MARKET ANALYSIS ON ZARA

ASSIGNMENT I

Presented bY: Deepika Tripathi, MFT/15/44

IntroductionInditex is an eight-brand group of the world’s largest fashion retailers with its headquarters

located in La Coruna, in Spain. Founder and majority owner of the company is Amancio

Ortega, famous Spanish entrepreneur. Chairman and CEO of the company is Pablo Isla

Alvarez de Tejera. Inditex’s corporate culture is based on close communication between the

customers and the employees. Today company has more than 100.000 employees

worldwide.

The largest brand of Inditex is Zara, which runs three independent product lines for women,

men and children where most of the accent is stressed on women’s garment. Each of the

lines is managed by separate team which consists of Diression de Tiendas (DTs). DT’s

collaborate with commercials, country managers, HR managers and headquarters. We can

freely say that Zara is a pioneer in fast fashion industry. The customer is at the heart of their

unique business model, which includes design, production, distribution and sales through

their extensive retail network.

The Zara case study is an interesting example on how one company can be successful on the

market. The dynamics of the company and its adapting ability show how important is the

right thing regarding market’s needs. Zara is an apparel chain that works differently from

traditional retailers. The main characteristic is the vertically integrated model. Instead of

relying fully on outside partners, the company manages all design, warehousing,

distribution, and logistics itself. The products are distributed in small batches. Due to the

stylish garment and affordable prices, consumers visit Zara’s stores very often.

FOUR P’S

1. PRODUCT:

S.NO WOMAN MAN TRF KIDS1 Outerwear Outerwear Outerwear MINI2 Bombers Bombers Bombers Baby Girl3 Jumpsuits T-shirts Jumpsuits Baby Boy4 Dresses Trousers Dresses Girl5 Trenchcoats Shirts Trenchcoats Boy6 Tops Polo-T shirts Tops7 T-shirts Bags T-shirts8 Trousers Shoes9 Shirts Accessories10 Knitwears11 Bags12 Shoes13 Accessories14 Wear to work

2. PRICE:

WOMEN: Rs 690-8990

MEN: Rs 690-1190

TRF: Rs 690-8890

KIDS: Rs 590-4490

3. PROMOTION

The fashion company Zara has a marketing strategy that is quite unique. Zara only spends about 0.3% of their revenue on promotion. This would be the reason Zara does not appear on television or poster advertisements. Zara focuses heavily on their product, place and pricing as opposed to promotion. Zara rarely advertises any store sales or have sales promotions other than sale items unlike other retailers. It is also interesting to note that

Zara never places their brand or logo on their products. In contrast to local retailers like J2 Clothing, Zara’s sales associates do not need to focus on personal selling. Their customer service within the store is rather weak. It is their innovative products and affordable pricing that keeps customers returning to their store. Their products seemingly advertises itself.

In addition, Zara has remarkable logistics and they are able to get a product from design to the shelf in just two weeks. With such efficiency, they are able to produce thousands of new designs a year. In fact, Zara produces new products every week as said on their website. Zara is known for their fast fashion, which means popular products may disappear off the shelf within days, forcing customers to constantly check for new items.

Zara also markets it’s brand through rapid expansion. With more than 1,500 stores around the world in over 70 countries, they open around 150 new stores every year. With the brand becoming world renown, the company is also focusing on sustainable marketing by opening stores which consume 30% less energy compared to the average conventional store. The new stores also save 50% of water consumption and maintains their CO2 emissions below 150 toms a year.

4. PLACE:

Global Presence with more than 6900 Stores, 88 Countries, five continents. All stores located in niche and high end shopping malls and shopping streets. Presence in Online store

MARKETING PLAN OF ZARA

The company has a goal to achieve $5 million as online revenue.Zara is focusing on the customer ship to achieve there level maintained by the management and also targeting on the lifestyle and moderation of the customers. For the change and to be different from others every month company changes the clothes in their stores.

