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The Zara store in Melbourne

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Table of Contents

Introduction ................................................................................................................................................... 3
Organizational Background .......................................................................................................................... 3
Marketing Context ........................................................................................................................................ 5
Marketing Issues ........................................................................................................................................... 5
Suggested Methodology................................................................................................................................ 6
Possible Sources of Error .............................................................................................................................. 6
Conclusion .................................................................................................................................................... 7
Reference ...................................................................................................................................................... 8
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Introduction

There are many companies successfully running in the market (Car, Gallie & Corre,

2010). Zara Company is the one who designs the clothes in the field of fashion with the

exception not to use specific marketing strategy. In this paper, the marketing issue of “Zara’s

store in Melbourne” is identified and discussed along with demonstrating the problem in the

marketing context. Thus, the paper makes the identification of comprehensiveness of marketing

issues and proposes the methodology to investigate the problems of this organization. The next

section of the paper describes the background of this organization for better understanding to the

organizational issues in the context of marketing.

Organizational Background

Zara is a clothing retail store for women, men and children, concentrating sixty percent of

their effort to the women clothing market. Besides retailing, Zara also designs, produces, and

ships their lines of clothing to their Zara stores. Zara's corporate concept is to offer fashionable,

trendy, designs at a reasonable price (Car, Gallie & Corre, 2010). The key to their corporate

success is to offer the latest propensities and fashions by their participants. They suppose that,

they are in the fashion business, not the clothing business. As part of this corporate concept, the

stores try to hold very low levels of inventory, often having their entire inventory out on display,

in order to sell out and make room for the next wave of fashion. Their stores are located

transversely in the main commercial areas of cities across America, Europe and Asia, with their

base in La Coruna, Melbourne. The store locations are always located at prestigious, high-traffic

locales. Ever since the Zara’s store is opened in Melbourne, the store has been experiencing huge

crowd of customers but it was commented that the launch of Zara in Melbourne is not

compulsorily a high profile like other fashion stores in the city. Thus, it was forecasted that the
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Zara’s store in Melbourne that attracts wealthy demographic including Apple might not lead to

customer traffic because of weak retail environment of the store (Stafford, 2011).

Retailers have continued to put additional stress on designers and manufacturers for

lower priced items. In Melbourne, Zara's competitors for the most part, have followed the trends

to source product development and materials to cheaper foreign partners (Hildegunn 2006).

While there is a substantial cost advantage to be gained, particularly in manufacturing through

outsourcing, the effect on lead-times is severe (Car, Gallie & Corre, 2010). It is not distance that

causes replacement the times of lead to lengthen in global sourcing but the delays and variables

source by internal development at chain ends. The net result is longer ‘pipelines’ with more

inventories and the ever present risk of obsolescence. Same time, there have been go by many

traders to significantly reduce the number of suppliers with whom they do business (Torun,

2007). This supply-base rationalization has been driven primarily by the need to develop

receptive replacement systems. This is almost impossible when sourcing is spread in hundreds, if

not thousands suppliers (Capell, Kamenev & Saminather, 2006). Zara has three closest and

strongest competitors, which are GAP, H &M and Benetton. They have a narrower vertical scope

than Zara. Because Zara owns much production and stores that is advantageous when adapting to

demand quickly (Carmen, 2009). GAP and H&M own their stores but outsource production. The

GAP was doing quite well in the 80’s and 90’s, with their stance of unpretentious clothes.

However, their inability to expand internationally was due to pricing pressures, sizing

discrepancies and unusually long supply chains (Masa& Zara, 2001). This did not allow them to

compete in the fast fashion industry, they were crushed by an over abundance of unsold

inventory. In addition, due to lack of fashion positioning across their three chains, other

competitors were able to hurt their market share in the America.

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Marketing Context

The major problem faced by Zara is an unrealistic international growth strategy. Inditex

plans for 2002 included an addition of 55 to 65 Zara stores, 80% of them outside of Melbourne.

Zara accounted for two-thirds of the total sales across all its chains in 2001 and decisions about

Zara’s expansion would have important group-level implications. Zara’s ability to offer new

products quickly is strength in Melbourne and Western Europe; however, it can also be a

weakness (Torun, 2007). While Zara’s market share in Europe is very strong, its marketplace

contribute to the United State is minimal with approximately 25 stores. Its biggest competitor,

Sweden’s H&M, has one hundred stores in the U.S. Zara is incoming the emerging in Asian

markets (Masa& Zara, 2001).

Marketing Issues

Zara’s prices are very low for European consumers due to its integrated supply chain and

onshore production facilities throughout Melbourne. In the America and Asia, low price is

significantly higher because of tariffs and other related costs (retail prices in the U.S. were

approximately 60% higher than prices in Melbourne) (Capell, Kamenev & Saminather, 2006).

