IMPACT OF COVID-19 ON MARKETING STRATEGY ON

ZARA (fashion retailers)

About ZARA:
Zara is one of the world's largest international fashion companies. It belongs to Inditex,
the world's biggest fashion group. Zara is a Spanish clothing retailer based in Galicia,
Spain. Founded by Amancio Ortega in 1975, it is the flagship chain store of
the Inditex group, the world's largest apparel retailer.

Marketing Strategy of ZARA

Zara, with more than 6,500 stores and a growing presence online has managed to
thrive without going this traditional route. Zara rides the wave of what’s currently hot and
established to provide affordable copycat versions of high-end brands. And to appease
its teen and 20something demographic, the store prides itself on getting new designs in
stores within 2 weeks.

Zara Marketing Mix (4Ps) Strategy

Place:-
Since its foundation in 1985, ZARA has seen a lot of expansion and growth.
As per its 2017 Annual report, the brand is now selling across 96 markets. In
2020, it opened 524 new stores in 58 markets. As of 2020, it had 7,475 total
stores. Based on geographical regions, its market is divided into three
segments which include the Americas, Asia & ROW as well as Europe. The
number of stores in Americas was 805, in Europe, 5008 and in Asia & ROW
1,662. Zara, the flagship brand of ZARA had 2,251 stores in 96 markets and
46 online markets in 2017. These numbers have further increased in 22021
and Zara is now available across 48 online markets. In 2020, the ZARA group
focused its growth efforts to increase its online presence in Asia. It launched
its e-commerce platforms in Asia in India, Malaysia, Indonesia, Singapore,
Thailand & Vietnam. In China and Japan too, the group had some of the best
openings. Inditex brands opened their stores in 10 new Asian markets in
2017. The company is using an optimized mix of online and physical stores to
expand its global presence and to increase its sales.

Price:-
The pricing strategy of ZARA has played an important role in the growth and
expansion of its business. It is one of the most important pillars of its business
strategy. However, ZARA has tried to touch different customer segments with
different tastes through its various brands. Not all of these brands follow the
same strategy whether in terms of pricing or product design. Some of them
are targeted at the average middle class consumer while others are a bit pricy
and cater to the needs of the higher end consumer.

Zara, Bershka and Pull & Bear are affordably priced brands that are targeting
the middle class shoppers who want their fashion stylish but affordable. On
the other hand, Massimo Dutti and Uterque are targeted at the higher end
customers who are willing to spend more on their fashion.

Promotion:-
With regards to marketing and promotions, Inditex ZARA has never used
brand promotions aggressively to pull customers. It is known to maintain a
minimal ad spending. It still manages to promote its brands well but that too
without spending a fortune on marketing campaigns and advertisements.
However, it has taken care of certain things that are important for any great
brand which wants to become its customers’ favorite and retain them for
longer. It has managed a large team of expert fashion whose number exceeds
700. These people know their customers and their taste very well and bring
amazing designs that appeal to their customers. This is how the brand of Zara
has grown. Apart from quality, its prices and designs have also created the
necessary buzz in media. Inditex ZARA has grown very fast in a very small
period of time. It is now the largest fashion brand but has pulled this miracle
without investing in marketing. It used other channels for marketing. It
invested instead in good store designs and great customer service.

Inditex ZARA focused on providing its customers and immersive experience

that would engage them and grow their interest in the brand. So, instead of
trying to push sales, it focused on pulling customer by turning shopping into a
distinct and comfortable experience. The few channels that it used for
marketing were its own website, its e-commerce platforms and the social
media. The brand used social media and other free online channels to create
excitement and for running promotional campaigns. By creating a distinct
customer experience inside its stores, it was able to drive user loyalty high
and create a better brand image. A lot of the credit also goes to its brand
image, its store design and the great level of customer service. If you cannot
engage your customers well, it just remains a give and take relationship. Zara
instead built a string connection with its customers and the right atmosphere.
The rest channels that it used for promotions were sufficient and did not need
any penny in investment. So, in the world of marketing, ZARA achieved no
mean fit just by focusing on its customers rather than depending on great
advertising. However, to improve the customer experience further, it has
started investing in IT, AI and virtual reality to ensure that the customers have
an elegant and immersive experience.

