Market Research for Zara - Essay Example

Market Research for Zara Objective: Marketing report on launching new lingerie range/brand for Zara. Executive Summary: Zara is a retail company floated by the parent manufacturer Inditex. It is based in Spain and has dozens of manufacturers in and around Spain. It has stores all across the world starting from US to Japan. Zara’s direct competitors are H&M of Sweden and GAP of US. We will analyze the market scenario and other components of our marketing plan with respect to these competitors. Products: Zara currently caters to fashion clothes for Men, Women and Children. It includes both under wears and outer wears. Besides these it also provides fashion accessories for all the categories. We will be specifically targeting our study on the women’s under wear section in our report. In this category Zara has the following products available – various varieties of shorts, briefs, Underwired plunge bras, G strings and some varieties of basks and corsets (bravissimo.com). They do not have much choice in this segment though. Most of the products are made to order and most of the clothing is stand alone. You have the option of mix and match but nothing is available in lingerie sets (mynippon.com). Pricing: Zara’s pricing is more commensurate with quality. Most of the products are on the higher side as compared to the other stores; however, they are one of the best in quality. Since many of the products are made to order, the pricing is based on the flexibility available to the customer to get products as per their choice. Customer surveys – Attitudes and Expectations: A survey by Invista showed what exactly the expectations of women regarding underwear clothing were (lingerie-buyer.co.uk). They found very startling facts: A quarter of the British women surveyed said that they have not yet found the bra they are looking for as far as size is concerned. 34% of the British women found them to be uncomfortable. 80% of the British women go for comfortable and romantic styles. Yorkshire and Midlands women can spend as much as five hundred pounds on under wear clothing. People have become conscious about green trends and hence companies should look into green fabrics like bamboo etc. European women are very much interested in high-tech under garments like remote control bras etc. Trends in Lingerie Industry: Companies are looking at various technologies to provide under garments for the future (lingerie-buyer.co.uk). A special trend has caught up the lingerie industry called the “Inside Out trend” (lingerie-buyer.co.uk). This trend has resulted in 175% increase in UK alone as reported by Ebay (lingerie-buyer.co.uk). Bras sales by Ebay alone were 350% up (lingerie-buyer.co.uk). Celebrity endorsements are a huge success these days. This can be seen from 700% increase in sales of big pants look by Ebay due to the endorsements by Daisy Lowe and Lady Gaga (lingerie-buyer.co.uk). Another fashion trend in this industry is the return of Corsets and Body stocking as per Marie Weaver of “Bare Sinsations”. This is specially true for plus size women. She has seen an increase in bridal lingerie over the past years. More popular among them are white or off-white corsets and long gowns. For other she has seen an inclination towards white, red and black colors in lingerie items (dotcomwomen.com). Popular materials used as per her are (dotcomwomen.com): Charmeuse - An opaque shiny fabric, it has the appearance of satin but less expensive. Tapestry - A rich looking fabric, similar in appearance to the heavy designs used in making curtains. It is made for corsets and is a very strong material that holds up well. Slinky Knit - A soft, elastic knit fabric that conforms to the shape of the body. Used mostly for gowns or dresses, its very comfy while at the same time incredibly sexy. Satin - Shiny, woven fabric that is still #1 to most. To keep themselves ahead of the competition, retailers and designers have been innovating and trying to find a gap in this market. Wishroom, a Japanese retailer has been innovative enough to come up with bras for men and even managed to sell 300 bras at £15 each (utalkmarketing.com). As per Milten, a consumer research firm, this is a very tough market and differentiation is the key to survival. As per them, 56% of the adults buy underwear only when they actually need to replace them. Hence, firms need to increase the desire. The global undergarments sale during the period 2004-2007 shows, 56% was for bras, 32% was for briefs and 12% of the total sale was of shapewear (utalkmarketing.com). Western Europe and North America accounted for 65% lingerie market in the period 2004 – 2007 (utalkmarketing.com). By 2014 this market will be worth $33.57 billion as per Just-styles global market researc (utalkmarketing.com). Celebrity endorsements are not always enough to attract customer. The product is important. If it does not have the appeal and does not instigate desire, big celebrity campains can be expensive disasters (utalkmarketing.com). Demand for lingerie is seen to rise at the of 5% only, while that in the other worlds is rising at 20%. This is mainly because of low population growth as well as aging there (Doshi 2006). It has been observed that the market is getting more and more competitive and the prices have to be lowered to compensate for that. Between the period 1994 to 2005, the proces for bras fell in all markets except Spain, even though the size of the bra market grew at 7%. The average price of Bras is $17.58 per item, while that of briefs was $ 3.60 as of 2005 (adsaleata.com). As per Koncept, apart from Asia and Russia, the biggest opportunities lie in UK in Western Europena market (just-style.com). Most growth in UK will come from the plus-sized and body control lingerie (just-style.com). Technology Technology in this sector is a very important aspect. To be innovative and provide product differentiation, one needs to be abreast with technology. For example to produce seamless bras or one with lesser seams, Karl Mayer, a flat bed knitting specialist has developed a machine which has a string bar 170 needles (adsaleata.com). The yarn used to produce these product is also specially made. Special technology is needed to produce contours. Competitive advantage of ZARA As compared to its other competitors, Zara has a reputation of instantly reacting to the customer needs. It immediately pulls products that are not selling fast and instantly restocks it with new designs. It can provide for a new product within 3 weeks of conceptualization (fashionunited.co.uk). Zara has a clear focus on its technology. Their main designing and manufacturing facility is made up of network of underground tunnels and complex web of conveyor belts. Hence, there is complete vertical integration and production starts from the production of linen (fashionunited.co.uk). Designers and sales staff work on the real-time sales data after taking inputs from the customers. There is a very well knit network between the design team and the store managers (fashionunited.co.uk). However, if we look at some of its direct competitors like GAP, Benetton and H&M, they do not manufacture their own collections. This does not give them as much control over their sales as Zara has (wharton.universia.net). . H&M Vs Zara However, H&M has better control over its margins due to its outsourcing business model. This enables H&M to take advantage of the low cost textiles and apparels from China and other Asian economies. H&M has another advantage in its kitty, it is a multi-platform brand. The variety it offers in low range lingerie and other apparels is very helpful in attracting a good customer base. One of the Marketing research projects conducted online gives a good view of the respondent’s perceptions about the two stores (bmelie.wordpress.com). Of the total people surveyed, 62.3% of the respondents were women. Some of the findings of the survey show the following results: ZARA H&M Only 1 person did not know about the store. 68.9% frequent this store. 85% of the people who frequent the store go there for fashionable looks. 56% go there because they feel the products are cheap. All knew about the store. Only 32% frequent the store. All those who prefer H&M think it’s cheaper and has more choice. We can conclude from the above survey that Zara and H&M are similar types of stores and have similar target market (bmelie.wordpress.com). Both these companies have a similar business philosophy “a low-cost, high-quality approach to fashion” – (foodandretail.blogspot.com). H&M spends more on advertising as can be seen from its much publicized celebrity endorsement strategy whereas Zara earns through frequent visits of its customers which is as high as 17 times in a year as compared to just 3 for other stores (foodandretail.blogspot.com). Both have invested in advanced technology and logistics. GAP Vs ZARA GAP is a US based company and works on a similar model as H&M. It is also able to take advantage of outsourcing cheaper designs from outside. However, it’s mostly present in the US and does not have much presence in Europe. It also does not compete on style (wharton.universia.net). In fact, they had opened stores in Europe so indiscreetly that they had to close many of them. Some of the customer comments regarding the comparison of the two companies showed that they felt GAP was more for “high-schoolers and college student” while Zara was more stylish (Kiley 2004). They felt that the GAP stores are more cluttered as compared to the Zara stores. One of