SWAMI KESHVANAND INSTITUTE OF TECHNOLOGY,

MANAGEMENT AND GRAMOTHAN

MARKETING LAB ASSIGNMENT (PBM)

Activity : Brand Equity Analysis of ‘ZARA’

Program : MBA-II

Course : Marketing Lab (PBM)

Code : M-323

Session : 2021-22

Submitted To : Dr. Atul Gupta

Date : 25th December, 2021

Submitted By: Aman Chitkara.

BRAND EQUITY ANALYSIS OF CERTAIN BRANDS

Plenty of brand leaders have disappeared because they lost brand equity, that
intangible quality that keeps customers coming back. Take Sears, for example.
The company was formed in 1893, and throughout the 1980s, it was America’s
largest retailer. Then Sears lost its ranking to Walmart in 1991. It continued to
decline, and now the brand has filed for bankruptcy and closed hundreds of
stores.

Sears isn’t a one-off example. There are hundreds of more brands that rose and
fell in a similar way — think about BlackBerry, Polaroid, and Toys “R” Us.
This will happen even more as disruptive companies enter the marketplace
and shorten the lifecycles of some of the world’s largest brands.

But there is hope! To retain your strong brand, follow these five brand equity
examples of companies that have maintained both customer loyalty and
financial success.

Here’s how they’ve done it.

While other retailers are struggling or have disappeared, Walmart’s brand

value continues to rise, making it one of the largest retailers in the world. The
58-year-old brand can attribute its success to staying true to its positioning as
the low-price retailer. And this positioning goes all the way back to the first
Walmart that opened in Arkansas in 1962.

To set his business apart from the existing brand leaders, Sears and Kmart, Sam
Walton focused on serving rural and suburban areas and keeping costs low.

His low-price position paid off, and the company steadily grew throughout the
state, region, and country and then went international. And Walton’s business
model of finding ways to keep costs as low as possible has endured. The brand
has implemented a cost-effective supply chain management process and
minimized its operating costs. It’s even been reported that Walmart executives
fly coach and share hotel rooms to keep costs down.

The brand has always communicated its low-price positioning to customers. For
example, take a look at the company’s first ad for its grand opening. While not
the prettiest, it does communicate the message that you’ll get discounted prices
at Walmart because its policy guarantees it.

While the ads have improved over the years, its low-price message is always
present. For almost 20 years, Walmart’s slogan was “Always Low Prices.”
When research showed Walmart saved American families $2,500 each year,
it changed the slogan to “Save Money. Live Better” in 2007.

The brand’s positioning as the low-price retailer is clear, and it has loyal
customers because they know exactly what to expect from the brand. You can’t
argue with the results.

Walmart has grown from a single store in Arkansas to almost 11,500 stores in
27 countries. The brand ranks 8th in Brand Finance’s annual report of the 500
most valuable and strongest brands, and it ranks no. 23 on Morning
Consult’s 2019 list of most loved brands.

Walmart is a great example of why it’s important to differentiate your brand

against competitors in consumers’ minds and maintain that brand consistency.

Netflix Keeps Its Brand Relevant

Netflix is a perfect example of a company that knew it needed to innovate to

stay relevant in customers’ lives. Today, Netflix is the leading on-demand
media brand with almost 193 million subscribers across the globe. But in 1997,
it was in the DVD-by-mail business.

Netflix’s former VP of Product Management Gibson Biddle says that at its core,
the company’s goal was to give customers “Movie Enjoyment Made Easy.” In
the early 2000s, the brand provided that by offering thousands of DVD options
that it delivered straight to customers’ mailboxes. Customers didn’t have to go
to a store and hope that the title they wanted was available, and there would be
no late fees to pay.

Then in 2007, Netflix made movie watching easier when it launched its
streaming service. It allowed customers to stream up to 1,000 TV shows and
movies on their computers, and it grew its subscribers by almost 20% to 7.5
million.

From there, the brand continued to innovate its product to make watching
movies easier for customers. It partnered with technology providers to stream
content to subscribers’ TVs and phones. It allowed multiple people to use one
account. It provided the ability to download content to watch when Wi-Fi and
cell service weren’t available, and it made recommendations for content you’d
like based on what you had previously watched.

It even began creating its own TV shows and movies, for which it’s won both
Emmys and Academy Awards.
Netflix is a brand equity example that shows that continuing to innovate is the
key to staying relevant. The brand currently ranks 73rd on Brand Finance’s
Global 500, up six spots from the 2019 report, and it was the fourth most
relevant brand on Prophet’s 2019 Brand Relevance Index. Meanwhile, its
original DVD competitor, Blockbuster, no longer exists.

Starbucks Maintains Brand Consistency

From its beginnings as a single coffee bean store in Seattle in 1971, Starbucks

has grown into the world’s largest coffeehouse chain by providing its customers
with consistent offerings.

From its branding to the taste of its beverages, when customers see the green
twin-tailed siren logo, they know they’ll receive a consistent experience. Their
drink will taste the same and come in a white branded cup with their name – or
something resembling their name – on it, whether they’re at the Starbucks down
the street or across the globe.

“No matter if I am in Toronto, Las Vegas, London or Grand Rapids, the

experience is consistent,” wrote sales expert Tibor Shanto for The Globe and
Mail. “All satisfying my expectations, Starbucks provides a predictability I find
worth paying a premium for.”

While consistency is key, the brand also stays relevant by simplifying the
coffee-buying experience. Through its app, customers can pay, place mobile
orders so their drinks are waiting when they arrive in-store, and receive free
beverages.

Today, Starbucks ranks 28th among Brand Finance’s Global 500 most valuable

and strongest brands.
Pro-Tip: Brand management software like Frontify helps brands maintain
consistency with a cloud-based Brand Guidelines, design collaboration
platform, and Digital Asset Management solution. Read about how Brand
Finances’ 91st strongest brand, Vodafone, uses Frontify to increase consistency
across its organization.

