The Retail Mix and the Basis of Offering a Competitive Advantage of Zara - Report Example

Zara’s Retail Marketing and of the Table of Contents Table of Contents 2 1.0 Introduction 3 2.0 The Retail Mix and the Basis of Offering a Competitive Advantage 4 2.1 The Merchandise Range and Assortment 4 2.2 The Retail Communication 8 2.3 The Store Layout, Design and Visual Merchandising 9 2.4 Customer Service and Facilitating Services 11 2.5 The Stores Format and Location 12 2.6 The Pricing Strategy and Tactics 13 3.0 The Challenges to Continued International Growth Likely to Face Zara 14 3.1 The Market 14 3.2 Competition 15 4.0 Conclusion 16 List of References 17 1.0 Introduction Zara is a clothing and accessories company that is headquartered in Galicia, Spain (Zara, 2014). The company was established in 1970s by two entrepreneurs: Ortega Amancio and Mera Rosalia (Zara, 2014). Zara is considered the largest clothing retail firm in the world (Zara, 2014). The company owns a number of recognized brands, such as Pull and Bear, Bershka and Uterque among others (Zara, 2014). The company is distinguished by its capability of developing a product, and displaying on its stores within a period of two weeks; this contrast with a period of 6 months that is witnessed in the retail industry (Zara, 2014). The company is also distinguished from other companies by the fact that it does not embrace the current trend of taking the fast-fashion production to economies that are associated with low levels of cost. As opposed to investing its revenue in marketing, Zara resolves to expand the number of stores in different localities; this has seen the company continue upholding the objective of excising a zero-advertising policy. Currently, the apparel retailer has more than 2000 stores worldwide; however, the company relies on the Spanish market (Zara, 2014). The clothing retailer deals in a number of products; these include the categories of male and females’ clothing. They are further classified to the upper and lower garment, footwear and cosmetics among others. Additionally, the company engages in the sale of children accessories and clothing. With its focus on sizes and women’s clothing, the firm has gained popularity in Spain, and the entire world (Zara, 2014). This report is focused on assessing the retail mix of Zara and the extent to which the retail mix offers a basis for a competitive advantage that is sustainable. The report would finally assess the challenges that Zara faces due to continued international growth. 2.0 The Retail Mix and the Basis of Offering a Competitive Advantage 2.1 The Merchandise Range and Assortment Zara is associated with policies that are responsive to the quick market-changes as far as fashion is concerned among consumers (Bush, 2009). The products are also associated with a high content of fashion. Besides, the company ensures that it provides a wide range of products as far as the retail clothing industry is concerned. However, the products are not characterized with physical qualities that are deemed to be disproportionate. The products of Zara are categorized in a number of groups; they are categorized according to prices, age and the content of fashion. Additionally, these categories are further categorised into the children’s, adult male and females’ clothing. As opposed to other similar firms which their prices are determined by different branches, Zara’s prices are determined centrally; this is an attempt to reflect relatively similar prices in different stores. The reliance on the zero-advertising policies and low prices has seen the firm lower its lower the cost of operation, as well as experience increased levels of sales. Coupled with a supply chain that is short and vertically integrated, Zara has been able to experience optimal results as far as far as the cost reduction, profit maximization and efficiency are concerned. In relation to other fashion retailers in the industry which spent more than 3% on advertising their brands via media, Zara stands out as a company that spends less than 0.4% on advertising via a similar platform (Nagy and Várfalvi, 2012, p.209). The company also differs from other players due to the fact that Zara displays trendy items in its stores as opposed to diverse shows. White (2005) asserts that Zara also adds value to its business operation via the creation of a sense of scarcity among customers as far as new items are concerned. Although different stores in the UK are frequently stocked with new items after every fortnight, Zara attempts to undersupply the stores with various items with a view of creating a sense of scarcity among the customers (Fredriksson, 2011, p.43). It is not uncommon that the Zara’s stores are characterized by clothing and other accessories that are stocked and arranged sparsely. In a number of cases, the shipments that are made to the UK are often small in an endeavour to create scarcity; additionally, a store can be stocked with new items after a period of one month. The difference of stocking the stores with items every month and fortnight attempts to create the sense of scarcity among consumers. In this regard, Zara normally witness significant sales since customers are inclined to think that the new items are likely to run out of stock. This has seen Zara perform optimally in the recent past. However, the optimal performance is also explained by the fortnight stocking of new items in various; this aspect normally creates a sense of freshness among consumers. Women Attire Source: Zara 2014. Men Attire Source: Zara 2014. A Child Attire Source: Zara 2014. 