Professional Documents
Culture Documents
Zara Marketing Plan
Zara Marketing Plan
MBA
Programme
Spring 2010
Zara- Case
Study
Known for its fast,
affordable fashion, retail
chain Zara has built up a
multi-billion dollar brand
through listening and
reacting quickly to its
customers
Presented to: Professor Dr.
Nabila Abass
Presented by: Roula Jannoun
Contents
Contents
Introduction and Background
Zara's marketing strategy
Unified marketing approach
Vertical integration
Zara's five-point marketing approach to reach its customers
Company history
Zara's products-Manufacturing and distribution
Zara: Taking the Lead in Fast-Fashion
BASIC BLACK. Operation/Expansion Key Success/Failure
Factors Learning Points and Recommendations
Fast Fashion: ZARA - Zara doing what it does best,
Fast Fashion
Customer Profiles- Positioning Strategy - Differences in
Marketing Strategies for the Different Customer Segments
Segmentation Strategy - Targeting Strategy- Positioning
Strategy
- Differences in Marketing Strategies for the Different
Customer Segments
Zara's competitiveness
Conclusion
Reference
Appendix of the Case Study attached
Zara is a popular Spanish clothing store that uses a very unique marketing
strategy. Because they do not outsource their manufacturing, the company is
able to more quickly respond to fluctuating customer demands in fashion
trends. Zara's Unique Selling Proposition (USP) is to create or imitate the
latest trends within a short two-week period; the new styles are available on
sales floors for no longer than 4 weeks. In the case that a product does not sell,
its inventory is immediately pulled from the floors and discontinued after one
week.
Zara is said to have the "most unusual strategy...its policy of zero advertising;
the company preferred to invest a percentage of revenues in opening new
Because items move so quickly through Zara stores, customers feel the
pressure to buy an item for fear that it may not longer be there next time.
Known for its fast, affordable fashion, retail chain Zara has built up a
multi-billion dollar brand through listening and reacting quickly to its
customers.
At a time of uncertainty in global stock markets, there is increasing emphasis
on the brand equity of companies, particularly as many decide whether to
decrease spending or cushion a fall with continued brand investment. One
company that doesn't have to worry too much is global fashion retail chain
Zara. It joins household names like Google, Apple, Amazon and Nintendo as
one of the fastest-rising brands on the highly regarded Interbrand Best Global
Brands listing for 2008.
Zara achieved 62nd place this year, a jump of just two places from last year
but representing a 15pc increase in its brand value. Interbrand takes many
factors into account when ranking the 100 companies on the list, including
revenue attributable to the brand (derived from analysts' reports and company
information) and the brand's ability to sustain future revenue.
With such rapid expansion and a massive global market presence it's easy to
see why a unified marketing approach is the most viable option.
"It was not an easy move at the beginning, especially since communication is
such an important branch of the business. The decision was made that Zara
would no longer talk about itself (through mass marketing campaigns), but
would instead let the customer talk about it and so increase brand awareness
through word of mouth.
It works.
Zara's rise continues unabated, with the result that it is now present in almost
every continent. The company is currently concentrating on a line of
expansion from Poland to Japan. "This is where Zara have room to grow". It
follows the company's strategy to prioritize Europe as its No 1 growth market,
followed by Asia.
Keeping a hands-on approach is very much part of the Zara ethos. "The most
important item is the store [rather than the market.
Each customer must be heard and we take care of every store as if it were
the first one
Again, a consolidated marketing effort makes sense in this regard as trying to
keep control of individual marketing activity in every single location would
prove a tall order to say the least.
Success depends on following the strategy to the letter, however, "It's about
having the same image, the same customer service, the same specific way of
doing things.
The result is customer satisfaction. You must pursue the same policy in every
single store, you can't afford to have gaps. That's Zara’s philosophy."
All Zara stores receive new product twice a week. This compares favorably
with many of the chain's competitors, which usually receive new styles just
once or twice each season. The fact that new stock arrives so frequently has
several benefits. Most importantly, it encourages customers to come back
regularly and, because styles are only available for a limited period, it
promotes a sense of exclusivity.
The process starts with an order from the store manager. Thanks to the
logistics system, the time between receiving the order at the distribution centre
and delivering the goods in store is, on average, 24 hours for Europe and 48
hours for the remaining stores.
Zara has resisted the industry-wide trend towards transferring fast fashion
production to low-cost countries. Perhaps its most unusual strategy was its
policy of zero advertising; the company preferred to invest a percentage of
revenues in opening new stores instead.
Company history
The founder of Zara, Amancio Ortega, opened the first Zara store in 1975 in a
central street in A Coruña, Galicia. Its first store featured low-priced
lookalike products of popular, higher-end clothing fashions. The store
proved to be a success, and Ortega started opening more Zara stores in Spain.
During the 1980s, Ortega started changing the design, manufacturing and
distribution process to reduce lead times and react to new trends in a quicker
way, in what he called "instant fashions". The company based its
improvements in the use of information technologies and using groups of
designers instead of individuals.
Zara's products
As of 2007 Zara stores have men's clothing and women's clothing, each of
these subdivided in Lower Garment, Upper Garment, Shoes, Cosmetics and
Complements, as well as children's clothing (Zara Kids). Currently their
sizing on women's clothing goes to a US size 12 or a UK size 14 or extra
large.
