Tanveer AhmedMBA

Inditex is a global specialty retailer that designs, manufactures, and sells apparel, footwear, and accessories for women, men and children through its chains around the world.  Zara is the largest and most internationalized of the six retailers that Inditex owns:  (Zara, Massimo Dutti, Pull & Bear, Bershka, Stradivarius, and Oysho).  By the end of 2001, Zara operated 507 stores around the world, including Spain.

Of Inditex’s total employees, over 80% of them are part of the retail sales force and 8.5% are in manufacturing, design, logistics, and distribution. The remaining 11.5% are part of the corporate headquarters of Inditex, which is located in the region of Spain called Galicia.

The role of the corporate center at Inditex’s headquarters is that of a “strategic controller” only, and is involved in setting the corporate strategy, approving the business strategies of the individual chains, and controlling their overall performance rather than as an “operator” functionally involved in running the chains.  This gives Zara autonomy to operate independently and be responsible for its own strategy, product design, sourcing & manufacturing, distribution, image, personnel and financial results 

With this freedom, Zara was able to make major investments in manufacturing, logistics, and IT, including establishment of a just-in-time manufacturing system and a 130,000 square meter warehouse close to its corporate headquarters.  Zara manufactured its most fashion-sensitive products internally and its designers continuously tracked customer preferences and placed orders with internal and external suppliers based on this information.  Due to its unique needs, Zara chose to internally develop its business systems.  Zara is now able to originate a design and have finished goods in stores within weeks for entirely new designs and take even less time for modifications of existing products. 

History

Zara is a Spanish clothing and accessories retailer based in Arteixo, Galicia. The company was founded in 1975 by Amancio Ortega and Rosalía Mera. It is the main brand of the Inditex group, the world's largest apparel retailer. The fashion group also owns brands such as Massimo Dutti, Pull and Bear, Bershka, Stradivarius, Oysho, Zara Home, and Uterqüe.

Amancio Ortega opened the first Zara store in 1975 in downtown A Coruña, Galicia, Spain. Ortega initially named the store Zorba after the classic film Zorba the Greek, but after learning there was a bar with the same name two blocks away, they rearranged the letters molded for the sign to 'Zara.' It is believed the extra 'a' came from an additional set of letters that had been made for the company. The first store featured low-priced lookalike products of popular, higher-end clothing fashions. Ortega opened additional stores throughout Spain. During the 1980s, Ortega changed the design, manufacturing, and distribution process to reduce lead times and react to new trends in a quicker way, which he called "instant fashions". The improvements included the use of information technologies and using groups of designers instead of individuals.

EXPANSION

• In 1988, the company started its international expansion through Porto, Portugal.

• In 1989, it entered the United States, and then France in 1990. During the 1990s,

• Zara expanded to Mexico (1992), Greece, Belgium and Sweden (1993). In the early 2000s,

• Zara opened its first stores in Japan and Singapore (2002), Russia and Malaysia (2003), China

,Morocco,Estonia,Hungary and Romania (2004),the Philippines,Costa Rica and Indonesia (2005), South Korea (2008),India (2010),and South Africa and Australia (2011)

• In September 2010, Zara launched its online boutique. The website began in Spain, the UK, Portugal, Italy, Germany and France.

• In November that same year, Zara Online extended the service to five more countries: Austria, Ireland, the Netherlands, Belgium and Luxembourg.

• Online stores began operating in the United States in 2011,Russia and Canada in 2013,and Mexico,Romania,and South Korea in 2014.

• Zara introduced the use of RFID technology in its stores in 2014. The RFID chips are located in the security tags which are removed from clothing when it is purchased and can be reused.

• The chip allows the company to quickly take inventory by detecting radio signals from the RFID tags. When an item is sold, the stockroom is immediately notified so that the item can be replaced.

An item that is not on the shelf can easily be found with the RFID tag.• In 2015, Zara was ranked 30 on Interbrand's list of best global brands.

SWOT ANALYSIS (STRENGTH)

1. Zara have more than 2000 stores all over the world2. Part of one of the most biggest Spanish retailers in the world3. Zara have a well established brand name worldwide4. Their supply chain management is extremely low cost as well as most of their processes like operations, manufacturing are all vertically integrated

5. Strong online presence through their own website and other ecommerce platforms makes Zara a popular brand name

6. Clothes are produced at a competitive price with the most innovative and fashionable designs

7. Zara offers extremely trendy, well designed and fast delivery of new products

8. Apart from clothes, Zara also offers handbags, shows etc

Weakness

• Limited marketing and advertising as compared to some other brands

• High competition for Zara means limited market share and high brand switching

Opportunity

1.There are more global markets which Zara can explore2.They can also enter into segments and expand those areas where they haven’t3.Online marketing and ecommerce is gaining importance which can be tapped by Zara

Threat

1. The high end fashion merchandisers can be a major threat to them2. Economic downturn can also be a threat to their target segment3. There is a large amount of consumer switching taking place

4. Fake imitations can decline the sale of Zara products and hurt business

Segmentation

• Zara’s segmentation can be described by the principles of demographic segmentation.

• The target customer is usually aged 18-40, with a mid-range income. As part of his/her occupation fashion trends is usually on top.

• But not only from a demographic view Zara segments its targets, their products are also designed based on a psychographic view based on its customers hectic lifestyle which means that they are usually busy people or with some kind of intense activity which combines with Zara’s tactic, making the customer to buy by instinct.

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• There is a list of Zara’s segmentation:

• Small sized customers

• Plus sizes shaped garments

• Lifestyle

segmentation

• Hectic lifestyle• Small sized customers• Plus sizes shaped

garments

Demographic

segmentation

Aged 18-40Mid-range incomeInterested in fashion trends

• Customer – They are the starting point for all Zara’s activities. It has a leading role on the business model since it’s a customer oriented brand.

