Zara's Growth and Performance
Analyse the Marketing Strategy Use by One of the Biggest Fashion-Retailing Brand.
Zara is a well-known clothing and accessories brand operating all over the world. the brand was launched in 1975 by Amancio Ortega and Rosalia Mera. Since then it has grew its presence in almost all the countries and offer as the largest retail of apparel. The company started expanding its business in the international market in the year 1988 through Portugal and then it slowly entered United States, France and other countries. The company also went online in 2010 in which it opened its own online boutique to offer its product though online source. Such approach and initiative has helped the company to be the most successful apparel retail owners (Zara 2017). The paper discusses about the factors that let Zara to be the major focus company of this assignment along with analyzing its performance and strategies over the years. The report also analyses the marketing mix strategy, which has helped in good performance of the brand, and factors that will help the company in long-term growth.
Zara is one of a name in the retail industry because of its expansion, strategy and connection with the customers. Since the day, it has introduced itself in the market it has grown to every possible market with its exceptional strategy. The brand has gained a name and recognition by itself by the innovation and continuous initiative that it puts. The company has recent revenue of $17.2 billion, which has helped them to build their strategies successfully. The brand has been able to put a hold in the retail industry in the past 43 years of operations and own a total of 2200 stores worldwide. With a brand value of $11.3 billion, the brand has always known for its development of new products and offering it for sale within few days (Zara 2017). This shows the exceptional maintenance it carries out in its manufacturing and operations units. The company has grown exceptionally in 2015 by opening 65 new stores in existing as well as new locations and 50 new Zara Home in various new locations (inditex 2016). The biggest markets of Zara after its hometown Spain are China, France, Italy and Japan.
The above figure shows the performance of Zara in the last two years that has continuously increased the net sales and gross profit of its parent company Inditex. The brand has offered a tough competition to other retail chain in various countries with its strong sales and profit growth.
Marketing Mix Strategy
Zara is not just a name; it is a symbol of fashion in the retail industry. The company also maintains a strong online market and recently took some initiatives in which it wanted to expand its market coverage through online offering. An online store that has been started by the brand has expanded in various locations in the world within a short period. The brand has also taken various technology innovations since the time it has been in business (Burgen 2017). In 2014 Zara introduced RFID chips in its stores through which it could detect the location of its products in the store. The chip is removed once the customer has purchased it and can be reused for further use. Moreover, the company has also maintained a customer base covering wide range of culture, age and geographic boundaries (Fortune 2017). This is due to the product that it has manufactured and the fashion image it offers according to the country. Thus, it can be seen that the company has achieved superior performance and a brand value with its continuous initiative in various places.
Marketing concepts shows the achievement and potentials of the company by analyzing its strategies such as segmentation, positioning and promotional initiatives.
Segmentation is one of the crucial strategies of any fashion and retail brand as it helps them to design the type of product it will launch in the market. Segmentation and targeting helps the brand to offer a streamline picture of the type of customers it wants to design the product that will also give an image to the brand. Zara maintains a mix segmentation strategy such as demographic, geographic as well as psychographic segmentation. Based on this segmentation the company targets each type of customers accordingly (Forbes 2017).
In demographic segmentation, the brand mainly targets the young adults between the age range of 20 to 30 years of age that are just maturing and would love to dress up as a matured person. This is because the brand is known to manufacture much classy and basic casual with some ranges of formal attires for the customers. Thus, the look of the brand is designed to give a classy and formal look. The clothing offered by the brand mainly reflects fast fashion with various kinds of chinos, khaki and others (Forbes 2017).
Geographic segmentation is done by the brand as it has expanded its reach to many countries and the living styles of the people in these countries are very different from each other. This made the company to design its product by segmenting its market based on the demand and fashion trends in these countries. For example, in India it focuses more on traditional and less trendy attires compared to US market.