People:
People are the strength of ZARA. The company has over 171,000 employees
and the brand has focused on their engagement as well as learning and
growth. ZARA is committed to fair and decent treatment of their employees
and have respect for labour and human rights. It has adopted responsible
practices with regard to ethics and code of conduct. Apart from that the
company also focuses heavily on team motivation and trains employees to
collaborate. The brand cares for occupational health and safety and trains its
employees to be careful regarding people’s health and safety at the
workplace. It ensures inclusive and equitable quality education for all its
employees.

Other important focuses at ZARA are gender equality and empowerment of

women. At the end of fiscal year 2021, the brand had people from 97 different
nationalities and who spoke 54 different languages. 75% of the Inditex
employees are women and just 25% men. Female leadership is one of the
key pillars of its business model and an important pillar of its success. The
composition of its workforce is also excellent in terms of generational diversity.
For managing its enormous human capital well, the brand has built a culture
that focuses upon teamwork, humility, diversity, sustainability and being open
to new ideas. It has a separate website called Inditex ZARA careers that it
uses to attract and retain best talent. Internally too it is focusing on
performance manage to prepare the fashion leaders of tomorrow. In 2017,
Inditex provided more than 2.1 million hours of training to its employees and
more than 93,000 people from more than 40 countries attended these training
programs. There are several kinds of programs including those meant for
training employees in languages, business management as well as fashion
and textiles. Total personnel costs of the brand reached 3.96 million Euros in
2017, rising from 3.64 million Euros in 2021. The average salary per full time
equivalent employee per year was 22,627 Euros.

SWOT analysis of Zara – Zara SWOT

analysis
One of the stores which gives marketers lessons on how to keep customers coming
back is Zara. It is the flagship brand of the Inditex group, which has more then 8 brands
and subsidiaries in its belt. Out of all these, the one brand driving a lot of revenue
towards Inditex is Zara.

Strengths in the SWOT analysis of Zara

Unique designs – One of the first and foremost advantages of Zara lies in its
design abilities. It has a plethora of designers on board who understand the
Zara brand and the psyche of the customers who visit Zara very well. The
clothes are elegant, superior quality and have fantastic finishing. They come
in a lot of varieties including party wear, office wear, for kids, for men and
women, casuals as well as several others. Even accessories are an integral
part of Zara wear.

Strong presence – Zara has kept expanding its presence across the globe.
On latest count in 2015, it had 2100 stores worldwide with an average sale of
15.9 Billion per annum. In 2016, it has expanded even further. If it has to
survive in retail, Zara has to keep expanding its presence and it is good to
know that the brand is doing exactly that.

Brand value – The brand is ranked number 53 by Forbes in its brand ranking
and is valued at a whopping 10.7 Billion dollars. There are several positive
points leading to the excellent brand equity of Zara. The performance over the
years and the consistent quality it has provided has given a boost to the brand
in recent years. Besides this, the brand has stayed away from controversies
and tried to stay humble even when it came across them. Such a healthy
culture has resulted in the brand being loved by its consumers over and over
again.
Superb supply chain – Zara is known to get its designs from conception to
the stores in 2 weeks whereas it takes other competitors minimum 6 weeks or
more, automatically making Zara the trendiest store which has the latest in
fashion. On an average, 450 million items are designed every year by Zara.
This naturally pushes the consumers to visit the store again and again to
check out the latest designs.

Design advantage – Zara has the reputation of launching 1000’s of new

designs every year across the globe. As a result, a customer who might visit
other stores twice or thrice a year to check out the latest in fashion, might
have to visit Zara every month to see whats new in Zara. Because of their
strong design advantage, the customer keeps buying fashion forward clothing
from Zara besides purchasing the basics from the brand as well. Some
customers dedicate their complete wardrobe to Zara clothing. All of Zara’s
designs are elegant yet trendy, and are loved by their customers.

