This article is written by Darshit Vora, from Narsee Monjee Institute of Management studies. The article does an in-depth analysis of the fashion company Zara, mentions about the strategies, controversies, current challenges and suggestions for the company to increase sales.
Inditex is the world’s largest fashion retailer which has about eight brands; it has 7,200 stores across 93 markets across the globe. The company is manufacturing products for both men and women. It set up its first store in 1963. It has major brands like Zara, Pull and Bear Bershka, etc. Zara is the largest contributor in terms of revenue to the company.
About the company
Zara is a company that is the world’s largest apparel retailer. It provides products like clothing, shoes, swimwear, beauty and perfumes. The journey began in 1975 where a first store named Zorba was opened in Galicia Spain by Amancio Ortega. It was then changed to Zara because there was a bar store named Zorba blocks away. Initially in the store, Zara used to provide lookalike products of popular and high-end fashion products at a very low price. Till the 1980’s it opened various additional stores across Spain.
Zara had its first international expansion in 1988 to Porto in Portugal. In 1989 it opened its first store in the United States. After that Zara just kept on expanding in various countries like South Korea, Maldives, Philippines, Malaysia, Russia, etc. Even during the economic slowdown, it didn’t affect the company a lot. Zara in 2010 launched its online boutique website in various countries like Spain, the UK, Germany, and France. Zara was also quick to introduce RFID technology when the item gets sold it can be notified and can be replaced.
Vision and mission of the company
Vision: The company is dedicated to satisfying the desire of the customer. It promises to provide the new designs to the customer at an affordable price and ensure good quality.
Mission: To contribute sustainably to society and the environment.
Reasons for success of Zara
The success of Zara is quite admirable. The journey started from merely a small store outlet in Spain to becoming the biggest fashion brand across the globe. There are various factors that have played a critical role in Zara’s success.
Efficient supply chain
Efficient supply chain management is one of the important ingredients for their success. Zara has an efficient database which mentions the latest trends, new designs, etc to attract customers. It has adopted a buy runway model in which in a very limited period of time the product is delivered to the store which leads to the reduction of deadstock. Zara distributes about 60,000 items every hour. It launches about 400 million items and produces 12,000 thousand designs every year.
It is one area where Zara has a significant contribution in sustainability and spends about 52 billion every year for the arrangement of social and cultural programs. They have even eliminated the use of plastic to contribute to the environment positively. It also takes steps in the reduction of their use of water consumption, protecting biodiversity, etc. Due to such activities, it helps them earn customer loyalty.
Zara has limited exclusive products
Zara has a limited amount of inventory stock on its collections which creates a fear among the customer that their favourite would go out of stock and would attract them to purchase the product. Which is very unlike other brands due to excess inventory stock and have to sell products on discount.
Zara is one company that emphasizes in satisfying the needs of the customers. Therefore it invests heavily in technological innovation. It considers customers’ views and works on their customer service which gives them a competitive edge over other companies.
Attractive marketing strategy
There are various marketing strategies that they follow, the emphasis is given on word of mouth strategy rather than traditional advertising strategy. They emphasize enhancing customer experience by providing an ambience, good location, etc. All of the experiences are provided at a very affordable price. The brand used various social media platforms effectively to build brand loyalty.
Product replacement cycle
One of the major qualities that Zara possesses is lightning-fast replacement policies. This strategy helps the company to stay updated with the current brand. it creates needs among the customers to attract them to purchase products.
Integrated customer feedback model
The customer feedback given to the stores which sent directly to the designer. This helps to suffice the current needs of the customers.
Zara is a company that invests very minimally in advertising their brand but the thing that they don’t compromise is the location. According to research, the location has a significant impact on the customer’s mind while purchasing a product.
Why do customers prefer Zara over other competitive brands
Zara faces competition from international and national brands though through their various strategies and efforts are done to retain customers. This has helped them to build a strong customer base. Therefore they only prefer to buy from Zara and not from other competitive brands like H&M, GAP, and UNIQLO.
- H&M: It is also one of the fastest-growing fashion companies. Which also provides products at a reasonable price similar to that of Zara. The only thing where H&M is lacking is the quality it is not able to provide quality that is being provided by Zara.
- GAP: It is an American fashion-based company which is used to provide products which are simple and fashionable. It lacks in data analytics as compared to Zara where the designers are not able to understand the consumer minds.
- UNIQLO: It is a Japanese based fashion brand that has various strategies very similar to that of Zara. The point of difference is the new product experience provided to customers which reduces the stock of products and increases the sale revenue.