2.2 The Retail Communication As opposed to other firms which use the vertical form of communication, Zara normally embraces the horizontal communication approach. However, every manager is accountable for every store that is owned by Zara; nevertheless, an active communication is normally emphasized between managers and other stakeholders, such as the design personnel, salespersons and customers. Communication between the design personnel is also encouraged. Okazaki, Lee and Yun (2009, p.897) claim that this form of communication is focused on ensuring that Zara is responsive to the market changes as far as fashion is concerned. This culture among the employees and management experience a success with respect to developing and displaying new items on stores in less than three weeks. The company has also witnessed significant efforts of eliminating various forms of communication barriers; this is the reason why the manager of Zara can have a direct communication with a journalist. With respect to marketing, Zara spends about 0.3% of its revenue on promoting its products on different platforms; this figure is considered about ten times less than the average of similar players in the industry (Yuksel, 2012). The low cost that is associated with its promotional activities has seen Zara maintain a competitive edge as far as the operational costs are concerned. The company rely on the layout of the store (the luxurious and spacious inside layout), as well as its location- most retail stores are situated in prime locations. Additionally, the infrequent restocking of Zara’s items normally elicits the need to visit the Zara’s stores to find new items that are stocked. The sense of freshness and scarcity encourages a large number of customers to visit the Zara’s stores. The company also has a strong brand that is aimed at enhancing loyalty among its customers; it is evident that a large number of consumers are more likely than not to be associated with the Zara’s brand. 2.3 The Store Layout, Design and Visual Merchandising Zara endeavours to create an stylish atmosphere on its various stores with a view of creating a strong and unique brand image. In this endeavour, the retailer stores are characterized by ceilings that are stylishly decorated. In an attempt to improve the visual impression and sense of calmness, the walls are painted with a white colour; additionally, the stores are associated with reasonable lighting. Yuksel (2012, p.1018) shows that stores of the company are usually renovated after a period of five years with a view of ensuring the stores do not appear old-fashioned; in other words, the management ensures that the stores appear trendy and stylish. All the company’s stores are supported by a customer care that is proactive as far as directing and helping various types of customers in finding trendy apparels and related services are concerned. With respect to merchandizing, Zara considers the arrangement of items in various stores as a fundamental factor as far as a success in the fashion industry is concerned. In this respect, the management of the company ensures that the window displays are well arranged to capture the attention of both the existing and new customers. As far as the visual merchandising is concerned, it is required that the manager of every business unit should manage the window display. The management ensures that three window images are created every year; the creation of the window images are overseen by managers who are responsible for visual merchandising. Sedeke and Arora (2013) provide that although the images for implementation are designed in Spain, the results for images are provided to different stores managers who located in various parts of the world. The visual impression of the trendy apparels is normally supported by window display. Zara’s Interior Layout Source: Zara 2014. 2.4 Customer Service and Facilitating Services Zara normally ensures that its customers’ needs are met by a large base of personnel that is trained to handle the matters of customers’ satisfaction and dissatisfaction. In this regard, the employees are associated with a high level of knowledge as far as meeting the customers’ needs are concerned; moreover, the employees are trained to offer services that exceed the customers’ expectations. Mostly, the employees characteristically listen to customers’ queries and comments; the customer’s perceptions with respect to various comments are considered fundamental in the light of achieving a sustainable success. Zara understand that its customers are likely to get frustrated due to a number of issues; in this respect, Zara advises its staff members to exercise patient and humility, as well as the right attitude of listening. The frustrations of the customer should be understood, and respond by rectifying the existing problem; as a result, the customers’ are always provided the priority (Guidolin, Hyde and Ono, 2013). Additionally, the employees are advised to observe the behaviour of consumer as far as purchasing is concerned. It is regarded that the consumers behaviour as far as buying is concerned is essential in understanding the consumers taste. The learning of the consumer behaviours and offering excellent customer care services ensures that the company earns the edge in the market; this aspect is attributed to the fact that consumers’ attitude is critical with respect to the success of any brand in the market. In this regard, Zara continues to earn a competitive edge in the market via the provision of excellent customer services, as well as learning the consumer behaviours. 