The following is a report I wrote for a uni assignment and thought it may be of interest to people other than my lecturer. It's a summary of Zara, the international fashion retail company, its business models and how it stands out from its competitors. There's also a more opinionated piece at the end, but read on if you want a bit more insight into a powerful aspect of the fashion world...
Zara, the fast-fashion giant that has well and truly taken over the industry with over 2100 stores worldwide (Inditex - Zara, 2016), was founded in 1975 by husband and wife Amancio Ortega and Rosalía Mera in Galicia, Spain.
Zara is currently the world’s largest fashion retailer with a brand value of over $9.4 billion. Ortega still owns the business, and it is the founder of its parent company Inditex, which owns eight international retail brands. He is currently the second wealthiest person in the world, following Bill Gates, a result of Zara’s ingenious development and marketing strategies. Rosalía Mera was the richest woman in Spain, and the wealthiest self-made woman in the world until her death in 2013.
The philosophy and business model of Zara, despite its vast growth in the past 40 years, has remained mostly unchanged, and aims to deliver current trends and fashions to its customers as quickly as possible.
Zara’s marketing strategy is quite different to those of its competitors (H&M, Forever 21), with no use of public advertising, campaigns or celebrity endorsement (Zara Competitor Analysis, 2013), rather putting this money towards opening more stores and using storefronts, and store placement as their key strategy. More recently they have become present on social media, including Facebook and Instagram. With editorials and photographic campaigns being featured there, though it is still a minor aspect of their strategy.
From its beginnings, Zara has appropriated the designs of high fashion labels and sold them at affordable prices. They promise their customers “to provide new designs made from quality materials that are affordable” (Jhamb, 2013).
Rather than employing individual designers, Zara has a team of over 200 who follow the current trends and shows incredibly closely. They create up to 1000 new designs each week, which are on shelves within only two weeks, compared to their competitors who take up to six months from design to sale.
This hyper-fast fashion, which responds directly to customers buying habits and requests, is what gives Zara its appeal, and allows it to stay ahead of the pack, while infuriating high-end designers “[Zara is] the most innovative and devastating retailer in the world.” said Louis Vuitton’s fashion director Daniel Piette. Due to their appropriation and heavy ‘inspiration’ from other designers and brands Zara have faced copyright allegations several times. (Papa, 2014).
Zara’s garments are manufactured mostly in Europe (avoiding the trend of exporting production to the developing world), and have only one distribution centre based in Spain. Their factories are relatively green and sustainable, making use of wind turbines and solar power (Hume, 2011), though their prolific production of product increases their negative impact.
The garments produced by Zara are for men, women and children, though their womenswear department is the largest (60%). The designs themselves are versatile and have broad appeal, covering streetwear, tailored basics (blazers, coats, shirts, trousers), denim, semi-formal garments for going out and accessories too. All designs are constantly being updated, and are influenced but the most current trends.
They use mid-high quality materials, tailoring and finishes which raises their sales prices (which are still affordable), while keeping customers happy; providing them with pieces that will last at least a season. Turnover is incredibly rapid, with no restocking of designs. New designs are delivered to stores twice a week, instead of the usual seasonal deliveries, a marketing ploy which encourages customers to come back regularly so as not to miss out on the latest trends. Only 18% of Zara’s stock makes it to sale, which is less than half the industry average (Analysing Zara’s business model, 2011).
Zara puts a high focus on the desires of the customer, they monitor customer in-store habits, as closely as keeping records of what is tried on and not bought (Hungry Beast, 2011) and respond to popular feedback and requests made in store and online.
Garment price points range from $10 to $40USD for basic tops, $30 to $80USD for fashion tops, denim ranges from $40 to $80USD and outerwear being priced up to $320 for high quality leather and suede coats (Zara, 2016). For the quality of materials and construction, as well as the up-to-date designs (despite their lack of originality) these prices are very reasonable. These leads into the target market of Zara, which is the at the younger end of the spectrum (18-30), and is aimed at those who are fashion conscious and want to stay on top of the trends while still wearing pieces of quality. This includes students and young professionals.
Other labels with a similar price point (Gap, Witchery, Country Road, French Connection), produce far less product and have a smaller international market, and much fewer stores. Zara’s super fast turnover pulls in customers and sales and allows them to grow at a higher rate than these stores, and makes them a competitor with cheaper, lower quality fast-fashion brands. It is therefor able to dominate more of the market.
It is the combination of all these factors; their high volume, constantly changing product, their reasonable pricing and quality production and their pure accessibility through number of stores and online shopping (though an Australian online store is not yet available) that gives Zara its competitive edge and makes it a unique business model that has seen unparalleled success.
Analysing Zara’s business model (2011) Available at: http://www.harbott.com/2011/03/03/analysing-zaras-business-model/ (Accessed: 23 March 2016).
BBC (2016) Zara owner Inditex sees profits jump as sales soar. Available at: http://www.bbc.com/news/business-35761916 (Accessed: 24 March 2016).
Hume, M. (2011) The secrets of Zara’s success. Available at: http://fashion.telegraph.co.uk/news-features/TMG8589217/The-secrets-of-Zaras-success.html (Accessed: 23 March 2016).
Hungry Beast (2011) Zara masters the art of retail | the beast file. Available at: https://www.youtube.com/watch?v=qhCM0F81vEg (Accessed: 21 March 2016).
Inditex - Zara (2016) Available at: http://www.inditex.com/en/brands/zara (Accessed: 23 March 2016).
Jhamb, R. (2013) Case Study Zara. Available at: http://www.slideshare.net/rainajhamb/case-study-zara (Accessed: 23 March 2016).
Papa, M. (2014) Unfair competition and copyright infringement: The court of Milan decides on the case of Fendi vs. Zara - martini manna law firm. Available at: http://www.martinimanna.com/unfair-competition-copyright-court-milan-fendi-zara/ (Accessed: 23 March 2016).
Zara (2016) ZARA United States - Official Website. Available at: http://www.zara.com/us/ (Accessed: 23 March 2016).
Zara Competitor Analysis (2013) Available at: http://zarafashion2013.wix.com/zara#!competitor-analysis/c14m9 (Accessed: 23 March 2016).
Zara on the Forbes world’s most valuable brands list (2015) Available at: http://www.forbes.com/companies/zara/ (Accessed: 23 March 2016).
Zara (retailer) (2015) Available at: https://en.wikipedia.org/wiki/Zara_(retailer (Accessed: 23 March 2016).