Marketing Objectives for the ProjectAs for as the market is concerned, for the last few years it is going on constant changes along with the introduction of different concepts. Some of the merchants are selling their products at large profits, in this situation Zara provides its products with comparatively low prices which attracts the customers towards them.

Overall ObjectiveOverall objective of Zara is to produce high quality products at a very reasonable price and sells them by its own stores that are located at the commercial places by offering very fashionable prices and up to date stock. The main concept of Zara is to offer the sales of about 58% men’s clothes, 22% of women and children with 20%.Another objective of zara is related to management, whom there’s given an open hand to take decisions at their own capability and independently.

Strategic Objective for Every Primary ObjectiveThe strategy attained by Zara is to design products for countries with low cost and another totally opposite strategy maintained by the company is to spend money on the manufacturing of new products instead of spending them on advertisements.

Target Market SegmentsTarget segments approached by Zara are very vast because they are not focusing on the specific people for their products; it is just targeting the educated young people who wants to do fashion or have the idea of it but can’t afford it. The company is globally introducing the regular and fashionable products so that they are accepted by the customers.

Zara Marketing Mix

ProductZara manufactures the products like clothes, shoes, cosmetics and accessories for men, children and women, rugs are also a part of zara productions. At present company exceed the clothes with new sizes similar to Americans. Annually Zara produces almost about 11000 different products.

PriceAs the concept of zara was to provide its products to the less cost earning people so its prices are very reasonable that every person can afford that. The prices of zara are different for its different products.

PlaceZara is present in almost about 30 countries and at private location of these countries there are 600 commercial stores but now Zara is selling its services through out the world.

PromotionZara started campaigns in different countries with decency and simplicity to attract the customers, deals them with great manners to attain their loyalty. For the promotion of the company they start focusing on internet searches and spend more time on that because net is the best way to advertise in minimum cost.

Main StrategiesMarket PenetrationThe company is involved in the production at Galicia, Spain. Zara is selling its manufacturing goods almost about 50% in Spain, 20% in the countries of Africa and Asia and about 26% in Europe.Market DevelopmentThe company focused on the development by• minimizing the hurdles occurred in market,• try to enhance the brand value,• do focus on the demand of the customers, and• Have the strength to accept challenges.

Diversification StrategyDiversification strategy of Zara is based focused trough increase in the product line and to gradually head towards the places where it can establish its market. The addition of cosmetics is being planned along with the introduction of home line products.

Monitoring and ControlThe company controls and monitors its brand strategically by keeping in view all the goals and objectives.mangement is working properly with effective communication skills that added new business models in the company.

BudgetAlmost about $7.5 billion of income is received by Zara each year with increasing trends of sales and profits each year.

CONSUMER BEHAVIOUR

• A person who is up to date with the latest developments in the fashion industry and wants fashionable, trendy and unique outfits at affordable price.

• 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.

• A typical Zara customer can belong to any social strata and demographic as Zara caters to a wide range of tastes.

SUPPLY CHAIN MANAGEMENT

The brand is renowned for it’s ability to deliver new clothes to stores quickly and in small batches. Twice a week, at precise times, store managers order clothes, and twice a week, on schedule, new garments arrive. The company produces about 450 million items a year for its 1,770 stores in 86 countries.

To achieve this, Zara controls more of its manufacturing and supply chain than do most retailers. For Zara, its supply chain is its competitive advantage.

Synergy between business and operations strategy

Zara’s overarching strategy is achieving growth through diversification with and vertical integrations. It adapts couture designs, manufactures, distributes, and retails clothes within 2 weeks of the original design first appearing on catwalks.

The company owns its supply chain and competes on its speed to market, literally embodying the idea of “fast fashion”.

Just in time production

The retail giant delivers fashionable and trendy numbers catered for different tastes through a controlled and integrated process – just in time.

Zara keeps a significant amount of its production in-house and makes sure that its own factories reserve 85 percent of their capacity for in-season adjustments. In-house production allows the organization to be flexible in the amount, frequency, and variety of new products to be launched.

