Gymshark PESTEL Analysis - The Strategy Story

Before we dive deep into the PESTEL analysis, let’s get the business overview of Gymshark. Gymshark is a UK-based fitness apparel and accessories manufacturer and online retailer. It is one of the fastest-growing companies in the UK, with customers in 150+ countries worldwide.

Founded in 2012 by Ben Francis and a group of his high-school friends, Gymshark has expanded rapidly. Ben Francis was initially a pizza delivery boy and started Gymshark from his garage with a sewing machine and screen printer.

Initially, The company focused on providing innovative, high-quality fitness apparel for a young demographic. Its commitment to functional, stylish designs, quality manufacturing, and a keen understanding of social media marketing has always been noted.

As of 2021, Gymshark sells primarily through its website and does not operate any physical stores, but they have hosted pop-up events. The company initially became famous for its fitted t-shirts and stringers and now offers a broad range of fitness clothing and accessories.

In terms of marketing, Gymshark has utilized a powerful strategy by leveraging social media platforms and partnering with fitness influencers who resonate with the brand. This strategy, combined with its high-quality products, has helped Gymshark to create a solid and loyal customer base.

In August 2020, Gymshark sold a 21% stake to the US private equity group General Atlantic in a deal that valued the company at over £1 billion. This investment aims to help Gymshark with its international expansion, particularly in North America.

Financial Performance: While overall sales were up, with Gymshark reporting a 21% rise in revenues to $605.3 million during the year, compared to $502.1 million in 2021, the gross profit margin dropped to 65%. That’s down from 70% in the previous year.

Here is the PESTEL analysis of Gymshark

A PESTEL analysis is a strategic management framework used to examine the external macro-environmental factors that can impact an organization or industry. The acronym PESTEL stands for:

Political factors: Relate to government policies, regulations, political stability, and other political forces that may impact the business environment.
Economic factors: Deal with economic conditions and trends affecting an organization’s operations, profitability, and growth.
Sociocultural factors: Relate to social and cultural aspects that may influence consumer preferences, lifestyles, demographics, and market trends.
Technological factors: Deal with developing and applying new technologies, innovations, and trends that can impact an industry or organization.
Environmental factors: Relate to ecological and environmental concerns that may affect an organization’s operations and decision-making.
Legal factors: Refer to the laws and regulations that govern businesses and industries.

In this article, we will do a PESTEL Analysis of Gymshark.

PESTEL Analysis Framework: Explained with Examples

Political

Trade Policies: Since Gymshark sources and sells globally, trade agreements, tariffs, and import/export regulations in various countries can influence costs, pricing, and supply chain dynamics.
Stability of Governments: Political stability in countries where Gymshark operates or sources its materials can affect its supply chain reliability and market predictability.
Regulations and Legislation: Different countries have their own set of regulations for product standards, labeling, and advertising. Gymshark must ensure compliance with these local regulations to avoid legal complications.
Tax Policies: Taxation, including VAT, customs duties, and corporate tax rates, varies from one country to another. These varying rates can influence Gymshark’s profitability, especially in its primary markets.
Currency Regulation and Monetary Policy: Fluctuations in currency exchange rates, influenced by political decisions, can affect Gymshark’s earnings and expenses in international markets.
Incentives for Sustainable Businesses: Governments are increasingly promoting sustainability. If Gymshark adopts eco-friendly practices, it might benefit from incentives or subsidies in certain regions.
Infrastructure Development: Government investment in infrastructure, such as roads, ports, and internet connectivity, can influence Gymshark’s logistics and e-commerce operations.

Gymshark SWOT Analysis

Economic

Economic Growth: A country’s general economic health and growth rate can directly impact consumer purchasing power. In booming economies, consumers might have more disposable income for luxury or non-essential items like premium fitness clothing.
Exchange Rates: Since Gymshark operates internationally, fluctuations in currency exchange rates can significantly impact profitability, pricing, and sourcing costs.
Interest Rates: Changes in interest rates can influence Gymshark’s financing decisions, especially if the company is looking to borrow funds for expansion or operations.
Inflation Rates: Inflation can affect the purchasing power of consumers. High inflation can lead to increased production costs and might necessitate price adjustments.
Employment Levels: High employment levels increase disposable income, benefiting consumer-centric brands like Gymshark. Conversely, high unemployment might reduce consumer spending on non-essentials.
Taxation: Changes in taxation policies, especially for e-commerce or international trade, can influence Gymshark’s pricing strategy and overall profitability.
Trends in the Fitness and Wellness Industry: The economic health of the broader fitness and wellness industry, including gym memberships and fitness equipment sales, can indirectly influence demand for Gymshark products.
E-commerce Trends: As a digitally native brand, Gymshark is influenced by the economic dynamics of the e-commerce sector, including digital payment trends, online shopping growth rates, and digital advertising costs.