Low cost and higher profits – Because of their design advantage and
fantastic physical evidence in stores, Zara rarely advertises its products. It
relies completely on its trendy image to pull the customers to its stores. This is
the reason that Zara has very low cost of operations and at the same time has
high margins. It spends most of its earnings and profits on backward
integration and on supply chain rather then spending it on Advertising.

Physical evidence of stores – Another strong positive of Zara is that the

service has very good physical evidence of the stores. Whenever you walk
into the store, you will get this open minded feeling instead of feeling cramped
like you do in other showrooms. Zara uses a wide and deep store layout so
that customers would love to walk around the store while picking up and trying
out their favorite designs.

Weaknesses in the SWOT analysis of Zara

Generalized collection – Zara does not specialize in anything and has

everything for everyone. One of the reasons that a customer shifts to a
competitor is when the competitor is focused on one thing. It might be shirts, it
might be pants, it might be dresses or party wear or whatever. Such
immediate focus is lacking in Zara and it is good for the day to day wear or
trendy wear.

Lack of advertising – While it may lead to a cost advantage and cost is one
of the strengths of Zara, the lack of advertising is a weakness because the
brand
can double its profit and its turnover by advertising its collection. It is known to
be a trendy fashion outlet and it can easily pull in more customers with
advertising which will generate a lot of positive word of mouth for the brand.

Low safety stock – A regret which Zara stores have is that stocks which are
fast moving rarely have a safety buffer behind it. Low inventory is kept at
Zara as a strategy to keep customers walking into the stores to check out the
latest items. But it also means that if a particular design is a hit with the
customers, it wont reach its potential because there is no safety stock or buffer
for this design.

Opportunities in the SWOT analysis of Zara

Online E-commerce – Zara can definitely take advantage of the online buying
trend and make its clothes available not only in its own stores but also on
other E-commerce stores as well thereby bringing a hike in sale.

Backing some flagship designs – One of the common traits of top brands is
that they have some designs which are flagship designs of their stores. This is
lacking in Zara and hence, there should be some designs which should
always be sold from a Zara store, bringing in great demand for these designs
and building even more brand identity for the brand.

Growing market potential – Wherever Zara is currently existing, he brand is

becoming more and more popular, thereby resulting in
growing market potential. A rise in earning potential of consumers results in
rise in demand for status symbols. Zara is one such status symbol in clothing
industry which consumers love to wear. Hence, Zara needs to capitalize on
the growing market potential of existing markets.

Market expansion – New markets will always give new business and
potentially profitable business to Zara. It needs to keep a constant eye on
emerging markets, where the spending power is rising and where people can
spend on a semi premium brand like Zara so that they can wear better and
more stylish clothing. Such market expansion insures the clothing brand
against saturation in developed countries where the competition is too high.

Threats in the SWOT analysis of Zara

Low advertising – Zara needs to ask this question to itself. Looking back, will
Zara think that it made a mistake by not advertising its unique brand
proposition
from the start? The way that Zara keeps rotating design, it can rope in a lot
more consumers if it advertises the fact that you will get the latest in designs
from Zara. But maybe, if its consumer base increases tremendously, coming
up with new designs and differentiating itself will become more and more
difficult. So, the debate of whether Zara should advertising or not, will be
going on in the management room of Zara itself.

Competition – Zara is not the only one which is known for its chic design. Vero
moda, H&M and Mango are also loved for its design. But the advantage to
Zara is that the other brands are quite costly when compared to Zara whereas
Zara gives much better designs at affordable prices. However, this
competition leads to saturation in the semi premium segment indirectly
affecting the margins.

Reach – Zara needs to increase its reach tremendously. Zara operates

exclusively through its own stores and does not have shop in shop kind of
stores or smaller displays (at least in Asia). This is where the competition gets
its tremendous volumes from. But these volumes are missing in Zara and the
only answer to this is that Zara increase its reach. If it does not, then
competitors will eventually affect the brand equity of Zara because of their
sheer power of penetration.

