Global Marketing strategy of fashion brand “Zara”

 Topic:  Global Marketing strategy of fashion brand “Zara”

Who is "Zara" :

Zara was founded by Amancio Ortega and Rosalía Mera in 1975 as a family business in downtown Galicia in the northern part of Spain. Its first store featured low-priced lookalike products of popular, higher-end clothing and fashion. Amancio Ortega named Zara as such because his preferred name Zorba was already taken. In the next 8 years, Zara’s approach towards fashion and its business model gradually generated traction with the Spanish consumer. This led to the opening of 9 new stores in the biggest cities of Spain.

Zara have some sister brand under INDITEX, a continual company of Zara.

In the next decade, Zara began aggressively expanding into global markets, which included,

Portugal, New York (USA), Paris (France), Mexico, Greece, Belgium, Sweden, Malta, Cyprus, Norway and Israel. India, China

To entre in India they make joint venture with Tata, and for china market they follow low price strategy.

Market regulation requires that foreign brands find a majority partner to operate in India. Zara partnered with retail giant Tata Group to approach the Indian market in a 51:49.

Zara faces stiff competition from other global brands keen to snatch market share in China. Key competitors here include H&M and Uniqlo.

Today, there is hardly a developed country without a Zara store.

 Zara now has 2,264 stores strategically located in leading cities across 96 countries. It is no surprise that Zara, which started off as a small store in Spain, is now the world’s largest fast fashion retailer and is the flagship brand of Inditex. Its founder, Amancio Ortega, is the sixth richest man in the world according to Forbes magazine.

 

Introduction: Zara is a well-renowned name in the field of clothes and accessories, all across the world. It is a popular fashion designing and manufacturing company, which has been declared as the most efficient market responding enterprise. Just a few fashion brands keep pace with the latest fashion, Zara is one of the bests, as it is always up to date with the latest trends in high quality at affordable prices. Mr. Amancio Ortega, the founder of Inditex, has always received wide appreciation from public, industry people, even from his competitors for his bold and strategic business decisions. Zara is one the most successful and well-known brands of Inditex. After ten years of forming Inditex, Mr. Amancio Ortega started a small store in Spain under the flagship of Inditex called Zorba. Later he changed its name to Zara. Zara began to become popular and slowly it captured the markets of the United States of America, France, and then across the globe.

Co Brands of Zara

Zara Home: Home goods and decoration objects founded in 2003. Operating in 183 markets, 70 of them with stores.

Pull & Bear: Casual laid-back clothing and accessories for the young founded in 1991. Operates in 185 markets, 75 of them with stores.

Massimo Dutti: High end clothing and accessories for cosmopolitan men and women acquired in 1995. Operates 186 markets, 74 of them with stores.

Bershka: Blends urban styles and modern fashion for young women and men founded in 1998. Operates in 185 markets, 74 of them with stores.

Stradivarius: Casual and feminine clothes for young women acquired in 1999. Operates 180 markets, 67 of them with stores.

Oysho: Lingerie, casual outerwear, lounge wear and original accessories founded in 2001. Operating in 176 markets, 58 of them with stores.

Uterqüe: High-quality fashion accessories at attractive prices founded in 2008. Operating in 158 markets, 17 of them with stores.

The Zara brand strategy

In 2019, Zara was ranked 29th on global brand consultancy Interbrain’s list of best global brands. Its core values are found in four simple terms: beauty, clarity, functionality and sustainability

Shorter lead times (and more fashionable clothes): Shorter lead times allow Zara to ensure that its stores stock clothes that customers want at that time (

Lower quantities (through scarce supply): By reducing the quantity manufactured for a particular style, Zara not only reduces its exposure to any single product but also creates artificial scarcity. Similar to the principle that applies to all fashion items (and more specifically luxury), the lesser the availability, the more desirable an object.

Customer co-creation: Zara’s principal designer is the customer

Zara’s unrelenting focus on the customer is at the core of the brand’s success and the heights it has achieved today. There was a fascinating story around how Zara co-creates its products leveraging its customers’ input. In 2015, a lady named Miko walked into a Zara store in Tokyo and asked the store assistant for a pink scarf, but the store did not have any pink scarves. The same happened almost simultaneously for Michelle in Toronto, Elaine in San Francisco, and Giselle in Frankfurt, who all walked into Zara stores and asked for pink scarves. They all left the stores without any scarves – an experience many other Zara fans encountered globally in different Zara stores over the next few days.