Without expanding the number of international distribution centers while continuing to expand

the number of stores, Zara faces the threat of losing its identity as the retailer of fast fashion at

low prices (Car, Gallie & Corre, 2010). Because of European production, as the dollar weakens,

Zara store in Melbourne will have greater difficulty realizing big profits. Other issues are Inditex

other stores as Bershka and it presents a threat as well in the form of cannibalism. Inditex’s

revenue growth rate was projected to be at 20%+ per annum. Pricing is market-based so

customers pay extra costs for supplying the products from Melbourne (Hildegunn 2006). The

rate of average prices was, 50% higher in European countries than in Melbourne, 100% higher in
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Japan and 60% higher in the United State. Traditional competitors pose threats, H&M, Gap, and

Benetton all are involved in global expansion initiatives. H&M also spends a great deal more

money on advertising and marketing than Zara, utilizing billboards, newspaper and magazine

advertisements by expansion of sales via the internet (Carmen, 2009). Zara is a European brand

and it initiated there but in the Melbourne, mostly people of Melbourne do not know about the

Zara’s brand. It is the big issue and it can be resolved by using the marketing strategies and

advertisement of the brand.

Suggested Methodology

For the marketing strategy, they can use advertisement strategy for the publicity of

Zara’s. Melbourne’s bodies do not well know about that brand quality and productivity (Capell,

Kamenev & Saminather, 2006). They lack Web Knowledge about brand media for the

advertisement. If Zara starts advertisement in the market so it productivity will be increased

more (Torun, 2007). In addition, Zara Company researchers should use SWOT analysis to focus

on the strengths and weaknesses internal differential when compared in an objective and realistic

competition and the opportunities and threats environmental cues.

Possible Sources of Error

Marketing strategy demonstrates the product in the market. Zara Company uses the

SWOT analysis to find out the threat of the company that is Zara's short cycle time reduces

working capital intensity and facilitates continuous manufacturing of new merchandise. The

weakness of the Zara is that the inventory costs are high for competitors as orders are located for

whole events in advance then held in allocation facilities pending periodic delivery to stores. The

strength of the Zara Company is well (Capell, Kamenev & Saminather, 2006). Zara’s business
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model is characterized by a highly integrated vertical structure and strict supply chain

management. This model is designed for structural flexibility and a belief that the clients should

approach in any company’s operational aspect. Melbourne city is the good opportunities to the

Zara to increase the productivity and make the customers. The model of Zara business highly

price aggressive, allowing it to offer mid-market chic at down-market prices. In addition, it

protects against missed forecasts, mistakes are easy to reverse since they are no more than 2 to 3

weeks forward (Torun, 2007). Zara produces 60% of its merchandise in-house, makes 40% of its

own textile and purchases dyes from its own supplementary. Their researchers use forecasting

strategy to check the market trend of the cloths in the world (Hildegunn 2006). (Capell,

Kamenev & Saminather, 2006).

Conclusion

This research shows the Zara’s stores in Melbourne are elegantly designed providing a

contented setting for the customer to come across fashion. Same time, it serves as a site for

getting the information wanted to regulate supplies in demand response. The suppliers’

proximity gives Zara great flexibility in adapting their product lines to market trends and

consumer behavior. The quick response to shifts in consumer demand decreases costs of holding

inventory. Zara gives store managers significant autonomy in determining which products to

display in their stores. Zara retail managers relay customer preferences and store trends back to

headquarters in Melbourne. Designers talk about the demands of the customers in the store

managers on the daily basis and they are trying to start the marketing strategy. Thus, this study

will help Zara store in Melbourne to improve its marketing strategy and gain maximum market

share.
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Reference

Capell Kerry, Kamenev Marina & Saminather Nichol. (2006). Fashion conquistador. Published

by business week. Pp. 17-67

Car Felipe, Gallie Jérémie & Corre Juan. ( 2010). Zara Uses Operations Research to Reengineer

Its Global Distribution Process. Published by The Franz Edelman Award: Achievement

in Operations Research. Pp. 23-56

Carmen Lopez, Ying Fan, (2009) "Internationalisation of the Spanish fashion brand Zara",

Journal of Fashion Marketing and Management, Vol. 13 Iss: 2, pp.279 – 296

Hildegunn K. Nordas, Enrico Pinali, Massimo Geloso. (2006). Gross Logistics and Time as a

Trade Barrier. Policy Working Papers, No. 35, OECD Publishing.

doi:10.1787/66422030887. Pp. 56-89

Masa, M.; Zara, J. (2001). The general variables concept: a simple step from single- to multi-user

environment. Published by Information Visualisation, 2001. Proceedings. Fifth

International Conference on UK. Pp. 34-67

Torun Fatma. (2007). ZARA - A European Fashion Brand. Published by GRIN Verlag. Pp. 56-

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Stafford, P., 2011. Zara launches in Melbourne, but flow-on effects to surrounding retailers may

be limited. [Online] Available at: http://www.smartcompany.com.au/property/20110615-

zara-launches-in-melbourne-but-flow-on-effects-to-surrounding-retailers-may-be-

limited.html [Accessed 10 January 2012].