50% of the products Zara sells are manufactured in Spain, 26% in the rest of
Europe, and 24% in Asian and African countries and the rest of the world.
So while some competitors outsource all production to Asia, Zara makes its
most fashionable items -- half of all its merchandise -- at a dozen company-
owned factories in Spain and Portugal, particularly in Galicia and northern
Portugal where labour is cheaper than most of Western Europe. Clothes with a
Zara's success is all the more surprising because at least half its factories are in
Europe, where wages are many times higher than in Asia and Africa. But to
maintain its quick inventory turnover, the company must reduce shipping time
to a minimum. The fast-fashion approach also helps Zara reduce its exposure
to fashion faux pas. The company produces batches of clothing in such small
quantities that even if it brings out a design that no one will buy -- which
happened during an unseasonably warm autumn in 2003 -- it can cut its losses
quickly and move on to another trend.
"As well as keeping sales high throughout the year, it also keeps margin-
stripping markdowns to a minimum,"
Operation/Expansion
There are three basic international expansion strategies as entry modes: own
subsidiaries, joint ventures and franchising.
Zara adopted the first strategy for most European and South American
countries which are perceived to have high growth potential and low business
risk.
The second strategy is adopted for expanding the business in Germany, Italy
and Japan. Franchising is adopted on high risk countries such as Saudi
Arabia, Kuwait and Malaysia. Which among this expansion strategy is used
in penetrating the Lebanese market?
Zara is also often one step ahead of the high-fashion ready-to-wear brands by
providing similar garments made with less expensive fabric so prices are
much lower.
A huge 480,000 square metre warehouse is able of handling 60,000 items per
hour, processing orders twice a week to all parts of the world.
Zara’s product managers are in constant contact with the stores, seeking
customer feedback and monitoring the popularity of items. They know within
a day or two whether or not a product is successful.
Zara sources fabric, other inputs, and finished products from external
suppliers. It has purchasing offices in Barcelona and Hong Kong. This gives
Zara a competitive advantage towards the costs of goods sold, as it can
purchase from both Europe and Asia according to prices. Buying more from
China in the future might reduce even more the costs of goods sold.
This gave Zara further competitive advantage, in terms of both cost and
Zara does not compete on price. The usual Zara customer is not very price
sensitive. Zara rather competes on fashion they can only do that by having
that quick response capability.
All the production was fully under control of Inditex. Vertical integration
helped reduce the bull whip effect: the tendency for fluctuations in final
demand to get amplified as they were transmitted back up the supply chain.
Zara could originate design and have finished goods within four to five weeks
for entirely new designs and two weeks for restocking or modifying existing
products vs. six months for other competitors.
Customer Profiles
A typical Zara customer as identified by the company is a person who is up to
date with the latest developments in the fashion industry and wants
fashionable, trendy and unique outfits at affordable prices. The customer can
be a man, a woman, a teenager or even a child who is interested in being up-
to-date. As Zara has its origins in Spanish fashion and is primarily and
European fashion brand, the customers of Zara also are also heavily
influenced and moved by European fashion. Aside from this a typical Zara
customer can belong to any social strata and demographic segment as Zara
caters to a wide range of tastes.
Segmentation Strategy
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.
Zara did not face the two basic barriers for going globally which are:
1. Costs: that Zara did not incur when entering a new market, as the
company does not have extraordinary advertising expenses to create
brand recognition.
2. Logistics: which involve being ahead of the curve, volume, SKUs, and
delivery points; all are the same in every store which allows the
company to take better advantage of real estate opportunities regardless
of the market the company is in.
A short lead-time is important for Zara to be able to offer the latest fashion
in store at all time.
The reduction in transportation time by having the whole production close to
the market give Zara a big lead-time advantage compared to its competitors,
In the fashion industry the customer's demand changes rapidly, and what the
customers finds fashionable today might be impossible to sell tomorrow.
Therefore, to base the future revenue on always offering fashionable clothes
depends on good predictions of customers future preferences. The chance for
a miss prediction is quite big and knowing that there is a chance of ending up
selling the whole collection on discount, or not be able to sell it at all, the
prediction of the next fashion has to be prepared carefully.
Zara's short lead-time gives a higher chance for a more accurate predicting the
next fashion. This makes them able to meet the customers demand and offer a
higher level of fashionable clothes in their stores. It also makes it possible for
Zara to have a higher turnover and continuously refresh its stores with new
fashion twice a week, this comparing to many of the competitors that refresh
their store once a session. Knowing that there will always be new designs in a
Zara store, customer will visit the store more frequently leading to more sales.
The reduction in lead-time does more than improving the forecasting. It also
decreases the level of inventory, which conduct to release of capital locked up
in stock, reduce the cost of holding it and the risk of stock going out of date.
The above model clarifies the huge advantages gained by Zara as a result of
their reduced business cycle. Not only does Zara attain higher customer
satisfaction as they are quickly able to respond to their feedback and needs,
but also Zara manages to highly decrease its operating costs as a result of
decreased inventory held and thus lower level of risk when new models are
introduced.
However it is difficult to decide that Zara will not step down because there is
always uncertainty in the market and the degree of certainty in planning
decreases over time but as long as the company continues to maintain the
philosophy of adapting to the market and operates from the bottom up, it will
not be dropped out.