The company often relies heavily on sophisticated fabric sourcing, cutting, and sewing facilities nearer to its design headquarters in Spain.

The wages of these European workers are higher than those of their developing-world counterparts, but the turnaround time is miraculous.

Zara also commits six months in advance to only 15 to 25 percent of a season’s line. And it only locks in 50 to 60 percent of its line by the start of the season, meaning that up to 50 percent of its clothes are designed and manufactured smack in the middle of the season.

If a certain style or design suddenly become the rage, Zara reacts quickly, designs new styles, and gets them into stores while the trend is still peaking.

Store managers communicate customer feedback on what shoppers like, what they dislike, and what they’re looking for. That data is instantly funneled back to Zara’s designers who begin sketching on the spot.

Zara also has extra capacity on hand to respond to demand as it develops and changes. For example, it operates typically 4.5 days per week around the clock on full capacity, leaving some flexibility for extra shifts and temporary labor to be added when needed.

This then translates to frequent shipments and higher numbers of customer visits to the stores, creating an environment of shortage and opportunity.

This strategy allows Zara to sell more items at full price because of the sense of scarcity and exclusiveness the company exudes. Zara’s total cost is minimized because merchandise that is marked down is reduced dramatically as compared to competitors.

Zara gets 85 percent of the full price on its clothes, while the industry average is 60 to70 percent. Unsold items account for less than 10 percent of its stock, compared with an industry average of 17 to 20 percent.

“Most companies are riddled with penny-wise, pound-foolish decisions to reduce cost,” says Kasra Ferdows, a professor at Georgetown University’s McDonough School of Business. “Zara understands that if they don’t have to discount as much, they can spend money on other things. They can see the benefit of this certainty and rhythm in the supply chain.”

This is also the reason why Zara can afford the extra labor and shipping costs needed to accommodate and satisfy changes in seasonality and customer demand.

Inventory management

Zara is fully aware of the saying, “inventory = death”. It avoids piling up inventory in any part of its supply chain from raw materials to finished products.

Inventory optimization models are put in place to help the company to determine the quantity that should be delivered to every single one of its retail stores via shipments that go out twice every week. The stock delivered is strictly limited, ensuring that each store only receives just want they need. This goes towards the brand image of being exclusive while avoiding the build up of unpopular stock.

This quick in-season turnaround, from production facilities located close to Zara’s distribution headquarters in Spain, allows Zara to ship more often and in smaller batches. If the design Zara hastily creates in an attempt to chase the latest trend does not in fact sell well, little harm is done.

The batch is small, so there’s not a ton of unsold inventory to get rid of. And because the failed experiment is over in a jiffy, there’s still time to try a different style, and then a different one after that.

Centralized logistics

“The secret to their success has been centralization,” says Felipe Caro, an associate professor at the University of California at Los Angeles’s Anderson School of Management and a business adviser to the company. “They can make decisions in a very coordinated manner.”

Zara sticks to a deep, predictable and fast rhythm, based around order fulfillment to stores.

Each Zara outlet sends in two orders per week on specific days and timing. Trucks leave at specific times and shipments arrive in stores at specific times. Garments are already labeled and priced upon destination.

As a result of this clearly defined rhythm, every staff involved (from design to procurement, production, distribution, and retail) knows the timeline and how their activities pan out with respect to other functions. That certainly also extends to Zara customers, who know when to visit stores for fresh new garments.

Solid distribution network

Zara’s strong distribution network enables the company to deliver goods to its European stores within 24 hours, and to its American and Asian outlets in less than 40 hours.

According to Nelson Fraiman, a Columbia Business School professor who wrote a 2010 case study about Zara, the retail giant can get a product out from concept to store in just 15 days, while the industry standard is 6 months.

At Zara, change doesn’t disrupt the system; it’s part of the system.

This brand’s success story shows the strength of its operations. Its cross-functional operations strategy, coupled with its vertically integrated supply chain, enables mass production under push control, leading to well-managed inventories, lower markdowns, higher profitability, and value creation for shareholders in the short and long term.