During the past twenty years, the textile market has undergone profound changes. China is largely responsible for the upheaval in the sector. But other factors, such as increased costs (cost of fabric production cost and so on) are also taken into account. Larger companies then introduced the retail mix.
Today, major clothing retailers like H & M, ZARA, and Benetton, represent not less than 40.6% of the market, as against 18.7% in 1990. They won against independent retailers and supermarkets. ZARA is one of the largest brands of ready-made global brands. It is found in 72 countries with over 1,300 stores in all major cities. ZARA not only consists of women's clothing but is also aimed at men and children's fashion.
ZARA has opted for a particular promotion that is exceptional on the market. With the advertising expenses of the competitors usually totaling to 3 or 4% of turnovers, ZARA's expenses are more or less 0.35%. The brand chooses not to use aggressive means of advertising.
The brand instead concentrates on weaving an interactive relationship with its clientele. By frequently rotating the range ZARA encourages the client to regularly revisit and rediscover the display available in its stores.
In addition, the brand has adopted a specific strategy for its stores. Each outlet or store is considered a showcase for the brand and is then thought to detail. The string therefore considers each of its stores as iconic.
This promotional approach, allowing a reduction in communication costs, allows significant investments in real estate capital and thus ensures a better location for shopping. These are found in every city in the world to maximize the visibility, accessibility and presence in neighborhoods conducive to consumer shopping and with the aim to compete with more expensive brands on their own territory.
All the elements discussed above, therefore, promote the direct relationship with the client. Like many competitors, ZARA has developed ways of loyalty programs such as loyalty cards, discount vouchers and gifts etc.
The chain has developed a particular philosophy: "design,continuous innovation, quick response to market and customer focus". In addition to customer focus ZARA gives great importance to the layout and designof its stores.
ZARA has developed within the framework of this philosophy, a system whose speed of adjustment to market need far exceeds the capabilities of its competitiors. While all production stages of a product in them (design, production, distribution) takes 6 months, ZARA is able to achieve this in three weeks. This is possible due to a centralized system in Spain, with 70% of production including 50% in Spain and the whole process of production, design, manufacture and distribution is from Spain.
ZARA first integrated (downstream) the distribution chain, including stores and its logistics. This allowed the brand to develop a distribution system capable of delivering goods around the world within 72 hours. In addition, it also allowed the company to develop displays, namely its stores, leading to customer loyalty to the brand. ZARA has also benefited from its integration into the group Inditex (upstream) to have better access to the system of production and raw material supply.
Tags: ZARA, strategic analysis, marketing concepts
[...] And finally, back on the market requires huge capital intensity. All these factors make it difficult to establish a new entrant to the market. A potential threat is retail, e.g. Carrefour. - Threat of Substitutes: You can see the threat of substitutes in two ways. First, there may be a threat on the products from offshore companies that manage to produce a good quality for a lower price. Second, the lifespan of an article of clothing that is subject to fashion is very short. [...]
[...] Resulting in a gain in terms of speed as well as the costs incurred. Finally, ZARA has also implemented a strategy of geographical expansion. The company opened stores with a vengeance every year worldwide. It began in Spain and is now present in at least 72 countries around the world. Conclusion ZARA has been a huge success since its inception in 1975. The brand managed to gain market share in the European sector, the latter being highly competitive and yet extends even now increasingly in Asia and America. [...]
[...] It was during this same year that the first store opened in Spain. Between 1976 and 1984, the model ZARA pleased the public, so it could run on Spanish territory. In 1985, the Ortega family decided to create the company Inditex, which will then take control of the brand ZARA. During the first years after its creation, the Inditex Group will focus its production on the brand ZARA. In 2007, the turnover of the parent company amounted to 9.435 billion euros in ZARA which contributes around or 6.264 billion. [...]
[...] But the customer has become demanding and simply offering clothes "trend" is not enough. This is why ZARA has launched services in various more or less related to textiles such as makeovers, customization, cosmetics, etc . To summarize all of these ideas, the business model ZARA (and Inditex) is based on a high level of vertical integration. In fact, every activity of design, production, logistics and distribution takes place within the group, or be sub-contracted to a company close to the group. [...]
[...] The speed, because it requires that the firm can follow the latest trends and competitors to speed, but also to differentiate themselves from future copies that could come from Asian countries. The cost control seems as an obvious factor in any business that wants to compete. ZARA has implemented a system that is in full agreement with these three factors whose mastery is essential. In fact, it masters the costs by integrating upstream. In addition, ZARA is fast and flexible thanks to its system that allows a rotation of its bid every three weeks. [...]
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