2.5 The Stores Format and Location According to Bhardwaj (2009, p.167), Zara is among the firms that associated their operations and existence with luxury; this is the reason why a majority of the Zara’s stores are located in mega cities. With over two-thousand stores, the retailer’s business units are located in major cities of more than seventy countries (Zara, 2014). It is evident that Zara faces a number of challenges as far as locating its stores is concerned; the company typically focuses on locating the stores in major towns. In addition to location, the clothing retailer focuses on the interior design of its stores, as well as the window displays. It also evident that Zara embraces a number of approaches with respect to selling various items; for instance, it is not uncommon to find a certain store which deals in a particular type of items, such as men’s clothing. With reference to location, Zara normally relocates its stores in various sites due to a number of factors. Among the factors which coerces the management to relocate a store includes the change of the traffic patterns. However, in other circumstances, the old stores are renovated and expanded to meet the prevailing industry’s trend. Unlike other clothing retailers, Zara ensures that its stores are consistently renovated in a period of less than four years; the consistent remodelling of various stores is associated with a high level of investment. The two major lines of product include the male apparel and female wears; the children’s clothing is not considered as a major line of product despite the fact that Zara engages in selling kid’s attires. The two major lines of Zara’s products are further categorised into the upper garment, lower garment, shoes, assortment, as well as cosmetics and compliments. The locating of Zara’s stores in major cities embraces the customer base that is usually located in the upper market. In this regard, the company stands a chance of earning a higher profit margin- this majorly because the Zara’s brand is likely to be associated with a high quality and luxury. 2.6 The Pricing Strategy and Tactics The pricing strategy that a company pursues is crucial as far as experiencing a sustainable success is concerned. Zara is keen to ensure that the pricing strategy that is employed matches to the market conditions. In particular, Zara embraces the cost-leadership strategy- the cost leadership attempts to lower the cost of production with a view of selling products at a lower price. A firm that sells its products in a market at a low price is predisposed to experiencing a high level of sales; as a result, a firm is likely to gain high sales from increased volume sales. However, in order to be successful in the market, Zara embraces the different pricing strategy- this strategy entails pricing similar a product differently in distinct regions. With respect to the cost leadership strategy, Zara pursues a human resource strategy that endeavours to drive the cost of labour down; Zara understands that the clothing industry is associated with a high level of labour cost, especially with reference to designing and developing accessories and clothing (Yuksel, 2012, p.1016). As regards the different pricing strategy, the company assigns similar attires different prices in diverse regions; however, the management considers the willingness of consumers to pay for the price difference. For instance, Zara can sell certain apparel at 100 sterling pounds in England and 110 sterling pounds in Ireland. In most cases, the assigning of similar items different prices is effected by variations in the levels of demand in different regions. The different pricing strategy enables the company to earn high profits in regions that are characterized by high demands for Zara’s attires and accessories via the charging of high prices. On the other hand, the company optimizes its profits via driving down the operational costs- this objective is achieved in the pursuant of the cost-leadership strategy. 3.0 The Challenges to Continued International Growth Likely to Face Zara 3.1 The Market As of December 2009, the economic activities that were associated with clothing, as well as footwear and apparel, experienced a turnover of about five-hundred and sixty-two billion Euros (FashionUnited, 2014). The statistics indicate that 800,000 businesses were involved in the retailing, wholesaling and production of clothing and accessories (FashionUnited, 2014). On the other hand, the United Kingdom’s spending on footwear and clothing was estimated at 59 billion Euros (FashionUnited, 2014). The total consumption that is spent by the UK consumers on fashion amounts to 900 Euros (FashionUnited, 2014). Statistics also indicate that the United Kingdom street fashion industry is approximated at more than forty-four billion sterling pounds (FashionUnited, 2014). Additionally, it is reported that the UK’s clothing and footwear retailing accounts for eight percent of the GDP (Gross Domestic Product). There were more than 290,000 retail shops in the United Kingdom (Goworek,, Fisher and Hiller, 2012, p.943). In addition to statistics, the spending by consumers tended to differ not only in the UK but also other countries. The variations in the level of spending are experienced in different regions. Among the factors that caused the level of spending to differ among various regions include the price level. The price is, however, influenced by a number of aspects; among them include the level of competition, the level of income, and costs of production. An increase in the cost of clothing and footwear production normally result in an incline the level of prices. However, a high level of completion in the market tends to drive the prices down. On the other hand, an increase in the level of prices normally leads to an increase in the demand of stylish clothing and footwear. Generally, German is associated with price sensitivity; on the other hand, consumers in France are inclined to prefer quality to low-priced products (Villette and Hardill, 2010, p.465). With respect to Park’s (2012, p.36) argument, Zara should be keen to ensure consumers with different tastes and preferences are satisfied as far as different regions are concerned. For instance, the cultures of different nations, such as India and Pakistan, require women to dress in attires that display respect. As a result, the attires that are worn by their female counterparts in Western tend to differ. In this regard, Zara should respond to these differences positively. 