the customers felt that Zara wasn’t advertising much specially outside Spain (Kiley 2004). This is one advantage GAP has over Zara especially in the US. Zara stores are very difficult to find and hence have not been able to make a mark there. Thus, as far as trendy and classic looks are concerned Zara scores over GAP. ZARA SWOT Analysis Strengths Strong market presence They have a short turnaround time for production of a new product and shipping to the customer (2 weeks) Designers do not predict trends but ask the customers what they want. Hence save time the usual time of 8-9 months Zara works on low volumes and quick design changes –every week. This helps to attract customers more often. It also helps in keeping inventories low Target – young customers and older ones who look for good bargain and quality Centralized operations help in keeping turn-around time low. Vertical integrations helps quick response to changed customer requirement. Weaknesses Only one manufacturing and distribution unit. Too much reliance on this can be dangerous in case there is some problem at the plant. Zara accounts for 86% of Inditex’s total international sales. Zara’s failure could lead to complete change in International strategy. (Craig, Jones and Nieto 2004) Have higher R&D costs because of their quick design change strategy. This also leads to higher re-training costs. Because of too much vertical integration they can not take advantage of economies of scale. They do not have distribution centers anywhere else. This can cause excessive transportation expenditure. Opportunities So far targeted only young crowd. There is a lot of opportunity in higher-age market as they too are now becoming style conscious. So far, Zara has used only Spain’s low-cost work force. They have an opportunity to setup manufacturing base in Asian countries and can take advantage of lower wages there. Can diversify into other product lines and localize the lingerie range as they enter new markets and learn about local tastes and preferences. Have a strong technology back-up which help them compete on quality on entering new markets Threats Only one manufacturing and distribution unit. They have very low dependency on advertising. This can be a huge problem later as they penetrate further as they would need to make more awareness campaigns. Have not invested much in growing economies of Asia and Russia. H&M have already setup base in China and imports about 30% of the material from there (wharton.universia.net). Since it manufactures only in Europe, a high Euro can cause very high manufacturing costs as they will not be able to take advantage of diversified operations (Craig, Jones and Nieto 2004). Major threat comes from GAP and H&M as both have internationalized their operations. They have already set up distribution networks and if Zara has to enter these markets it will be difficult for them to setup these networks. Both GAP and H&M have similar product categories as Zara and more or less at similar rates. Though the quality factor is on Zara’s side, pricing is an important factor for entering into emerging markets Demographics and population aging: We will look at the aging of population before we decide upon our target market and people. The following figures show the aging data of populations of major countries where Zara has its base or should go to: Spain (www.iiasa.ac.at) Europe as a whole (www.iiasa.ac.at) Europe: Population by age groups, 1950-2050 in 1000 in % of total population 1950 1970 1995 2025 2050 1950 1970 1995 2025 2050 Age 0-14 143,175 166,367 139,464 103,212 90,430 26.2 25.3 19.2 14.7 14.4 Age 15-64 359,162 421,432 487,110 451,599 364,277 65.6 64.2 66.9 64.3 58.0 Age 65+ 44,981 68,642 101,338 147,524 172,985 8.2 10.5 13.9 21.0 27.6 Age 75+ 14,553 22,762 38,139 63,663 91,343 2.7 3.5 5.2 9.1 14.6 Total 547,318 656,441 727,912 702,335 627,691 100.0 100.0 100.0 100.0 100.0 United States (longevity-science.org) Marketing plan: Target Market: Looking at the aging of population of major countries we can find that in Europe more population will lie in the age group of 45 years and above by the year 2025. Specifically in Spain, the main country for operations of Zara, only around 23% of the population is predicted to lie in age group of 25-44 years in 2025. There is a reverse pyramid trend. A trend of population de-growth. Looking at US, the population pyramid looks more or less equally spread over the various age groups. Thus in Europe our target market will be higher age group individuals which at present is not Zara’s focus. For US, we will target the teenage group as our new focus area (also based on client feedback discussed in the previous sections). Following gives a snap-shot of target market and segmentation. Europe on the whole – Target market -1) Higher age group, new products to be introduced. 