J. Crew Forgot About Its Customers, but Zara Didn’t

Around since 1983, America’s preppy brand J. Crew was “arguably the
most popular clothing brand in the US in the 2000s.” Celebrities from Michelle
Obama to Taylor Swift wore its clothes. The company’s revenue tripled from
2003 to 2013, and there were fashion blogs dedicated to celebrating the brand.

But all the acclaim caused the company to face an identity crisis and mark up its
prices. It forgot its typical customers were middle-class consumers, not New
York fashionistas. In 2014, it suffered a net loss of almost $658 million. The
company filed for bankruptcy this year.

As its then-CEO Mickey Drexler said in an interview, "We became a little too
elitist in our attitude." He told The Wall Street Journal, "We gave a perception
of being a higher-priced company than we were — in our catalogue, online, and
in our general presentation. Very big mistake."

Retailer Zara has experienced its fair share of celebrity love. The future Queen
of England is frequently photographed sporting its clothes and causing them to
sell out, but Zara hasn’t changed its prices or forgotten its customers. In fact, it
focuses on giving its customers what they want: a frictionless shopping
experience where they can get the hottest trends at affordable prices. As a result,
Zara customers visit the store up to six times a year, while the norm for other
retailers in the contemporary market is two to three times a year.
Per a 2018 write-up in Forbes, “For Zara, it is all about the customer—
experiences for the customer, exchange with the customer, Evangelism through
the customer, and being every place for the customer.”

The brand has maintained its positioning as quality, affordable fashion. As a

result, Zara currently ranks 128th on the list of most valuable brands and is 29th
on Interbrain’s best global brands.

Coca-Cola Keeps Advertising to Stay #1:

Dating all the way back to 1892, Coca-Cola is currently the largest beverage
company in the world. With its longevity and leadership status, you might think
the company has cut back on advertising, but the opposite is true. Coca-Cola
has made a yearly commitment to large ad spends. Between 2015 and 2020, it
spent an average of $4 billion each year to market its drinks to consumers
around the world.

Its ad spending and strategy give it a competitive advantage and increase brand
awareness and brand equity among consumers.

Coca-Cola currently ranks as the 34th most valuable global brand on Brand
Finance’s Global 500, while its primary competitor, Pepsi, trails at 92.

These Brand Equity Examples Show Maintaining Brands Takes Effort

It takes a lot of effort to build a strong brand and develop intangible qualities
that keep customers coming back. As these brand equity examples show, you
can’t just build a brand and then forget it. Strong, valuable brands know the
brand-building process is ongoing. To stay on top, think about your positioning,
stay relevant, provide consistent experiences, focus on your target audience, and
maintain brand awareness.
 Brand equity can be defined as “the tangible and intangible value that a brand
provides positively or negatively to an organization, its products, its services,
and its bottom-line derived from consumer knowledge, perceptions, and
experiences with the brand” (Gunelius, n.d.). Additionally, Aaker defines brand
equity as “a set of assets and liabilities linked to a brand, its name and symbol,
that adds to or subtracts from the value provided by a product or service to a
firm and/or that firm’s customers” (Aaker & Joachimsthaler, 2009). And
specifically, according to the American Marketing Association, brand equity is
the value of the brand from a consumer’s perspective (Gunelius, n.d.).

Therefore, based on the above definitions, an appropriate brand equity

measurement system will incorporate the following aspects:

 The tangible and intangible value of a brand

 That are derived from a consumer’s perception of the brand
In order to establish the intangible value of Zara’s brand equity, the Aaker
model will be used. The Aaker model incorporates the following elements
(Aaker, 1996):

 Brand awareness
 Perceived quality
 Brand associations
 Brand loyalty
 As well as other brand associations
A tangible value represents the benefits that can be quantifiably measured, and
therefore in order to establish a tangible value for the brand, a brand valuation
should be used (Merriam Webster, n.d). Based on the above, a brand equity
measurement system will be proposed that incorporates both Aaker’s model to
measure the intangible aspects of the brand, as well as brand valuation tool in
order to measure the tangible financial value of the Zara brand.

BRAND EQUITY MANAGEMENT SYSTEM OF ZARA:

The proposed brand equity measurement system focuses on key features that
would affect Zara, where they operate within the fast-fashion industry, and brief
examples will be provided on how their performance would be in each category.
Additionally, brief examples will also be provided on how the proposed
strategies for Zara can fit in with this measurement system. The basis of the
recommended brand equity measurement system is that it is suitable to the
performance of Zara operating within the fast-fashion industry as it addresses
the factors that contribute to Zara’s brand equity.

Brand awareness refers to the salience of a brand in the mind of a consumer

(Aaker, 1996). Where the different levels of awareness include recognition,
recall, top-of-mind, brand dominance, brand knowledge and brand opinion
(Aaker, 1996).
Zara is often referred to as the top fast-fashion brand in the world, and as a
result have high brand awareness amongst consumers and therefore this
measure can be used to positively increase Zara’s brand equity (Loeb, 2015).
Additionally, the proposed strategies aim to increase brand awareness of the
Zara brand, so that it becomes the dominant brand in consumer’s minds when
they think of the fast fashion industry.

