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ZARA HOMES PRODUCT ASSORTMENT STRATEGY: ADVANTAGES AND DESADVANTAGES RETAIL: PURCHAISING AND SUPPLY CHAIN MANAGEMENT BUS020N570Y

BY: EUGENIO PAVON GUTIERREZ PAV11326752 09/12/2011

TABLE OF CONTENTS 1. INTRODUCTIONP3 2. MAIN BODY..P4 Zara Homes target market and interior store perspectiveP4 Zara homes product assortmentP5 Advantages and disadvantages of narrow and deep product assortment.P7 3. CONCLUSION...P8 4. BIBLIOGRAPHY..P9

INTRODUCTION The Group Inditex is one of the world largest fashion distributors, which offers eight varieties of brands in order to satisfy different types of customer fashion demands and needs. However, this paper will focus on Zara Home, which specializes in home fashion and decoration with the purpose of satisfying consumer trends. Zara Home aims to offer the latest trends in home decoration each season (2010, p36). Through the findings carried out by a survey of the purchasing strategy, at Zara Home store located in Westfield London (UK) along with further research, this paper will provide strategic issues, which are used by retailers in order to persuade buying decisions. In addition, a description of the product assortment of Zara Home based on retail theory will be provided, whilst critically analyzing the advantages and disadvantages of its product assortment strategy. The main focus of this essay will be the analysis of Zara Home product assortment in order to present possible solutions to help managers make assortment decisions by understanding the complexity of a particular merchandising strategy.

MAIN BODY Zara Homes target market and interior store perspective The fashion industry is one of the most dynamic industries worldwide; with new product trends, consumer demands and continuously rising competition. Therefore, Zara Homes retailers hold an important role in the implementation of the retail strategy. According to McGoldrick (2002, p188) The merchandising strategy is a key element within the retail mix. The selection of a range of products represents the target market, how customers needs can be satisfied and the product differentiation regarding its competitors. This may be translated as the image of the brand. The target market of Zara Home is aimed to the majority of all socio-economic groups, which makes it difficult to analyze the target customer. Recent evidences (Microsoft Advertising, 2011, p6) show that the main age group of furniture and home wear buyers are between 35 - 49 followed by 25 - 34 years old category with 32% and 24% respectively. Because of this, the brand tries to attempt more than one market segment by offering a variety in quality, such as middle and top-line items for middle and upper-income shoppers. Zara Homes customer commitment is to provide a wide variety of items designed to appeal to each customers taste, interesting home fashion trends and improving the look and style of the home with affordable prices. Having considered Zara Homes target market and customer needs, the focus moves to the group perception regarding store image and store atmosphere as a good marketing communicator. The physical characteristics of the products are generally not high quality and sophisticated in comparison to other competitors such as The White Company. As a result, they may not be able to price products higher to attract more wealthy customers. Nevertheless, Zara Home offers basic ranges at affordable prices, alongside a limited premium range in some home wear and textiles. On the other hand, the store interior design has a pleasant environment with a free form and the layout of the shop creates a relaxing

atmosphere. However, from the consumers perspective there would appear to be no real structure regarding the layout. For instance, pictures frames and vases are mixed up with cushions and throws. Consequently, The Zara Homes selling environment may be attracting less potential customers and not maximizing their purchases within the store. Clearly, visual merchandising is not something they invest highly in. As a result, Zara Home may need to focus on a more cost-effective use of visual merchandising as other competitors do (McMoldrick, 2002).

Zara homes product assortment Obtaining the total product offering in terms of width and depth, is an important task for Zara Home managers. To obtain this product range Zara Home managers have to deal with meeting customer demands alongside the need to reach selling expectations. According to Cox and Brittain, (1996: 97) there are six variables that need to be considered in order to make decisions about what product range should be included in order to maximizing sales and profits: 1. 2. 3. 4. 5. 6. Type Quantity Price Quality Time Place

On the other hand, retailing concern is not just choosing the right products, but selling them as well. Furthermore, there is other variable, which may be considered which is how consumers perceive the product range (Aspfors, 2010). This can be helpful for retail managers in order to develop an appropriate merchandising strategy. To fully understand

the term product assortment, the mix of merchandise must be examined applying Berman and Evanss explanation of the theory, which considers the width and depth of product range, which the retailer must carry in order to give customers a proper selection (2010: 392-402): 1. Width: How wide or narrow are the stock selection of a variety of different product

categories. 2. Depth or Breadth: Is it a Deep or Shallow stock assortment (selection of merchandise

that a retailer carries of a variety of functions), which describes the selection of one particular class of product in brand, size, price, color and style variation.