Lastly, Zara also follows psychographic segmentation in which it targets the customers having a love for classy and fashionable dresses. Moreover, it also offers its products at high prices and targets the niche market that loves to maintain high quality dresses in their wardrobe as a symbol of their status. These customers will love to buy their products irrespective of the prices (Sheth and Sisodia 2015).
Thus, the brand follows such strategy so that it can target the customers efficiently and set its further strategies effectively. Depending on the type of strategy the company also designs its marketing strategy so that it can target the right customers at right place. Zara carry out online marketing strategy so that it can target the young and rich customers efficiently.
Zara has positioned itself as one of the most fashionable international brand operating in almost all the countries and having huge customer base. The company has also followed used based strategy to position itself as a customer centric brand. This is because the brand has always followed customer satisfaction as their main aim and accordingly modified their products and marketing initiatives from time to time (Baker 2014). Zara is well aware that the type of fashion industry in which it exists, it is necessary that it satisfy the changing needs o the customers. this made the company to focus on innovation instead of manufacturing a brand new product. The motive of Zara has always been to modify the products offered by other brands that the customers demand so that it can easily trace the customers. Moreover, it always maintained a good amount of stocks of clothes (Forbes 2017). Thus, positioning of Zara has always been about innovation, which made it the world’s biggest fashion retailer.
Among promotional strategy, it is seen that Zara spends the least amount in their promotional activities compared to other fashion brands and this has led to their success. The brand only spends 0.3 percent of its sales on promoting its product compared to other brands that invests 3.5 percent of their revenue. However, it do carry out promotional strategy ny maintaining a shop windows through which customers can be attracted easily by just looking at their unique collection. The retail brand started its online marketing due to its international presence in 88 countries (Forbes 2017). This led the company to carry out online marketing. Online marketing is increasing day by day and is used by most of the competitors. This makes t necessary for Zara to carry out online strategy. For this purpose, the company started it online marketing channel through its website in 2010. The online marketing of the brand is mainly through its website. It does not follow any other social media strategy (Baker 2014). However, the marketing through online website marketing has helped the company to fight competition from other retailers. Since the introduction of online selling, the brand has been able to expand its online sales by 42 percent (Mail Online 2017).
Political scenario of any country has a lot of effect on the brand’s operation within that region. Political scenario such as instability, war and others effect people badly making them lose a lot of their resources. This in turn will affect the brand, as the customers will not be able to demand their products due to high price. Moreover, it will also influence the operation of the brand within that region due to unavailability of various resources. Zara being a fashion retail company will be affected by political instability in a region, as it will be difficult for them carry out their operations and led to wastage of their resources (Gupta 2013).
Economic factors such as GDP, interest rate, employment rate, literacy rate and others help the brand to decide the type of pricing strategy it will follow in a region. It is important that Zara analyze the economic condition of the country efficiently before strategizing its pricing level in that region. This requires the brand to set competitive price in low-income level countries and premium pricing in countries having high GDP (Sheth and Sisodia 2015).
Social and cultural trend is yet another crucial factor that the brand requires to analyze before entering a country because the living style and culture of a place helps the company to decide their revenue. Zara will benefit by maximizing its sales in a country having preference for classy and elegant western wear. The society should be modern to accept the products of (Zara Arrieta et al. 2017).
Technological innovation and level in a country will help the company to reduce the cost of production. Moreover, it would help them to modify their distribution system by incorporating information system (Sheth and Sisodia 2015).
Bargaining power of suppliers
Zara belong to the retail industry and is one of the largest fashion retailers in the world. Suppliers of the retail industry mainly supply things to big brands like Zara, Marks and Spenser and others. Thus, the bargaining power of suppliers is low because the suppliers do not want to lose their market share to these big brands (Gupta 2013).
Bargaining power of the buyers
Buyers on the other hand have moderate bargaining power because of low switching cost and preference for the brands. Due to low switching cost customers can easily switch to any other brand. However, there are customers that prefer only one brand and love to stick to one brand at any cost.
Threat from substitutes
Fashion retail industry faces rare to negligible threat from substitute, as there is no such substitute of clothes. Thus, the effect of this force is not seen in the fashion retail industry (Gupta 2013).