• They provide excellent customer care and are frequent to see campaigns to collect customer’s opinion.

• Store – It meets the point between the customer and Zara’s fashion offer. Rather than paying millions on advertising Zara locates its stores in customer oriented venues (e.g. in Manchester Zara is at the city centre in a area with huge movement, New Market Street).

• Zara also provides quantity and the more than 1000 suppliers and the 200 designers show it. Its different from their rivals in the same segmentation, which usually has less different products but more quantity on sizes and less designers so they have the advantage of making sure that Zara’s trend identification is present despite the large number of designers.

• Logistics – More than 600 million garments are distributed every year.

• Even the Logistics are customer oriented providing replenishments twice a week grace to a 24h receiving order office.

• Teams – Also the teams are customer oriented and part of the employee’s roles is also provide the friendly environment “feeling” in the store.

Marketing mix• Product in the marketing mix of Zara

• Zara is known as the Coca Cola of fashion. Such is the craze of this brand among the fashion enthusiasts. One of the major strength of the company is that it is able to respond very quickly to the changing needs of the customers. The company does not source its manufacturing process, making it fully in control of the products it produces. Its unique selling preposition is to imitate or create the latest trends. In most cases, new styles are normally available on the sales stores within two weeks, four weeks maximum. If a product is not selling in the stores, it is immediately pulled from the stores.

• However, when it comes to India, it has a few problems to sort out, prominent among those being the lack of seasonal variations in their range. Secondly, it needs to tackle and cope up with the cultural needs of the local people which is a big challenge and Zara is working to reach out local people by coming up with designs that integrate modernism with local traditions.

Pricing in the marketing mix of Zara

• Because the concept of Zara is to provide its products at a reasonable price to its customers, it follows that customers find its prices quite affordable. However, we have to know that we are referring to the cream customers who would compare Zara with Hugo Boss or others. Some Zara stores might be very premium whereas others will be very much affordable. But mostly Zara has a premium pricing strategy. The pricing is made possible by optimizing development and training costs.

Promotion in the marketing mix of Zara

• Zara has a unique marketing policy of “Zero investment in marketing”. Instead, the company uses the money it would have used to advertise in opening new stores. The striking thing about Zara is that it has found differences that matter to the consumers and used that to differentiate itself from the rest of the competition. In other words, its key marketing strategy is based on exclusivity, experience, differentiation and affordability.

• In essence, the company relies heavily on the word of mouth advertising more than anything else does. The products target population in age group 18-40 that live in the cities. This is because; this group is the most fashion conscious, more than any other group. Specifically, the market segment comprises of women (65%), men (25%) and children (15%) all of them being fashion conscious, educated and fall in the middle class category.

Place in the marketing mix of Zara

• Zara is very unique and one of the things that make it a stand out brand is the fact that it is a vertically integrated retailer. What this means is that it designs, manufactures and distributes the products itself. This approach seems to be working for it because it has managed to establish itself as one of the leading Spanish fashion stores globally. Zara is present in over 30 different countries including India and its expansion is ongoing. Therefore, you will soon be seeing more Zara stores in more countries.

• In fact, 90% of Zara stores are owned by the company and the rest are joint ventures of franchises. This means that customers experience the same environment when entering one of the Zara stores be it they are in London, New York, Paris, Rio de Janeiro, New Delhi etc.: the stores are spacious, well-lit, modern and predominantly whiter and walled with mirrors.

• Most people say Zara’s real strength lies in its culture, something that can never be replaced for anything. One of the things it does is that it hires young designers and trains them to make quick decisions. In other words, while good decisions are encouraged, bad decisions are not severely punished.

• Facing several problems related to rent space, every mall owner in India is ready to provide free space to Zara, which speaks volumes about the popularity of this brand in urban areas and the long way it has traveled.

• It is unbelievable but the fact is Zara comes out with at least 500 or more new designs per month. This, coupled with the brand name Zara enjoys, helps to price their products according to their will and wish, as new trends tend to be a bit costly. However, the people at Zara are sensible enough as pricing is quite competitive with the brands like Pantaloons, and Phoenix etc in India as well as other parts of the world.

ZARA (PLC) 2016

REASON BEHIND THE BRAND NAMING

• When Zara founder Amancio Ortega was searching for a name for his first fashion store in La Coruña back in 1975, he decided upon 'Zorba' after the 1964 film Zorba the Greek, Zara communications director, Jesus Echevarría, explains to the New York Times.

• "I don't think they were thinking of making history, just that it was a nice name, but apparently there was a bar that was called the same, Zorba, like two blocks away, and the owner of the bar came and said, 'This is going to confuse things to have two Zorbas.' They had already made the molds for the letters in the sign, so they just rearranged them to see what they could find. They found Zara.

COMPETITORS

1.Chanel

2.Christian Dior

3.Burberry

4.Ralph Lauren

5.Prada

6.Gucci

7.Louis Vuitton

8.Hugo Boss

9.Hermes International

10.Versace

11.Valentino S.P.A

Positioning Strategy

• The main objective for positioning the Zara brand in a market as mentioned by the company is to ‘democratize fashion’. The company aims to provide its customers with trendy and high fashion products at lower prices to accommodate their requirements. As a result the marketing strategy that is employed by Inditex for Zara is to open stores and outlets that provide the Zara experience at high profile locations to set the image of the brand as being trendy, hip, high fashion and accessible.

USP • Zara offers perfect combination of high end, chic clothing at premium prices

BRAND ASSOCIATION

• Stylish

• Good quality

• Trendy

• classy