Perceived quality refers to consumers’ perceptions about the relative quality of

a brand, and therefore it generally needs to use a competitor as a frame of
reference (Aaker, 1996). A key aspect of Zara’s strategy is for their products to
be perceived as high quality, affordable fashion, where many consumers
actually perceive the quality of Zara’s products to be high compared to the price
they are paying as well as compared to other fast-fashion competitors (Bailey,
2015). Thus by having a high perceived quality, this can positively impact
Zara’s brand equity. Additionally, by offering the proposed strategy of the
virtual fitting room, Zara have the opportunity to increase the perceived quality
of the brand.
Brand associations refers to anything that connects a customer to the brand,
including the imagery that is unique to a brand, where three different
perspectives with which to associate the brand include the value, brand
personality as well as organisational associations (Aaker, 1996; Aaker &
Joachimsthaler, 2009). The proposed strategies aim to positively impact the
brand associations for consumers of the Zara brand, for example, in regards to
the E-commerce website, the aimed associations are; the ease of use for
consumers and the benefit of ordering from the comfort of their own home. The
aimed associations of the sustainability initiatives include; environmentally
conscious and sustainability. Additionally with the virtual dressing rooms, the
aimed associations are; an innovative and memorable experience.
Brand loyalty refers to consumers’ decisions to repeatedly purchase from a
brand over time (Gunelius, n.d.). As previously mentioned, Zara provide limited
quantities of each item they offer which creates an artificial scarcity, which as a
result, motivates consumers to visit the store regularly as well as purchase items
when they see them which in turn creates brand loyalty. Additionally, the
proposed strategy of virtual fitting rooms provide unique in store experiences as
well as the proposed brand extensions are aimed at achieving a sustainable
competitive advantage as well as brand loyalty.
Other brand associations refer to the associations that are strongly and
specifically linked to a brand which allow them to differentiate themselves from
their competitors (Aaker, 1996). Other brand associations for Zara can include
anything that consumers relate to the brand, for example, their efficient value
chain, or their fast supply of trendy fashions.
A tangible value represents the benefits that can be quantifiably measured, and
therefore in order to establish a tangible value for the brand, a brand valuation
should be used (Merriam Webster, n.d)
There are many ways that a company is able to quantifiably value a brand. This
includes various methods such as cost-based, market-based and income-based
(Brand valuation, n.d.). According to IFRS, a company is required to apply their
accounting policies consistently for similar transactions unless a standard states
otherwise (IFRS, 2012). Zara used the cost-based method to value intangible
assets, and therefore in order to financially value the Zara brand; this method
will need to be applied (Inditex, 2015).

The ultimate aim of this proposed brand equity measurement system is to asses
the Zara’s brand equity from an external perspective (the consumers
perspective) as well as an internal perspective (financial value), in order to
create a meticulous and coherent measure of Zara’s brand equity. The proposed
brand equity measurement system is also essential in identifying whether the
proposed strategies actually provide Zara with a sustainable competitive
advantage that they did not have previously.

SWOT ANALYSIS OF ZARA:

STRENGHTS
‘ZARA’ is Inditex’s first as well as the most profitable brand. The reason that it
has become a major hit in the world of fashion is because it could manage to
defy conventional wisdom. ZARA’s fast fashion model and its astounding
success are often discussed in the form of case studies in major business
institutions.  The fashion brand has adopted a unique model and also found a
unique balance between demand and supply. While on the one hand, you will
always find something new in its stores, on the other, there is no overstocking.
The result is that the stocks always remain fresh and the brand creates a sense of
urgency among its customers. Something you can see on the shelves today,
might not remain available the next week. Unlike most fashion brands that have
limited fashion cycles, ZARA is able to bring several fashion cycles with the
help of a highly integrated supply chain and a highly skilled team of fashion
designers.
– Strong supply and retail network:-
Inditex, the parent company of ZARA has adopted a integrated business model.
Using IT and other model technologies, it has created a system that facilitates
easy flow of communication and data. It makes information sharing and
collaboration easier. Higher interconnectedness also means faster flow of raw
materials and ideas as well as greater flexibility. Higher flexibility is a core
feature of ZARA’s supply chain. Its high level of integration and flow of
communication helps bring new designs to the market in as less as 15 days.
Inditex factories are supplied by more than 1800 suppliers and through higher
level of integration; it has controlled costs and brought higher efficiency to its
business model. Apart from that, ZARA’s retail network has also expanded a lot
in the recent years. Its number of retail stores has reached 2,251, as of Jan,
2018. Apart from that, as of Nov, 2018, ZARA’s commerce network is reaching
48 markets.
– Investment in technology and innovation:-
ZARA is making large investments in information technology, AI and other
modern technologies to bring greater efficiency in its supply chain and retail
network. Apart from the RFID technology which will enable better inventory
management inside the stores, it has invested in IT. IT tools enable better
information sharing as well as higher flexibility and enable the conversion of
ideas into products faster. ZARA’s growth is also a result of its focus on
innovation throughout its value chain.
– Affordable Pricing strategy:-
Another key strength of ZARA that has helped it to grow its customer base and
revenue faster is its pricing strategy. ZARA is among the affordably priced
brands by Inditex. It has released some higher priced brands too that cater to the
higher end of the market. ZARA’s pricing strategy and its affordable designs
are targeted at the youth and drive higher footfalls and conversion inside the
ZARA stores. In fact, the pricing strategy of ZARA is the charm of its business
strategy. People want high fashion and ZARA makes it available to them
created from cheaper fabric but equally attractive. This strategy has been
driving higher loyalty and popularity. Moreover, people can buy new fashion
regularly, since one does not have to spend a fortune each time. Overall, ZARA
has been able to create a win-win situation successfully for its customers and
itself.
– Fast increasing sales:-
ZARA’s sales have grown fast driven by its excellently integrated offline and
online retail channel. It has expanded fast globally in the recent years. ZARA’s
total number of physical stores is now past 2100. The highest numbers of them
are in Spain followed by China. Based on its pricing and customer service
strategy as well as attractive designs which are the main drivers of its demand, it
has acquired global fame and success which can make any other fashion brand
jealous.
-Highest focus on customer service and customer experience:-
ZARA is also known for its customer service. The brand has strengthened its
value proposition through exclusive focus on customer service and convenience.
It has strategically opened its retail stores in areas that attract highest number of
footfalls. These attractively designed retail stores are also equipped with
technology to make shopping more convenient. ZARA trains its employees to
provide better customer service. The brand-customer relationship is valuable for
ZARA and by focusing on customer service; it has been able to create higher
loyalty and retention rate. Using RFID technologies in its stores to track the
location of its garments, ZARA makes the products its customers are looking
for available to them instantly.
WEAKNESSES
– Low presence in some fast growing markets:-
In several of the fast growing markets including India and Malaysia, the number
of ZARA stores is low. Number of ZARA stores in India is just 20 (Jan, 2018),
Malaysia 10, Thailand 11 and New Zealand has just one store. This is much less
compared to the number of ZARA stores in USA, UK, China, and Russia, Spain
or several more European and American nations. India is an attractive market
for fashion brands where expanding ZARA’s retail presence would be
profitable.
– Less aggressive about marketing and sales:-
Compared to most of its rivals, ZARA has been less aggressive about marketing
and promotions. Instead of trying to push sales by advertising heavily, it tried to
pull customers by responding to their taste and needs. In this way, ZARA
created strong recognition without marketing. However, this has also led to
higher competitive pressure not just for ZARA but for the entire Inditex group.
In the coming years, if the pressure continues, ZARA might be forced to invest
in marketing to drive sales and to expand its customer base.

