within a market that is held by one brand / product or company. Market share can be measured in several ways. However, the two most important measures are by: - Sales revenue - Sales volume (the number of units sold) Examples of market share Market share information on the UK clothing retail market is summarised below: Position 1 2 3 4 5 6 7 8 9 10 Brand Marks & Spencer Next Arcadia Debenhams Asda Matalan Tesco Bhs New Look John Lewis Total of Top 10 UK Market Source; Deutsche Bank 2002 Sales('m)Market Share (%) 2,743 10.2 1,708 6.3 1,609 5.9 1,076 4.0 963 3.6 776 2.9 710 2.6 631 2.3 552 2.1 482 1.8 11,250 41.8 26,911 100.0 Number of Outlets 315 333 1,603 97 215 137 588 163 573 25

The UK clothing market, as defined by Deutsche Bank in their recent report, is valued at 26.9 billion. It is one of the most concentrated retail markets in Europe, with the top ten retailers accounting for some 42% of the market. What is market concentration? It is the proportion of market value that is owned by the leading brands or products/companies in the market. Where the market leaders own a large part of the overall market, the market is said to be highly concentrated. By contrast, where the market leader has a relatively small market share and there are many other competitors, a market is said to be "fragmented" There has been little change in the concentration of the UK clothing retail market in recent years. The top 10 retailers accounted for 39% of the market in 1995. However, as the

table below illustrates, the composition of the top 10 has changed quite considerably, with only six of the top ten in 1995 remaining in the top league in 2002: Position 1995 1 M&S 2 Arcadia 3 Debenhams 4 C&A 5 Next 6 Sears 7 Bhs 8 Littlewoods 9 John Lewis 10 House of Fraser Source: Deutsche Bank 1997 M&S Arcadia Debenhams Next C&A Sears/Adams Bhs Asda Littlewoods House of Fraser 2002 M&S Next Arcadia Debenhams Asda Matalan Tesco Bhs New Look John Lewis

The table above masks the change in the format of retail businesses that have evolved in the UK over recent years. Five years ago, the value or "discount" retailers had a relatively small share of the clothing market, accounting for only 18% total market share. Today the market is very different. The value or discount retailers now have over a quarter of the market. Foreign clothing retailers have also penetrated the market (e.g. the Gap, H&M and Zara) although their total market share is still less than 5%.