7 days later, more than 2,000 Zara stores globally started selling pink scarves. 500,000 pink scarves were dispatched – to be exact. They sold out in 3 days. How did such lightning fast stocking of pink scarves happen?

Customer insights are the holy grail of modern business, and the more companies know about their customers, the better they can innovate and compete. But it can prove challenging to have the right insights, at the right time, and have access to them consistently over time. One of the secrets to Zara’s success includes using Radio Frequency Identification Technology (RFID) in its stores. The brand uses cutting-edge systems to track the location of garments instantly and makes those most in demand rapidly available to customers.

Zara’s super-efficient supply chain

Zara’s highly responsive, vertically integrated supply chain enables the export of garments 24 hours, 365 days of the year, resulting in the shipping of new products to stores twice a week. After products are designed, they take around 10 to 15 days to reach the stores. All clothing items are processed through the distribution center in Spain, where new items are inspected, sorted, tagged, and loaded into trucks. In most cases, clothing items are delivered to stores within 48 hours. This vertical integration allows Zara to retain control over areas like dyeing and processing and have fabric-processing capacity available on-demand to provide the correct fabrics for new styles according to customer preferences.

Standardization of product information: Zara warehouses have standardised product information with common definitions, allowing quick and accurate preparation of designs with clear manufacturing instructions.

Manufacturing approach: Zara uses a “make and buy” approach – it produces the more fashionable and riskier items (which need testing and piloting) in Spain, and outsources production of more standard designs with more predictable demand to Morocco, Turkey and Asia to reduce production cost. The more fashionable and riskier items (which are around half of its merchandise) are manufactured at a dozen company-owned factories in Spain (Galicia), northern Portugal and Turkey. Clothes with longer shelf life (i.e. the one with more predictable demand patterns), such as basic T-shirts, are outsourced to low cost suppliers, mainly in Asia. Even when manufacturing in Europe, Zara manages to keep its costs down by outsourcing the assembly workshops and leveraging the informal economy of mothers and grandmothers.

 

 

Market Expansion strategy of Zara: Zara followed polycentric marketing.

The EPRG framework explores four different orientations to internationalization:

 

 

• Ethnocentrism: where the company’s approach is determined by its domestic practices.
• Polycentrism: where the company pursues the strategy that is best suited to the host market.
• Regiocentrism: where countries that share economic, cultural or political similarities are grouped in regions, and the company adopts an approach specific to those regions.
• Geocentrism: an approach driven by the company’s global mindset, and which serves global needs and wants.

 

 

Depending on geographica region, Zara utilizes their own subsidiaries, joint ventures,as well as franchising for their entry in targeted territory.The majority of zaras store are company owned and rest are franchaise or joint venture.

Zara in China:

After its Spanish home market, PRC is Zara’s most important market. After its initial opening of a Shanghai flagship store in 2006, the brand took off quickly and had 120 stores by 2011.

It now has over 500 and it thought to be planning another 60 store openings in 2016. However, Zara faces stiff competition from other global brands keen to snatch market share in this important region. Key competitors here include H&M and Uniqlo.

Zara’s using local manufacturing to keep the supply chain short and maintain its cost leadership strategy in PRC.

 

 

Zara in India:

Market regulation requires that foreign brands find a majority partner to operate in India. Zara partnered with retail giant Tata Group to approach the Indian market in a 51:49 minority partnership.

General lack of retail space is also constraining expansion: there are few new malls for Zara to open sleek new stores in, making it difficult to decide where to cite new locations. Where Zara was able to open stores in major cities, the brand combined western and local clothing styles to offer a variety of lines to all customer tastes.

Zara now has 22 outlets in India, and the lack of commercial property suggests that adding more stores may be a struggle. In 2020, though, Zara opened its largest store

In both India and China, Zara finds itself taking a defensive position against major rivals. Clearly, the brand’s strategy is working so far despite the constraints it faces, including a lack of property to expand into in India.