OPPORTUNITIES
– AI for better customer experiences:-
While ZARA’s focus has always been to provide the best in class customer
service to its customers, it can improve its customer service further by investing
in AI, virtual reality and other similar technologies. Being customer oriented is
highly beneficial for any brand in this era. However, these modern technologies
can turn shopping into a much better experience.
– Investment in marketing:-
ZARA can grow its customer base and sales by investing in marketing and
promotions. Till now it has been known to invest very small sums in marketing.
However, with competitive pressure rising, investing in marketing can be good
for ZARA and help it increase its sales and customer base further.
– Expansion of retail channels:-
ZARA can expand its retail channel to several corners of the world including
the fast growing Asian markets like India. While it has an impressive presence
in China, in other markets like India, Malaysia and Singapore, it still does not
have an extensive retail presence. India can be a highly profitable market for
any fashion brand. Apart from being the fastest developing country, it is also a
large market with immense potential.

THREATS
– Competitive threat:-
Competitive threat in the fashion industry is growing intense. It is creating
pressures related to sales and marketing on ZARA. While, it has a strong brand
image and supply chain as well as retail network, ZARA is facing intense
competition from several brands.
– Regulatory threats:-
Legal and political regulation of the business industry has grown high. Around
the world, governments and legal agencies are regulating businesses including
those in the fashion industry. There is a large set of rules of regulations to be
complied with in the fashion industry too. From labour to quality and other
several areas, there are laws to be complied with. These laws differ from market
to market and from nation to nation. High level of regulation can become a
roadblock to fast growth.
– Rising cost of raw materials: –
Costs of raw materials have kept rising. It has managed a well-integrated supply
chain that caters to its needs for raw materials successfully. However, rising
costs of raw materials and labour can raise the operational costs of the brand.
This can negatively affect the revenue and profits of the brand.
 CONCLUSION:
ZARA is a celebrity fashion brand that enjoys high customer loyalty and
popularity. Apart from an integrated value chain, focus on customer service and
investment in technology is also a key strength of the brand. ZARA’s retail
network has also grown fast in the recent years rising to past 2200. It has also
extended its online presence to 48 online markets. ZARA is eyeing faster
growth in the coming years and investing in new technologies to improve its
customer experience. The brand’s fast fashion model has been hailed worldwide
as effective. Its large group of designers are creating fashion day and night to
keep the designs inside the stores up to date. Moreover, focus of ZARA is on
the modern generation and latest trends. It reflects in its store designs as well as
fashion trends. However, despite its strong image and large size, there are
challenges ahead. ZARA must ready itself to face these challenges. Moreover,
investing in modern technologies and increasing its investment in marketing
will also help the brand grow faster and achieve better results. The good thing
about ZARA is that rather than trying to create a business brand, it invested in
building a customers’ brand- something that each of its customers could connect
with and feel proud of. Customer satisfaction became a core focus of its
business model and that’s how it was able to achieve astounding success and
global recognition.

The Zara Case Study and the Activity System Map

The Zara case study shows how Zara’s different activities fit. To visualize the
strength of fit between activities, place the activities on a map.

 Start by placing the key components of the value proposition.

 Make a list of the activities most responsible for competitive advantage
 Add each activity to the map. Draw lines wherever there is fit: when the
activity contributes to value proposition, or when two activities affect each other
Here’s an example for IKEA:

A densely interconnected activity map is a good sign. A sparsely connected map

shows weak strategy.

The activity map isn’t useful just for description of your current strategy. It can
also be used for ideation for new strategies. Can you see how Porter’s Zara
case study applies to these strategies?
 Can you improve fit between activities? 
 Can you find ways for an activity to substitute for another?
 Can you find new activities or enhancements to what you already do?
 Are there new products or features you can offer because of your activity
map, that rivals will find difficult to emulate?
Case Study: Zara
Porter’s Zara cast study examines the strategy of Zara. Fast fashion brand Zara
is another strategy powerhouse. It aims to get styles from runway to store within
weeks, price affordably, and refresh its stores’ inventory every 2 weeks. The
Zara case analysis shows that to achieve this, it shows tailored activities and
strong fit:
 A larger design team (double that of H&M’s) quickly translates
innovative fashion seen in high fashion and clubs into affordable designs. This
reduces time from inspiration to production. 
 It does its own manufacturing in Europe, instead of outsourcing to Asia.
This reduces shipping time and allows for tighter control of quality.
 It owns its own delivery trucks, optimized for frequent shipments to
stores.
 Garments are delivered ticketed and hung on racks (instead of folded and
boxed), costing more to deliver but reducing time to hitting the store floor.
 It rents large stores in high-traffic places, attracting natural foot traffic.
This also reduces normal advertising costs.
 It adds new styles to stores in limited quantities every 2 weeks,
encouraging a high rate of return and compulsive shopping to buy before
they’re gone.
Once again, observe how a rival clothing brand would find it very difficult to
compete in fast fashion without adopting the whole set of activities. It might try
to design clothes quickly, but without all the reinforcing activities in
manufacturing and logistics, its new inventory would arrive in stores ready to
sell far later than Zara. The Zara case analysis proves why outsourcing works
for them.