3.2 Competition The competitors of H&M, Benetton and Gap are considered the rivals of Zara; both H&M and Gap own the production processes and a majority of the stores. Despite the stiff competition that is provided by these two companies, Zara is likely to earn a competitive edge due to its creativity and speed of displaying new items on various stores. The high speed has also seen Zara expand its operation via opening up new stores in various parts of the world. Despite the efforts made by Zara, other players in the retail clothing industry attempt to offer the latest trends in the market. Additionally, competitors also predict the market trends by studying the current consumer behaviours as far as the fashion market is concerned. Zara attempts to counterattack such measures by embracing the instant-fashion approach. Additionally, the company ensures its operational activities are characterised by effectiveness and efficiency via embracing the short chain of distribution; this is ensures that the company faces a low cost of production. Presently, the company has endeavoured to expand to North America; the company’s stores are not less than twelve in Canada. Given that the fashion industry is characterized by stiff competition, Zara is likely to maintain a competitive edge via its creative and speed as far as meeting and exceeding consumers’ expectations is concerned (Benedetto, 2014, p.23). 4.0 Conclusion Zara is among the three recognized clothing retailers in Spain; with a heavy investment in new stores, Zara has experienced growth since its inception (Gimeno-Martínez, 2011, p.211). The company has expanded in more than seventy countries (Zara, 2014). The rapid expansion and high level of sales that are experienced by the company is attributed to the Zara’s strategies which aim at a prudent expansion. Among the retailing strategies that are embraced by company include an excellent window display of its lines of products- men and women clothing. The exceptional window display is underpinned by a sense of scarcity and freshness given that the company stock a few and new items in diverse stores. The high speed (two weeks) of developing a product has seen the company outperform other players in the market. Additionally, the company continue to employ cost-leadership through a number of ways, such as embracing a short distribution chain. On the other hand, the company ensures that the different pricing is applied in different regions. However, the company faces a stiff competition from other competitors such H&M and Gap; Zara should ensure the instant-fashion is maintained to earn a competitive edge in the market. List of References Benedetto, C., 2014. Open innovation and the value of crowds: implications for the fashion industry. Journal of Global Fashion Marketing, 5(1), pp.26-38. Bhardwaj, V., 2009. Fast fashion: response to changes in the fashion industry. The International Review of Retail, Distribution and Consumer Research, 20(4), pp.165-173. Bush, S., 2009. From Prada to Zara: Is the Global Recession Out Of Fashion? Strategic Direction, 25(3), pp.9-11. FashionUnited, 2014.Facts and Figures about the Fashion [online] Available at [Accessed 26 June 2014]. Fredriksson, C., 2011. Retail and Fashion – A Happy Marriage? The Making of a Fashion Industry Research Design. Culture Unbound: Journal of Current Cultural Research, 3(1), pp.43-54. Gimeno-Martínez, J., 2011. Restructuring Plans for the Textile and Clothing Sector in Post-industrial Belgium and Spain. Fashion Practice The Journal of Design Creative Process & the Fashion Industr, 3(2), pp.197-224. Goworek, H., Fisher, T. and Hiller, A., 2012. The sustainable clothing market: an evaluation of potential strategies for UK retailers. International Journal of Retail & Distribution Management, 40(12), pp.935-955. Guidolin, M., Hyde, S. and Ono, S., 2013. Does the Macroeconomy Predict UK Asset Returns in a Nonlinear Fashion? Comprehensive Out-of-Sample Evidence. Oxford Bulletin of Economics and Statistics, 2(6), pp.6-12. Nagy, K. and Várfalvi, A., 2012. When Spain dictated fashion: A Hungarian ladys richly decorated garments, c. 1600. Studies in Conservation, 57(1), pp.208-216. Okazaki, S., Lee, C. and Yun, H., 2009. The Influences of Perceived Risk on Attributes of Smart Clothing -Comparison among Korea, Spain, and U.S.-. Journal of the Korean Society of Clothing and Textiles, 33(6), pp.893-903. Park, H., 2012. Eco-Fashion Industry Trend and Creative Fashion Design Technic for Zero-Waste. Fashion business, 16(4), pp.29-45. Sedeke, K. and Arora, P., 2013. Top ranking fashion blogs and their role in the current fashion industry. First Monday, 18(8), pp.11-18. Villette, S. and Hardill, I., 2010. Paris and fashion: reflections on the role of the Parisian fashion industry in the cultural economy. International Journal of Sociology and Social Policy, 30(10), pp.461-471. White, A., 2005. How Zara Fashions Its Supply Chain: Home Is Where The Heart Is. Strategic Direction, 21(10), pp.28-31. Yuksel, S., 2012. An Outlook of the Fashion Industry Through Fashion History. Procedia - Social and Behavioral Sciences, 51(4), pp.1016-1021. Zara, 2014. Zara. [online] Available at: < http://www.zara.com/> [Accessed 26 June 2014]. Read More