2) Current clients introduction of new products – Corselets, Vests, Lingerie Sets, Body shapers, Designer Stockings US – Target Market – Teenage group, new products to be introduced, modify the old ones Asia – New market hence need a blend of current designs and localization Japan – Aging population. Same strategy as Europe. New products we have short listed based on research on products of Zara are: Corselets, Vests, Lingerie Sets, Body shapers, Designer Stockings. Marketing Communication tools: Advertising has to be done through Internet and Television. Website containing new product categories and prices will be updated constantly. The marketing department needs to keep track of the content updating. Celebrity endorsement for US and Asia. Younger age group celebrity should run the campaigns. For Europe and Japan, a higher age group celebrity endorsement campaigns to be organized before launch of the new products. On-site customer feedbacks from customers to be continued at all sites. Design a newsletter and send through the net/email. Sales promotions to prepare brand aware in US and Asian countries. Pricing strategy: Europe – New customer base: Since higher age group individuals are the target customers, the pricing should be on the lower side than H&M. We will not compete on price though. These will be introductory prices and later to be increased as per quality. Old customer base, new products – Price to be based as per competitor. Focus will be on quality as these customers are already used to the quality standards. USA – New customer base (teenage group). These are more price-conscious hence prefer going to GAP as per our survey. Hence, all current products will be modified for their preferences and pocket. To increase penetration in higher age group pricing need not change. Advertising to help the same. Asia – Low priced products to be introduced. Competition is primarily on pricing here. Overall marketing plan: Besides the above strategy on pricing and advertising, a special strategy needs to be implemented for emerging markets. An initial study on their trends needs to be conducted followed by pricing range of various products. All the product ranges of Zara need to be introduced there based on this study. Works Cited adsaleata.com 2007, Lingerie wars on the rebound, viewed on March 1, 2010 http://www.adsaleata.com/Publicity/ePub/lang-eng/article-1616/asid-72/Article.aspx bmelie.wordpress.com 2006, Marketing Research, viewed on March 3, 2010 http://bmelie.wordpress.com/2006/04/19/marketing-research/ bravissimo.com, Zara Bra, viewed on March 3, 2010 http://www.bravissimo.com/products/lingerie/sensational-sets/panache/plunge-bras/pni1-details.aspx?colour=black Craig, A, Jones, C and Nieto, M 2004, Zara: Fashion Follower, Industry Leader, viewed on March 3, 2010 http://www.philau.edu/sba/news/zarareport.pdf Doshi, G 2006, Scenario of Intimatewear Market, viewed on March 3, 2010. http://ezinearticles.com/?Scenario-Of-Intimatewear-Market&id=371722 fashionunited.co.uk 2004, Zara a retailer’s dream, viewed on March 1, 2010 http://www.fashionunited.co.uk/news/archive/inditex1.htm Gavrilov, LA and Heuveline, P 2007. Aging of Population, viewed on March 3, 2010 http://longevity-science.org/Population_Aging.htm iasa.ac.at 2002. Human Dimensions (demography, education, culture), viewed on March 2, 2010 http://www.iiasa.ac.at/Research/ERD/DB/data/data_0.htm Kiley, D 2004, Is Zara all that? viewed on March 3, 2010 http://www.businessweek.com/the_thread/brandnewday/archives/2004/12/is_zara_all_tha.html dotcomwomen.com, Trends in Lingerie. Dot Com Women 2004-2005, viewed on March 3, 2010 http://www.dotcomwomen.com/beauty/lingerie.shtml just-style.com 2009, Emerging markets buoy global lingerie sector, viewed on March 2, 2010 http://www.just-style.com/article.aspx?id=102983 lingerie-buyer.co.uk 2007, The lingerie evolution, viewed on March 3, 2010 http://lingerie-buyer.co.uk/news/categoryfront.php/id/34/August.html lingerie-buyer.co.uk, Underwear as Outerwear Trend Increases Lingerie Sales, viewed on March 3, 2010 http://lingerie-buyer.co.uk/news/fullstory.php/aid/591/Underwear _as_Outerwear_Trend_Increases_Lingerie_Sales.html utalkmarketing.com, Lingerie sector will survive with innovation, viewed on March 1, 2010 http://www.utalkmarketing.com/Pages/Article.aspx?ArticleID=12466&Title=Lingerie_sector_will_survive_with_innovation wharton.universia.net 2005, Inditex Dazzels its Competitors Again, viewed on March 3, 2010 http://www.wharton.universia.net/index.cfm?fa=viewfeature&id=1050&language=english Wylick, VV 2006, Some initial impressions about Zara and H&M, viewed on March 3, 2010 http://foodandretail.blogspot.com/2008/04/some-initial-impressions-about-zara-h.html Read More