Sociocultural

Fitness Culture: The rising global health and fitness trend has led to increased gym memberships, participation in sports, and awareness of physical well-being. This culture significantly benefits Gymshark, as more people are keen to invest in fitness apparel.
Social Media Influence: The younger demographic, particularly Millennials and Gen Z, are heavily influenced by social media trends, influencers, and viral challenges. Gymshark has capitalized on this through influencer partnerships and strong social media campaigns.
Fashion Trends: As athleisure becomes popular, the blending of sportswear with everyday wear has become prominent. Understanding and staying ahead of these fashion trends is vital for Gymshark’s product design and marketing.
Sustainability and Ethical Consumerism: Modern consumers are more aware of environmental issues and look for sustainable, ethically-produced products. Gymshark’s approach to sustainability can influence consumer perception and purchasing decisions.
Cultural Sensitivities: As a global brand, Gymshark must know the diverse cultural norms, values, and preferences in various markets. What works in one country might not resonate in another.
Body Positivity Movement: The movement towards accepting all body types and promoting self-confidence has influenced the fitness and apparel industries. Brands now focus on inclusivity regarding sizes, designs, and marketing messaging.
Digital Connectivity: The increasing digitization of societies, with higher internet penetration and smartphone usage, affects how Gymshark engages with its audience, primarily through e-commerce and digital marketing.
Lifestyle Dynamics: Urbanization, work-from-home trends, and changing lifestyle habits can influence fitness routines and, consequently, fitness apparel preferences.

Technological

E-commerce Platforms: As Gymshark predominantly sells online, the functionality, user-friendliness, and reliability of its e-commerce platform is crucial. This includes mobile compatibility as mobile shopping continues to rise.
Digital Marketing Technologies: Advanced analytics, AI-driven marketing tools, and CRM systems can help Gymshark better understand its customers, personalize marketing efforts, and drive sales.
Supply Chain Management (SCM) Systems: Modern SCM systems, powered by AI and big data, can enhance inventory management, demand forecasting, and logistics, ensuring timely product availability.
Wearable Tech: The growth of wearable fitness technology (like smartwatches and fitness trackers) offers potential collaboration opportunities for Gymshark through partnerships or the development of complementary products.
Virtual and Augmented Reality: AR and VR can offer new ways to engage customers, such as virtual fitting rooms or immersive brand experiences, enhancing the online shopping experience.
Social Media Technologies: With platforms continually evolving and new ones emerging, Gymshark must stay updated to engage its target audience effectively. This includes leveraging new features, such as shoppable posts or live-streaming events.
Payment Technologies: With the rise of digital wallets, cryptocurrency, and other online payment methods, Gymshark must ensure its platform supports various secure payment options to cater to global customers.
Artificial Intelligence (AI) and Chatbots: AI-driven customer service, including chatbots, can enhance the online shopping experience by providing immediate assistance, product recommendations, and post-purchase support.
Manufacturing Technologies: Advances in manufacturing tech, such as 3D printing, can revolutionize how Gymshark produces its items, allowing for more customization or on-demand production.
Internet of Things (IoT): As devices become interconnected, there are opportunities for Gymshark to create smart clothing or integrate its products with other smart devices, enhancing the fitness experience.

Environmental

Sustainable Sourcing: Consumers increasingly demand products made from sustainable and ethically sourced materials. Gymshark would benefit from ensuring its raw materials are sourced sustainably, with minimal environmental harm.
Waste Management: The fashion and apparel industry is notorious for generating waste. Adopting eco-friendly waste management practices and recycling methods and reducing production waste can help Gymshark minimize its environmental footprint.
Water Usage: The production of clothing, particularly in dyeing and finishing, can consume vast amounts of water. Implementing water-saving technologies and processes is crucial for both environmental and reputational reasons.
Packaging: Sustainable packaging from recycled or biodegradable materials can reduce environmental harm and appeal to eco-conscious consumers.
Sustainable Products: Developing durable, recyclable, or eco-friendly products can cater to the growing demand for sustainable fashion.
Regulatory Compliance: As governments worldwide tighten environmental regulations, compliance is crucial to avoid legal issues, fines, and reputational damage.
Supply Chain Environmental Practices: Ensuring suppliers and partners adhere to sustainable practices can help achieve comprehensive environmental responsibility for Gymshark.

Legal

Consumer Protection Laws: These laws ensure that consumers’ rights are protected. They can relate to product quality, safety, accurate advertising, and fair treatment. Gymshark must ensure its products meet various markets’ quality and safety standards.
E-commerce Regulations: Operating primarily online, Gymshark must adhere to various e-commerce regulations, including digital transaction rules, online dispute resolution mechanisms, and electronic advertising standards.
Intellectual Property (IP) Rights: Gymshark, a brand with unique designs and branding elements, must protect its intellectual properties, such as trademarks, patents, and copyrights. They must also ensure they don’t infringe on the IP rights of others.
Employment Laws: These relate to worker rights, wages, working conditions, diversity and inclusion, and more. Adhering to local employment laws becomes critical as Gymshark grows and hires more staff across various countries.
Data Protection and Privacy: With the increase in data breaches globally, laws like the General Data Protection Regulation (GDPR) in Europe have been established. Gymshark must ensure it’s collecting, storing, and processes customer data in full compliance with such laws.
Environmental Legislation: As sustainability becomes a focal point globally, companies are often mandated to adhere to specific environmental regulations related to production, waste management, and more.
Import and Export Regulations: Gymshark’s supply chain might involve importing raw materials and exporting finished goods. Understanding and complying with trade regulations, tariffs, and customs duties in various markets is essential.
Taxation Laws: Different countries have various taxation laws related to sales, e-commerce, corporate income, etc. Gymshark must be aware of and compliant with tax obligations in every market.
Labeling and Advertising Standards: Different countries might have different regulations regarding product labeling, especially related to materials used, origin, care instructions, etc. Similarly, advertising standards can vary, ensuring claims are accurate and not misleading.
Health and Safety Regulations: This pertains to the safety of Gymshark’s products and the health and safety of its employees, especially in manufacturing units.