Implications for Outsourcing

The philosophy of core competences has led companies to focus on one key
activity and outsourcing many others, without thinking through the strategic
consequences.

Instead, the activities that have fit and are tailored to the company’s position
should not be outsourced. The fewer elements that are in the company’s value
chain, the fewer opportunities there are to establish tailoring, trade-offs, and fit,
meaning the less defensible the competitive advantage. 

(Short form note: this contributes to how manufacturing becomes a commodity

– there are few value added activities beyond pure production, which then
becomes a competition on price.

Continuity of Strategy

The last component of strategy is continuity. Companies need breathing room to

hone their activities and develop competitive advantage over time. Strategy isn’t
a stir fry, it’s a stew – it takes time for the flavors and textures to develop.
 The richly developed strategies of IKEA or Southwest took years,
decades to hone. 
 Strategies often begin with 2 or 3 essential choices, then adding
additional activities to extend the fit.
Continuity strengthens a company’s position in three ways:

 Branding and customer relationships: customers will know what the

company stands for, and what needs they can and can’t meet.
 Partners: suppliers, channels, and complements learn to contribute to a
company’s advantage.
 Dell had suppliers co-locate warehouses nearby
 (Short form example: Amazon works with manufacturers to
repackage goods in shipping-friendly forms)
 Team and internal culture: hiring for cultural fit and training employees
improves. People make better decisions that fit company strategy
It takes years to implement a strategy. Switching strategies too often is value
destroying, causing whiplash in the org and dismantling of value chains.

Maintaining Strategy
Continuity doesn’t mean an organization should stand still. As long as there
is stability in the core value proposition, there should be innovation in how it’s
delivered. The consistency of delivery and supply shown in the Zara case study
proves how important this is.
First, companies must stay on the frontier of operational effectiveness. You
must assimilate best practices that do not conflict with your strategy or
cause negative trade-offs. Think about how Zara might accomplish a faster
supply chain than competitors in the Zara case analysis.
 BMW embraced OE improvements to decrease design time, but stopped
short of steps that would remove its unique design language.
 Second, you must change whenever there are ways to extend your value
proposition or better ways to deliver it.
 Reuter started with spreading market information through pigeons, then
moving onto telegraph and the Internet.
 Netflix began with direct to customer movie DVDs, then switched to
Internet streaming as soon as it became feasible.
The Zara case study can help you understand the implications of outsourcing,
and weigh costs and benefits to your plan. If outsourcing or manufacturing
questions are a part of your business strategy, Porter’s Zara case study is a great
example.

ZARA’s Communication Material:

"It hardly even has a marketing department, and it doesn't engage in flashy
campaigns, as its competitors do, teaming up with fashion designers like Stella
McCartney, Karl Lagerfeld, Martin Margiela and Marni," wrote the New York
Times "Zara's designers are completely anonymous; some would say this is
because they are copiers rather than designers. The marketing [parent company]
Inditex does do is all about real estate. The company invests heavily in the
beauty, historical appeal and location of its shops."

This here says it all.

‘Zara usually selects the best located and most expensive real estate locations in
the world to open its flagship stores’- Wikipedia.

This is the strategy, Zara are not the most original people we know its why most
of their designers are not known. But how have they managed to be known
across the world? The place they open their stores does their marketing.
They have people search for the best spots to place their stores, places that are
known for fashion, places that the big fashion brands have already settled in.
And with these they gain popularity by association. And most of their products
will be cheaper than those of their competitors surrounding them, yet with
almost the same design. What will people chose? The secret is to choose a spot
where people will flock to buy their products, a classy place to satisfy those
who buy names and affordable for most people of their location.
They will learn about the environment they will put their store in, understand
what people of that place like the most and then use it to capture their attention.
Another thing is that they will make their stores grab your attention with their
flash designs, it is these little details they pay attention to that drive people to
their stores.

Zara has made its name as one of the fastest growing brands in fashion retail.
three-fourth of the revenue of Inditex (Parent company of Zara) comes from the
Zara stores, making the owner one of the richest persons in the world. His net
worth is over $70 billion.

Now here is what makes Zara different from other fashion retails and highly
successful in the business.
1. Zara is a fashion follower:

If we divide the fashion retailers into two categories, fashion leaders and
fashion followers, Zara is definitely the latter. There is huge risk associated with
being a fashion leader. Fashion leaders come up with new ideas, new trends,
which if successful make them money, if not then it is a disaster. Zara on the
other hand build upon what is already in fashion. For ex. if a celebrity wears a
dress on a show and people liked it, then they will be the first one to come up
with the product in market.

2. Make less sell more:

Zara carries a very low inventory as compared to other brands say like Benetton
or H&M. It affects Zara sales in two ways.

First, Fashion industry is very sensitive to trends. No one knows what is going
lesser number of manufactured products mean lesser markdown (Markdown is
the percentage of clothes that the store is forced to sell at lower price because it
is unsold and no more in fashion). Markdown for Zara is around 15–20.
Second advantage of making less is that it leads to stock out sometimes in the
stores. The store does lose on revenue here but it also sends a message to the
customer that if he doesn’t buy in time he might not get the item and the
customer has to hurry up he wants the item for sure from next time.