Competitive rivalry is high in this industry due to large number of similar firms and brands operating in the industry. There are large number of retail company selling similar kinds of western dresses and thus offers huge threat. Thus, the industry face huge rivalry within the industry.
Threat of new entrants
Threat to new entrants is low in this industry because the companies entering in this industry would require a lot of investment on infrastructure, manufacturing and other sectors. Thus, it is not possible for a newly made fashion company to take up huge investment at initial stage of the operation. This makes the threat to new entrant low for fashion retail industry (Gupta 2013).Strength and weakness of Zara
· Zara can gain market share in the industry due to low or negligible amount of new entrant
· The fashion retail industry in which Zara exists has very less chance to fall due to low substitute.
· The company will face huge competition from the other company operating in the same industry
· It is challenging for the company to meet the need and desire of the buyers
Table 1: Strength and Weakness of Zara
Sources: (Gupta 2013)
The brand has always followed premium-pricing strategy to offer its products to the customer. However, this strategy has been maintained by the company to portray itself as a status symbol for its customer. Thus, premium-pricing strategy of the brand has proved to be successful and allowed them to perform good because most of the customers of the brand are rich. Thus, they demand Zara’s product as a status symbol (Huang and Sarigöllü 2014).
Zara is one of the brands in the fashion industry for which the consumers are crazy. This is because of its products and style options it offers to the customers. The company has its own manufacturing process and controls every category of clothes that it produces. The wide range of clothing options and maintaining their own symbol in the industry has helped the company to offer superior performance.
Distribution channel of Zara has always been unique compared to other fashion brands. Zara offers its products to its customers through vertically integrated retailer. This means that all the steps from manufacturing to distributing are done by the brand itself. This has helped them to know their operations well and perform better than other brands that outsource their operations (Solomon 2014).
The company has not put much investment in marketing activities. This is the strategy it has always maintained and has invested more and more money in opening new stores in different places. The marketing strategy of the brand being unique has always helped them to be successful (Huang and Sarigöllü 2014).
Impact of Political, Economic, Social, and Technological Factors
With the existing marketing mix strategies, it is also important that the company modify some of its strategies in order to cope up with the increasing competitive scenario in the fashion retail industry.
Even though the company has been successful by offering its products at premium pricing strategy, many new competitors have come up that has started offering clothes at reasonable price. Thus, to avoid losing its customers base to other competitors and be in business for longer time, it is important that Zara follows a competitive pricing strategy or provide offers and discounts from time to time.
Even thought the company offers some of the best and unique style dress and maintain their own style statement yet it is facing some challenges while meeting the demand of customers having different lifestyle and preference. Zara fails to modify their product trend while entering into other markets as well. Thus, it is important for them to modify some of their product range according to the culture and people of the new country it is entering. This will help bring customers in that region more close to the brand.
The distribution channel has always been unique for the company as it supplies its products from its own store mostly. The brand has very less franchisee for offering its products. However, the company could try the strategy of offering more number of franchisee to big retail stores in order to increase its market share.
Even though the company has been successful by not spending much in the advertising or marketing activity, yet it will not always be a successful strategy for the business as the industry faces hue threat from competitors. Thus, in order to maintain their position in the market it is important that they take some marketing strategy. As social media is the most growing marketing tool, it will be beneficial if the company spreads its product recognition through social media.
From the above analysis, it can be deduced that Zara has maintained a strong base in the market all over the world due to its unique strategies. The brand has been successful in most of its strategies related to price, product, place and promotion. Moreover, the brand has been able to increase its sales and revenue from its newly growing online business. this showed that the company is trying to shift its distribution from physical stores to online channels. However, it is necessary that the company should modify some of its strategies in order to cope up with the rising competition in the market. As its is seen that the company might face issues in some of its marketing mix factors such as price and promotion, thus it is necessary to focus more in this strategies. This will help them to stay in business for longer time and increase their market share continuously.
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