The product mix of Zara Home may be categorized as narrow and deep: It has few categories (furniture and home decoration) and a large assortment in each. Zara Home has a considerable range of products for bedroom, bathroom, living room tablewares, accessories, and home wear. Zara Home specializes in furniture specifically in the home decoration market. It has a deep product assortment due to the different subcategories that Zara Home offers to its customers with roughly an average of six different product lines. These products differ in terms of color, size and price. From the Zara Home website, a clear example can be taken: Furniture and Home decoration category: Living room between eleven categories. Subcategory: Ashtrays and incense holders between 16 subcategories. Product line: Carmen ashtray, Paisley Ashtray and twenty-eight more. Rate price is

between 4.99 to 19.99 with different size, characteristics and colors.

Advantages and disadvantages of narrow and deep product assortment According to Berman and Evans, by having a narrow and deep product assortment, Zara Home may cover the following advantages (2010: 398): A large line of product assortments offers an opportunity for a better match between an individuals preferences and the available alternatives of choice. As well, deep assortments facilitate choice, because it allows buyers the flexibility to change their minds when making future purchase decisions. In turn, shoppers may prefer it because it increases the perception of freedom of choice and may help to retain customer loyalty. Zara Home builds a clear imagine of the purpose of the brand with a narrow and deep assortment strategy, which enables them to match customer expectation and avoid customer dissatisfaction. Narrow and deep may be less costly in stocking and investing than wide and deep. Furthermore, the inventory control may be less difficult as well.

In contrast, offering a wide variety of items within a category may be confusing and overwhelming rather than beneficial. The variety may cause information overload such that customers feel overwhelmed, dissatisfied and consequently it can negatively affect customers purchasing decisions and choose not to make any purchase at all. In addition, being focused on one category, the product assortment strategy may be more susceptible to seasonal factors and trends. As a result, retailers must take into account large inventories during peak times and less stock during off seasons.

CONCLUSION Through Zara Homes product assortment strategy, which has been examined above, (Cox and Brittain, 2002: 97) the six rights of merchandising, namely: Type, quantity price, quality, time and place, need to be combined in order to achieve the needs and wants of the target customer. This exploration covers three main conclusions: Firstly, retail buyers should ensure that the customer is equipped to handle the variety range of product in order to reach customer satisfaction. Secondly, in order to generate more customer traffic and lift profit margins, products should be allocated in order to optimize the limited selling space. Lastly, retail buyers should manage external factors such as seasonal trends and powerful suppliers who might insist retail buyers in stocking a full assortment within a product line.

Bibliography

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http://www.inditex.es/en/shareholders_and_investors/corporate_governance/general_mee ting/gm_2010>, (Accessed: 26/11/2011)

McMoldrick P., (2002) Retail Marketing, McGraw-Hill Education. Maidenhead. Microsoft Advertising., (2011) Retail Furniture Insights March 2011 [pdf] Available at:< http://docs.google.com/viewer?a=v&q=cache:mujn2lrJ3OIJ:advertising.microsoft.com/uk/ WWDocs/User/enuk/ForAdvertisers/Retail%2520Furniture%2520Insights_March%25202011_external.pdf+ Retail+furniture+insights+2011&hl=en&gl=uk&pid=bl&srcid=ADGEESiY3ysebQTccECKRrvC COoRyf5OvXFdzo4ztn2fDM0PSwN95EY0z57A3YGYD9c-yBDCc6dgSVSgoojF_7ps4b8nskSPI4HIvuzLc07ZwHupHDDVBBIwe86gWw37LgBBP_hG6h4&sig=AHIEtbSxP9Rm65 ZeWQSjQJyJbfwQM3VyrQ> (Accessed: 21/11/2011)