3. Quick response:

As i said earlier, being a fashion follower, Zara is always quick to respond to

new trends in market, but how do they do it?

While most of the players in fashion industry outsource their manufacturing to

Asia for cheap labour and production cost, Zara still manufactures a major
chunk in Spain and other neighbouring countries. The one sole purpose of doing
so is to reduce response time. They can move the products to market more
quickly if the production is near the retailers. The cycle time of production of
Zara is unmatchable and only a few Japanese players were able to match it.

They loses out on logistics cost as most of the time they have to send half-filled
cargo in order to be quick

4. Positioning:

Zara has success fully positioned itself as Value for money and high fashioned
garments in the industry. People love this positioning.

The Zara brand strategy

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

The secret to Zara’s success has largely being driven by its ability to keep up
with rapidly changing fashion trends and showcase it in its collections with very
little delay. From the very beginning, Zara found a significant gap in the market
that few clothing brands had effectively addressed. This was to keep pace with
latest fashion trends, but offer clothing collections that are a combination of
high quality and yet, are affordable. The brand keeps a close watch on how
fashion is changing and evolving every day across the world. Based on latest
styles and trends, it creates new designs and puts them into stores in a week or
two. In stark comparison, most other fashion brands would take close to six
months to get new designs and collections into the market.

It is through this strategic ability of introducing new collections based on latest

trends in a rapid manner that enabled Zara to beat other competitors. It quickly
became the people’s favourite brand, especially with those who want to keep up
with fashion trends. Founder Amancio Ortega is famously known for his views
on clothes as a perishable commodity. According to him, people should love to
use and wear clothes for a short while and then they should throw them away,
just like yogurt, bread or fish, rather than store them in cupboards.

The media often quotes that the brand produces “freshly baked clothes”, which
survive fashion trends for less than a month or two. Zara concentrates on three
areas to effectively “bake” its fresh fashions:

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 (e.g.
specific spring/ summer or autumn/ winter collections, recent trend that is
catching up, sudden popularity of an item worn by a celebrity/ socialite/ actor/
actress, latest collection of a top designer etc.). While many retailers try to
forecast what customers might buy months in the future, Zara moves in step
with its customers and offers them what they want to buy at a given point in
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 becomes. Another benefit of producing
lower quantities is that if a style does not generate traction and suffers from
poor sales, there is not a high volume to be disposed of. Zara only has two time-
bound sales a year rather than constant markdowns, and it discounts a very
small proportion of its products, approximately half compared to its
competitors, which is a very impressive feat.

More styles: Rather than producing more quantities per style, Zara produces
more styles, roughly 12,000 a year. Even if a style sells out very quickly, there
are new styles waiting to take up the space. This means more choices and higher
chance of getting it right with the consumer.

Zara only allows its designs to remain on the shop floor for three to four weeks.
This practice pushes consumers to keep visiting the brand’s stores because if
they were just a week late, all the clothes of a particular style or trend would be
gone and replaced with a new trend. At the same time, this constant refreshing
of the lines and styles carried by its stores also entices customers to visit its
shops more frequently.

In the following sections, the key components of Zara’s winning formula in the
fashion retailing industry are illustrated.

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. Additionally, it helps to reduce inventory costs, provides greater
flexibility to launch new designs, and allows fulfilment of online orders with
stock from stores nearest to the delivery location thereby reducing delivery
costs.

Another secret of Zara’s success is that the brand trains and empowers its store
employees and managers to be particularly sensitive to customer needs and
wants, and how customers enact them on the shop floors. Zara empowers its
sales associates and store managers to be at the forefront of customer research –
they intently listen and note down customer comments, ideas for cuts, fabrics or
a new line, and keenly observe new styles that its customers are wearing that
have the potential to be converted into unique Zara styles. In comparison,
traditional daily sales reports can hardly provide such a dynamic updated
picture of the market. The Zara Empire is built on two basic rules: “to give
customers what they want”, and “get it to them faster than anyone else”.

Due to Zara’s competitive customer research capabilities, its product offerings

across its stores globally reflect unique customer needs and wants in terms of
physical, climate or cultural differences. It offers smaller sizes in Japan, special
women’s clothes in Arab countries, and clothes of different seasonality in South
America. These differences in product offerings across countries are greatly
facilitated by the frequent interactions between Zara’s local store managers and
its creative team.

In the fashion world, a trend starts small, but develops fast. Zara employees are
trained to listen, watch and be attentive to even the smallest seismographic
signals from their customers, which can be an initial sign that a new trend is
taking shape. Zara knows that the quicker it can respond, the more likely it is to
succeed in supplying the right fashion merchandise at the right time across its
global retail chain. Zara has set up sophisticated technology driven systems,
which enable information to travel quickly from the stores back to its
headquarters in Arteixo in Spain, enabling decision makers to act fast and
respond effectively to a developing trend. Its design teams regularly visit
university campuses; nightclubs and other venues to observe what young
fashion leaders are wearing. In its headquarters, the design team uses flat-screen
monitors linked by webcam to offices in Shanghai, Tokyo and New York (the
leading cities for fashion trends), which act as trend spotters. The ‘Trends’ team
never goes to fashion shows but tracks bloggers and listens closely to the
brand’s customers.
The fact that Zara’s designers and customers are inextricably linked is a crucial
part of the brand strategy. Specialist teams receive constant feedback on the
decisions its customers are making at every Zara store, which continuously
inspires the Zara creative team.

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 centre 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.
It also eliminates the need for warehouses and helps reduce the impact of
demand fluctuations. Zara produces over 450 million items and launches around
12,000 new designs annually, so the efficiency of the supply chain is critical to
ensure that this constant refreshment of store level collections goes off smoothly
and efficiently.