Zara being a company along with being with one of the biggest fast fashion brands has involved in various kinds of controversies. One of the controversies that grabbed significant attention was
The ‘COPYCAT’ controversy
A 26-year-old designer Bassen posted her design on Instagram which was very similar to Zara’s design and claimed that Zara had been borrowing her artwork for many years. The Spanish giant has always denied the claim that they had copied the design. The retailer was accused of plagiarising her four works one of them being the flowing skirt. To the allegations, Zara claimed that the designer’s designs were quite generic and the complaints were quite less as compared to Zara’s customer base.
This statement invoked more controversy. Due to this many designers raised their voice against the company for imitating their design and are not compensated for their work. Inditex, the parent company of Zara had recently contacted the lawyer of Bassen to amicably resolve the matter. The company had even investigated this matter. Inditex commented on this issue claiming that it respects the intellectual property rights of the third party. They have also removed all the supposed stolen designs from the sale.
This is not the first time where Zara is involved in a controversy related to copyright infringement some of the prominent ones are as follows.
Rains is an Aarhus based outerwear company that has designed long jacket and parka styles. They had marketed these products extensively on various social media platforms. According to them, Zara has copied their raincoat design. This Is because they have approached owners of garment factories in China to copy Rains product. Rains have sought injunctive relief from Zara for infringing their designs. In the domestic Courts, rains have won the copyright case against the Spanish giant, the compensation amount is yet to be decided. Rains also claim that they are going to take international action against Zara.
Amiri sues Zara
Amiri, which is an American fashion company has sued Zara for allegedly copying AMIRI MX2 jeans which are sold by Zara in the name of skinny biker jeans. Therefore they have filed a 3 million lawsuit against Zara in federal court in Los Angeles.
Fiesta fabric copyright controversy
Fabric fiesta is a US-based textile supplier.The company focuses on prints, laces, and novelty fabrics. The company has filed a complaint in the US district court that Zara has created and sold items featuring a similar design. Fabric fiesta has claimed that the constituent design elements are the same. The company has claimed that each defendant would be liable to pay $ 150,000 each.
Various controversies on other matters
Controversy related to antisemitism
A swastika design was made in a Zara bag which was noted by a customer due to which Zara withdrew products that had this sign. In 2011 it was selling t-shirts that closely resembled uniforms worn by Jewish in the concentration camps. Which created a lot of controversies and in a few hours it withdrew the product and apologized for it.
Controversy related to labour practices
In 2011 in Brazil a Zara store got closed due to existing poor labour conditions. In 2017 many workers of Zara in Turkey wrote notes and agreed that the company was not paying them a salary. The company claimed that they would prove wages to their workers who haven’t received them. IN 2016 BBC news stated that there were various incidences of various child exploitation cases. The company claimed that they would resolve the matter within six months.
Recently in news
Recently Zara has been in news for not so good reasons because it has supported the protestors in the hong kong province and has climbed that they are in favour of one nation and two policy. This is not the first time where Zara has been in controversy for interference in Chinese matters. In 2018 it violated China’s sovereignty by naming Taiwan and Hong Kong as separate countries.
Due to coronavirus, the sales of Zara have taken a hit; it had a quarterly loss as due to lockdown 90 % of their retail outlets were closed. The owner of Zara has decided to close about 1,200 stores across the world due to the fall in sales. They have now set up an ambitious target to increase online sales from 14% to 25% by 2022.
During the starting of the pandemic Zara was hailed for their efforts it provided 3 million PPE Kits and 1,500 ventilators and also assured full salaries to all their workers. It has been one of the companies which can’t stay away from controversies. In Myanmar, they are treating their workers poorly. They are earning only 350 rupees a day and working for 11 hours for six days. Many of them have lost their jobs.
Challenges and threats for Zara
- Zara doesn’t rely on advertisements that can be used by their competitors to get an edge over them.
- If there are any logistics problems it can affect their sales drastically.
- During the situation of a pandemic where people would avoid coming to physical stores which would decline their sales.
- The main distribution centre of Zara is only in Spain; it would hamper the demands of international costumes.
- Lack of skilled individuals for the company to expand the market.
- Claims of imitation have hampered the reputation of the organization and also affected the customer base.
- Zara has failed to understand the needs of the customers of the Indian market measures should be made to adapt to the Indian market as it is being one of the fastest-growing ones.
- Decentralizing it’s manufacturing policies so that it can open its distribution centre.
- Investment should be made in introducing methods to improve their online sales.
- Efforts should be made to improve the mobile application of Zara to improve sales.
- Creating a customer loyalty program to increase and build a stronger customer base.
Zara is a company that is going to be one of the most affected by this pandemic to attract customers. They have to find new strategies and models and have to strengthen their online sales. They have to focus on not falling in any controversy which will hamper their reputation and thus decrease their sales.
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