 

Sustainability has been a hot topic in business for the last decade and is now quickly becoming a must-have hygiene factor for companies that want to resonate with and win the loyalty of its global customers. For Inditex, this means having a commitment to people and the environment.

Commitment to people: Inditex ensures that its employees have a shared vision of value built on sustainability through professional development, equality and diversity and volunteering. It also ensures that its suppliers have fundamental rights at work and by initiating continuous improvement programs for them. Inditex also spends over USD 50 million annually on social and community programmes and initiatives. For example, its “for&from” programme which started in 2002 has enabled the social integration of people with physical and mental disabilities, by providing over 200 stable employment opportunities across 15 stores.

Commitment to environment: Being in a business where it taps on natural resources to create its products, Inditex makes efforts to ensure that the environmental impact of its business complies with UNSDGs (United Nations Sustainable Developmental Goals). Inditex has pledged to only sell sustainable clothes by 2025 and that all cotton, linen and polyester sold will be organic, sustainable or recycled.

Need for marketing strategy to evolve: As discussed above, Zara does not engage in advertising and instead uses its store locations as a marketing strategy. However, brand communication is crucial in attracting new customers to the brand to support its growth. Without advertisements, Zara relies heavily on word of mouth or social media. This causes the perception of potential customers towards Zara to be heavily shaped by family and friends, which may not be accurate. In addition, Zara’s social media platforms such as Facebook and YouTube exists merely as a feed for updates rather than a platform that consumers can interact with. Its videos on YouTube are also seeing very low viewership in comparison with its follower count, which is not ideal as videos are a powerful medium for brands in the fashion industry. This is a gap that Zara needs to plug immediately as the reach and impact of social media marketing gets stronger. As Zara’s target customer segments start using more social and digital platforms for communication and for sharing their lives, it is important for Zara to have a strong presence on such platforms.

Family business planning and succession: With various technological and business disruptions in the past decade, leadership in the 21st century will be influenced by constant change, geopolitical volatility, and economic and political uncertainty. For Zara’s first 36 years in business, the brand has been controlled by its founder Amancio Ortega, who is currently 83 years old. In 2011, Ortega passed the Chairman title on to Pablo Isla, Zara’s Deputy CEO since 2005. Industry analysts predict that Zara is set to be succeeded by his 35-year-old daughter, Marta Ortega, who is currently senior creative consultant for all Zara Woman’s collections.

To effectively manage the above disruptions, Zara’s next generation leadership needs to step up to the succession planning challenge by being resilient in staying true to the brand promise to consistently produce “freshly baked clothes” for its fashion-forward consumers, and by balancing both short-term (profitability) and long-term goals (growing the business and reaching more consumers). More importantly, despite Zara’s global reach and consequent product standardization, it needs to constantly find new ways to serve local fashion needs and preferences of its consumers across the globe. This will be a challenge for the brand’s leadership in the next decade.

Conclusion: Take Zara’s cue and listen to your customers

The Zara brand was born with a keen eye on its customer – its ability to understand, predict and deliver on its customers’ preferences for trendy fashion at affordable prices. In addition to its effective supply chain, the brand’s ability to have its customers co-create designs is unique and provides it with a competitive advantage. Most fashion trends often start unexpectedly, originate from uncommon places and grow out of nowhere. With reference to the pink scarf trend mentioned above, it could have been that Hollywood actress Scarlett Johansson had worn a pink scarf to a charity gala the evening before in Los Angeles, or golf star Michelle Wie had showcased a pink scarf at a celebrity tournament in Asia. The fact that Zara was able to quickly jump on to this trend and provide hundreds of customers with the pink scarves they desperately wanted to buy.

In a world swamped with Big Data, and yet more collected at an even more rapid pace than before, brands still need to be careful and observant. Big Data does not provide answers to all business challenges, and it may be too hyped to be considered as the Holy Grail.

One of the secrets behind Zara’s global success is the culture and the respect for the fact that no one is a better, authentic trendsetter than the customer himself or herself – and this philosophy needs to be continually reflected in all its business strategies going forward..