Here are some of the characteristics of Zara’s supply chain that highlight the
reasons behind its success:

Frequency of customer insights collection: Trend information flows daily into

a database at head office, which is used by designers to create new lines and
modify existing ones.
Standardization of product information: Zara warehouses have standardised
product information with common definitions, allowing quick and accurate
preparation of designs with clear manufacturing instructions.

Product information and inventory management: By effectively managing

thousands of fabric, trim and design specifications and their physical inventory,
Zara is capable of designing a garment with available stock of required raw
materials.

Procurement strategy: Around two-thirds of fabrics are undyed and are

purchased before designs are finalized so as to obtain savings through demand
aggregation.

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.

Distribution management: Zara’s state-of-the-art distribution facility functions

with minimal human intervention. Optical reading devices sort out and
distribute more than 60,000 items of clothing an hour.

In addition to these supply chain efficiencies, Zara can also modify existing
items in as little as two weeks. Shortening the product life cycle means greater
success in meeting consumer preferences. If a design does not sell well within a
week, it is withdrawn from shops, further orders are cancelled and a new design
is pursued. Zara closely monitors changes in customer preferences towards
fashion. It has a range of basic designs that are carried over from year to year,
but some in-vogue, high fashion, inspired by latest trends items can stay on the
shelves for less than four weeks, which encourages Zara fans to make repeat
visits. An average high-street store in Spain expects customers to visit thrice a
year, but for Zara, the expectation is that customers should visit around 17 times
in a year.

This expectation for such a high frequency of repeat visits is evidence of Zara’s
confidence that it is keeping on top of changing consumer needs and
preferences and is helping them shape their ideas, opinions and taste for fashion.
In reality, Zara is also helping in giving birth to new trends through its stores or
even helping in extending the longevity of some seasonal styles by offering
affordable lines.

Sustainability at the core of Zara’s operations

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. The company also runs Join Life, a scheme which helps
consumers identify clothes made with more environmentally friendly materials
like organic cotton and recycled polyester.

Additionally, Inditex takes wide-ranging measures to protect biodiversity,

reduce its consumption of water, energy and other resources, avoid waste, and
combat climate change. For example, it has outlined a Global Water
Management Strategy, specifically committing to zero discharge of hazardous
chemicals. It has also been expanding its waste reduction programme through
which customers can drop off their used clothing, footwear and accessories at
collection points in 2,299 stores in 46 markets today.

Zara’s culture: The word “impossible” does not exist

Zara has a very entrepreneurial culture, and employs lots of young talent who
quickly climb through the ranks of the company. Zara promotes approximately
two-thirds of its store managers from within and generally experiences low
turnover. The brand has no fear in giving responsibility to young people and the
culture encourages risk-taking (as long as learning happens) and fast
implementation (the mantra of fashion).
Top management gives its store managers full liberty and control over their
store’s operations and performance with clearly set cost, profit and growth
targets with a fixed and variable compensation scheme. The variable component
amounts to up to half of the total compensation – making store level employees
heavily incentive-driven.

In addition, once an employee is selected for promotion, his or her store

develops a comprehensive training program for that individual with the human
resources department, which is followed up by periodic supplemental training –
reflecting Zara’s commitment to talent development. The organizational
structure is also flat with only a few managerial layers.

Customers are the most important source of information for Zara, but like any
other fashion brand, Zara also employs trend analysts, customer insights
experts, and retains some of the best talents in the fashion world. The creative
team of Zara comprises of over 200 professionals. They all embody and enact
the corporate philosophy that the word “impossible” does not exist in Zara.

For example, while many companies struggle with long lead times in
discussions and decision making, Zara gets around this challenge by getting
various business functions to sit together at the headquarters and also by
encouraging a culture (through structures and processes) where people
continuously talk to each other. The sales and marketing teams who receive
trend feedback talk regularly with designers and merchandisers. It is important
that there is constant two-way communication so that sales and marketing teams
can talk about new lines to customers and designers / merchandisers have a
strong visibility of customers’ needs and preferences enacted at a store level.
The production scheduling is also closely coordinated so that there is no time
wasted on approvals. The design team structure is very flat and focuses on
careful interpretation of catwalk trends that are suitable for the mass market –
the Zara customer. The design and product development teams, who are based
in Spain, work closely to produce 1,000 new styles every month.

Besides being customer centric, another important reason why Zara’s employee
strategy is so successful is the fact that it empowers its staff to make decisions
based on data. Zara has no chief designer. All its designers are given
unparalleled independence in approving products and campaigns, based on daily
data feeds indicating which styles are popular.

Due to the unwavering focus on the customer, the entire business model is
designed in such a way that the pattern of needs for the finished goods dictate
the terms of the production process to follow, instead of having the raw
materials determine the nature of the production process – something that is
very rare in multinational companies of similar scale.

In sum, the entire brand culture is extremely customer-centric, which has been
and continues to be a significant contributor to Zara’s success.

The Zara brand communication strategy

Zara has used almost a zero advertising and endorsement policy throughout its
entire existence, preferring to invest a percentage of its revenues in opening new
stores instead. It spends a meagre 0.3 per cent of sales on advertising compared
to an average of 3.5 per cent by competitors. The brand’s founder Amancio has
never spoken to the media nor has in any way advertised Zara. This is indeed
the mark of a truly successful brand where customers appreciate and desire the
brand, which is over and above product level benefits but strongly driven by the
brand experience.

Instead of advertising, Zara uses its store location and store displays as key
elements of its marketing strategy. By choosing to be in the most prominent
locations in a city, Zara ensures very high customer traffic for its stores. Its
window displays, which showcase the most outstanding pieces in the collection,
are also a powerful communication tool designed by a specialized team. A lot of
time and effort is spent designing the window displays to be artistic and
attention grabbing. According to Zara’s philosophy of fast fashion, the window
displays are constantly changed. This strategy goes down to how the employees
dress as well – all Zara employees are required to wear Zara clothes while
working in the stores, but these “uniforms” vary across different Zara stores to
reflect socio-economic differences in the regions they were located. This
effectively communicates Zara’s focus on the mass market, yet another detail
that reflects its close attention on the customer.

