Zara: A Cut Apart From the Competition

Introduction

Zara is a Spanish apparel company with international experience in designing and selling wears in the overall global arena. Having trailed other international traders like GAP in the market share for several years. Zara shot into the global leader of apparel trading when it managed to overtake America’s GAP. In terms of sales turnover, the company has had its sales increase over the last decade. Between 2001 and 2007, sales increased more than twice, from €4 billion to well over €49 billion (Ritz 2008, p.22). Currently, the company is worth billions of euros and owns a sizeable market share in the apparels business. The company’s success in developing itself as a business empire is rooted in its ability to penetrate the low-end market while maintaining high fashion quality in the highly competitive market. The company’s strategy is based on its focus on the trends as dictated by the changing consumer tastes all over the world, notably in high streets of Spanish cities, New York, Paris, and London. Notably, the company currently occupies almost every city in the world.

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Current Market Offering

Zara offers a range of fashion clothing products, targeting both low-end and high-end markets. Due to the big range of its products, Zara is designing its products to ensure specific designs are adhered to suit on-demand custom-made products. By 2007, the company had stocked both men’s and women’s clothing to suit a variety of market demands and effectively complete a series of market segments as decided by its strategic team. That is, its strategy is to subdivide low-end and high-end markets, with products such as lower garments, upper garments, children’s clothing, cosmetics, and many other accessories. It is critical to note that the company’s approach to marketing is based on postmodern consumer behavior. The common theme that has been entrenched in the modern marketing field is the fragmented nature of our society, particularly in line with what people need to consume and what is provided by the producers (Legge & Hindle 2004, p.127). That is, the firm recognized a shift in what consumers valued, based on their beliefs and taste, towards personal preference. This is evidenced in the speedy way in which it entrenched its mass production policy, as well as electric patterns of purchases and consumption and recognition of ambiguities that exists in the modern artifacts (Henry, 2009).

The company’s most important approach to internalization was based on its strength at home- its ability to dominate the domestic Spanish market before proceeding to expand its operations abroad. According to Nash (2006), once a company has managed to successfully entrench its products in the domestic market, there is a high likelihood of it developing successful marketing strategies and succeeding in a similar market abroad. This explains why the company’s first market was in Portugal, a country considered similar to Spain as far as culture is concerned. The founder Amancio Ortega had a vision for his fashion designs, with an eventual range of products under various brands of Massimo Dutti, Pull and Bear, Oysho, Bershka among others present in the market. So far, it has been described as the world’s “most innovative and devastating fashion retailer in the world”, due to its aggressive approach to market offerings (Skillsmart, 2009, p.5).

Target Customers

There are no direct criteria for a brand to be categorized as luxury. However, Zara has categorized its consumers with different products, depending on the target markets’ income and fashion trends. Unfortunately, sometimes fashion does not depend on the income of the consumers, but the trend of consumption (Welty, 1981). These are people who can afford anything unique and special, hence do not want to own that which anyone can own. In other words, the popularity of a brand becomes a weakness in the overall sense as this will drive the niche market away by losing its appealing strong points of uniqueness, safe and exclusivity. At this point, Zara cannot claim to have the exclusive market but fully relies on mass consumers to drive its sales further. The disadvantage is that the high fashion fad individuals cannot have what they consider unique for them, despite their high spending habit when it comes to fashion design.

But it must be acknowledged that the mass market is an important aspect of the postmodern market environment (Porter 1980). Marketers have significantly been affected by the emergence of postmodernism as a culture that drives mass consumption. But is this form of fragmentation relevant in the postmodernism era, where individuals’ behavior and characteristics change every day, every hour, or every minute? As Longenecker, Moore & Petty (2002, p.31) would say, “There are no fixed social roles as individuals are left to adopt a wide variety of identities in a post-modern society”, with no consistent behavior. This kind of culture is common in the fashion industry. Luckily, Zara realized this phenomenon early enough and engaged a team of creative individuals, who worked hard to produce fashionable products in line with the moving trend of the day. The company’s use of various media such as industry publications, electronic media (media and internet), fashion shows, and general observations of trends to acquire different market segments is critically important in the overall marketing of its trendy products. They are highly focused on customer satisfaction, thus the continuous response to market changes as dictated by consumer preferences.

The clothing business environment has grown significantly in the past decade. The growth has seen the changes or increase in size as well as the growing number of dominant retailers in terms of store sizes, brand superiority, and a wide range of product formats (Ryan, Hiduke, 2003). As highlighted earlier, the likes of Zara and a few other fashion retailers control the purchasing power of the clothing retail industry. It, therefore, follows that the growth in the industry is quite difficult, particularly where there is a lack of diversification.

Competitive Environment

The main competitors in the market are H&M, The Gap, and Benetton. H&M was founded in Sweden but has found most of its success in Germany, where it sells more than a quarter of its fashion products. H&M relied much on its advertisements, where its products and services are featured on TV premium ads and print media, thus 5% cost of production going to this venture. This is in contrast to the market Zara’s reliance on an on-store advertisement, which is inevitably cheaper. The gap on the other hand has specialized in casual wear, dominated by jeans, khakis, and T-shirts. The company mainly operates in the US, where it has developed a strong market niche over the years. However, stiff competition from small-scale traders has seen it lose grip on the market position (Ryan & Hiduke, 2003). There are some retailers which offer a one-stop-shop for all clothing needs such as Wal-Mart, making them more popular with the increasingly busy population. Though strong in customer service, Gap did not deliver its products as fast as Zara did, thus the difference between the two companies.