COVID-19 and ZARA

ZARA Inditex’s business model came into its own during the pandemic. Most garments
are ordered within the fashion season, and the company, which gets about two-thirds of
its revenue from Europe, has kept its supply chain tight. About 60% of products
come from manufacturers in Spain, Morocco, Portugal and Turkey.
In early March, the company scaled back purchases when it saw how the pandemic
was developing. In early May, it sped them up again to make sure it had enough
playsuits and flimsy blouses on hand for June and July. The strategy worked. ZARA
Inditex actually ended the first quarter with 10% less stock, an impressive feat when
other retailers have been saddled with a mountain of unsold spring and summer
garments.

At the same time, its online business thrived thanks to efforts including the introduction
of radio-frequency-identification technology that tracks where every maxi dress and
balloon-sleeve blouse is. This enables online orders to be fulfilled from wherever the
stock is, be that in warehouses or stores. As my Bloomberg News colleagues have
noted, when shops were closed, Inditex was able to redeploy stock to its digital
business. Online sales rose 95% year-on-year in April.
CHANGE IN MARKETING STRATEGIES AS A RESPONSE OF COVID 19 EFFECT

Online sales

Total sales were boosted by very strong online growth, which reached 74% year on
year in the first six months of the fiscal year.

Gross margin remained very robust at 56.2% of sales, compared to 56.8% in 1H19,
thanks to the management of a business model able to adapt to demand. This
management is also evident in inventory levels, which were down 19% compared
with close of 1H19. Active cost control helped reduce operating expenses by 21%.

Strategic outlook and digital transformation

Throughout the first half but particularly during the second quarter, the company
deepened its digital transformation and store and online platform integration
strategy initiated in 2012. This has been built on with the capex plan unveiled by
Inditex’s Executive Chairman at the Annual General Meeting on 14 July, which
envisages that the digital transformation strategy will drive online sales to more than
25% of the total by 2022, compared with 14% in 2019

Digital upgrade of the stores. Against this backdrop, Inditex opened large-
format stores in 14 markets during 1H, and refurbished 72 stores, 35 of
which were store expansions. This is in line with the company’s strategic
commitment to larger units, whereby it continues to absorb smaller stores
which do not lend themselves as effectively to the fully integrated store
model

New integrated platforms. Zara’s online platform reached Argentina,

Uruguay, Paraguay, Peru and Algeria for the first time in the second
quarter. The Group’s eight brands’ fashions are available in over 200
markets. Also in 3Q, Zara added online sales to now-integrated local
platforms in Chile, North Macedonia, Montenegro, Tunisia and Andorra,
and also new platforms in Nicaragua, Honduras, Costa Rica and
Guatemala will be launched today Wednesday 16 September. Stradivarius
opened its integrated online platform in Saudi Arabia and Israel.

Click & Go strategy. Customers can activate this function from the Zara
app to navigate through the store of their choice. At that point they can
look at the collections available for purchase in that store, purchase a
specific item online and, if they wish, collect it in-store within just 30
minutes, the time needed for the staff to prepare the order to Zara’s quality
standards.

Click & Find. This feature is possible thanks to the radio frequency
identification technology (RFID) system in place in all stores, which in turn
underpins the integrated stock management system (SINT). RFID and
SINT allows the fulfilment of online orders from the stores, providing
customers with an enhanced service while keeping all stock available to
purchase at all times, regardless of where it is physically located, be it on
the sales floor, in the store stockrooms or in one of the online stockrooms.
Once inside the stores, customers can use the Zara app from their
handsets to pinpoint the garments of their choice using a store layout map.

Click & Try. The ‘Store Mode’ function has other features that represent a further
evolution of the integrated shopping experience. Shoppers can book a fitting room
from the app, avoiding having to wait and improving the overall experience.

The app, also compatible with mobile payments, offers the choice of an e-ticket,
eradicating paper receipts while storing purchase records and the corresponding e-
tickets on the app.

Customer Service: ZARA provides more emphasis on customer.