To tap into the emerging e-commerce trend, Zara launched its online boutique
in September 2010. The website was initially available in Spain, the UK,
Portugal, Italy, Germany and France, and was extended to Austria, Ireland, the
Netherlands, Belgium and Luxembourg. Over the next 3 years, the online store
became available in the United States, Russia, Canada, Mexico, Romania, and
South Korea. In 2017, Zara’s online store launched in Singapore, Malaysia,
Thailand, Vietnam and India. As a fast fashion retailer, Zara is definitely aware
of the power of e-commerce and has built up a successful online presence and
high-quality customer experience.

Zara’s future brand and business challenges

Charting a new digital strategy in the COVID-19 crisis: With its primarily

offline shopping experience, Zara has been hard hit by global store closures
amid the COVID-19 crisis in 2020, with sales falling 44% year-on-year in Q1
2020 and the company reporting a net loss of USD 482 million. Inditex has
announced that it will be closing between 1,000 to 1,200 stores worldwide,
focusing on smaller ones in Asia and Europe. While online sales have been
encouraging – Zara’s online sales for Q1 2020 grew 50% – it is not enough to
mitigate the damage.

Amancio Ortega plans to spend USD 1.1 billion scaling up its digital

strategy and online capabilities by 2022 and a further USD 2 billion in stores to
improve integration between online and offline for faster deliveries and real-
time tracking of products. Its goal is for online sales to constitute at least 25% of
total sales. To achieve this goal, Zara will need to think of new ways to engage
its customers digitally, not just through its online store, but through online
communities and social media.

Mobile commerce: Zara woke up late to the potential of mobile commerce and

needs to catch up fast with competitors. Different forms of market analysis
strongly point towards a scenario wherein spends on mobile commerce will
overtake desktop based ecommerce by 2021. On an average, most brands
currently get about 15-20% of their website traffic via mobile devices and this is
growing rapidly. With the deluge of investments planned in the mobile
commerce space and Zara’s competitors already having an advantage on the
mobile front, Zara needs to quickly make mobile shopping not only an effortless
experience but also a delightful one.

Price is not an advantage anymore: Offering the latest fashion lines at

affordable prices continues to be a strategic advantage for Zara, but cannot
continue to be the only one. Across the world, and closer to home in Europe,
competitors are cutting prices and refining their business models to cut the
competitive advantage that Zara has. Swedish fast fashion retailer H&M, which
is placed #30 just behind Zara on Interbrand’s list, launched an online store in
Spain in 2014 to take own Zara in its home turf. Again in its home market, it
now faces increasing competition from brands like Mango, which cut prices and
started focusing on fashion segments in which Zara enjoyed popularity. In
addition to H&M and Mango, other competitors like Gap and Topshop are all
fighting for a share of the fast fashion retail market pie. Also with the rise of e-
and m-commerce, the number of indirect competitors has mushroomed. We
now have online fashion aggregators that bring in multiple brands under one
single online platform and cut through borders and price segments. Some
examples of such aggregators who are doing well include Lyst, Farfetch, spring
and Yoox Net-a-Porter.

For Zara to effectively compete and maintain its strategic advantage, the focus
needs to shift away from price but towards quality. Even today the Zara brand
enjoys high levels of appeal, which is evident by the serpentine queues outside
its stores when it launches in new markets. There is a need for Zara to start
investing in building a strong brand positioning and aggressively communicate
it. Additionally, Zara needs to adopt, imbibe and leverage social media and
digital platforms in its advertising and communication strategies deeper going
forward.

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 platform 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 85 years old. In
2011, Ortega passed the chairman title on to Pablo Isla, Zara’s Deputy CEO
since 2005.

Succession is currently taking place at Inditex and generational transfer will

empower the next generation in one of the wealthiest business families in the
world. Pablo Isla, chairman of Inditex since 2011, steps down in April 2022,
and 37-year-old Marta Ortega will take over as chair in the company that her
father Amancio Ortega started with his ex-wife Rosalia in 1975 in Galicia,
Spain. Marta Ortega is the youngest of Amancio Ortega’s three children.

Marta Ortega will become a non-executive chair, and will head the Inditex
group, the portfolio of companies including supervision of strategic operations.
She has been with Inditex for over 15 years, starting out working in a Zara store
at King’s Road in London, and as an assistant at the portfolio brand Bershka. In
recent years, Marta Ortega has been involved in strategy, brand building and
fashion proposals for the Inditex portfolio of brands.

Marta Ortega will not be involved in daily management of the financial

performance to shield her and the family from too much public exposure.
Amancio Ortega has always been known for appearing less in public and
avoiding any media exposure. His photo did not appear in the Inditex annual
report until 2000. Marta Ortega seems to be more open to media interviews and
public appearance, and granted her first interview with Wall Street Journal in
August 2021.

Óscar García Maceiras will be appointed CEO of Inditex in April 2022 and will
run the daily business. He joined Inditex in March 2021 and is currently general
secretary of Inditex and secretary of the board.

The sharing of executive powers between the chair and the CEO to enhance
corporate governance has historically been less common in the corporate world
in Spain but is often seen in Europe and elsewhere. Inditex will therefore return
to dual leadership in April 2022 with Marta Ortega as chair and García
Maceiras as CEO, the very same structure that ran for six years with Amancio
Ortega as chairman and Pablo Isla as CEO until 2011.

Despite working at Inditex for over 15 years, Marta Ortega Pérez does not hold
an office. Her father, Amancio Ortega, never had an office either and always
preferred to work in an open space in the fashion design department to be close
to teams around him.

To effectively manage the above changes, 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.

So, why not consult your customers for a start? Zara always does.