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The difference between Zara and other similar retailers is that it streamed all its activities with much efficiency, creating a model of production, distribution, and delivery that is up to standard. The stores were well designed and accommodative, making a strategic approach to the overall marketing strategies. Delivery of new products was made twice a week, and clients would be aware that if such a delivery occurred, it was better for them to purchase them as fast as possible for they may not be available the following week. This kind of fashion-frenzy buying habit has been the bedrock of speedy Zara’s growth. While observing this trend, Zara knows that its strong point is in the development of an environment with strong market demand within the shortest time possible.

According to Henry (2009) “Zara is in step with society, dressing ideas, trends and tastes that society itself has developed” (p.113). The company’s mission has been to develop a medium quality fashion and provide to its clients at an affordable price, a somewhat similar approach to that of H&M. However, Zara has put a lot of focus on design and instant response to market needs. Their target group ranges from 15 to 45-year-old individuals, considered to have a knack for fashion. Although this is a common trend among fashion traders, Zara’s approach of covering the needs of all other categories such as women, men, teenagers, and children. It is noted that retail in clothing is one of the biggest industries since they sell a wide range of products such panties, trousers, men’s and women’s wear, and many other garments as well as accessories.

Studies show that the affluent are more likely to buy online than any other group. While Zara has not exploited this opportunity to the fullest, it is evident that the company can still use an online retail strategy to increase its sales volume. Between 2007 and 2008, 47% of the affluent people who used exclusive products purchased their preferred products through online means (Kotler & Lee 2009, p.174). In contrast, only 16% of average consumers used online means of buying.

There are mainly three reasons why selling fashion brands online is advantageous. First, they encourage easy access to loyal customers, who may be traveling around the globe either in business trips or leisure activities. Secondly, those who would want to buy their preferred products but are unaware of the location of the stores can identify the physical locations of these stores. Lastly, it enables customers who would want to get a personal appointment with a retailer, hence increasing ease of accessibility.

Zara’s control of every aspect of its business may be beneficial in terms of building quick attachment with its clients, thus moving quickly to fill their needs. But, it may be costly in the long run as many nations are controlled by different business models. This may be disadvantageous in some Asian markets, where the need to develop business gets more control from local agencies (Kotler& Lee 2009). The company may consider outsourcing more of its retail business to minimize this possibility. The company may also change its advertisement approaches as many companies have decided to adopt similar strategies of on-store ads. This is likely to live the company with little option but to advertise more of its products on mainstream media channels. Whereas faster growth is necessary for the company, Zara also needs to focus a lot on an effort to strengthen its financial base and increase its turnover through the establishment of a high number of stores in various countries.

Studies have shown that social changes in Europe’s major cities and the global environment as a whole have made people from around the world prefer one-stop shops where they can sample all the available luxury products (Kotler & Lee 2009). While it is not possible that Zara would trade on everything, the company has an option of establishing more stores next to other high street retail outlets that offer a better opportunity for buyers to move faster from one store to another.

Conclusion and Recommendations

While it is acknowledged that Zara has acquired the fastest growth and success in the fashion business in recent years, it must be noted that the most important aspect of its development is its fast and efficient production and delivery process. The company’s competitors have adopted mainstream marketing strategies that call for intensive advertisements through multiple channels of communication. Zara relies on its on-store design and efficient service through properly designed stores to deliver its products. The design team knows how to respond quickly to market demand, focusing on what is selling faster at the moment.

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Reference List

Henry, A. (2009) Understanding Strategic Management. Oxford. Oxford University Press.

Kotler, P., & Lee, N. (2009), Up and Out of Poverty: The Social Marketing Solution. Pennsylvania. Wharton School Publishing.

Legge, J., & Hindle, K. (2004) Entrepreneurship –Context, vision, and planning. Basingstoke. Palgrave Macmillan.

Longenecker, J. G., Moore, C. W., & Petty, J. W. (2002), Small Business Management: An Entrepreneurial Emphasis. Georgetown, Texas. South-Western Publishing.

Nash, Bethany (2006) Fair-Trade and the growth of ethical consumerism within the mainstream. Leeds: University of Leeds.

Porter, M. (1980), How competitive forces shape strategy, Harvard Business Review, 1979.

Ritz (2008) Store wars, Business Review, Vol. 11, pp.22-23.

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Ryan, J.D., Hiduke, G. P. (2003) Small Business: An Entrepreneur’s Business Plan, 6th edition, London. South-Western, Thomson Learning.

Skillsmart (2009) Retail Analysis: Multi-channel retailing, Click or Mortar-the customer’s Choice? London. Skillsmart Ltd.

Welty, G (1981) The Materialist Science of Culture and the Critique of Ideology. Quarterly Journal of Ideology, Vol. 5, No. 2.

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