To: G. Bernard Yevin, CMO
From: Joey McNaught
Subject: Case 3: Marketing Excellence: ZARA (Pages 552 - 553)
Date: April 7, 2019
Background
Located in Spain, Zara has been Europe’s leading apparel retailer for a number of years. Their ability to provide consumers with current, high fashion styles at reasonable prices. Zara’s overarching strategy is currently achieving growth through diversification with vertical integrations. This strategy has adapted to couture designs, manufactures, distributes, and retails plentiful amounts of clothes within approximately two weeks after the original design makes its first appearance on the catwalks.
Zara makes approximately 85 percent on the full price clothes they sell, which is above the industry average (60-70 percent). On top of this, unsold items account for just less than 10 percent of its stock, which the industry average is about 17-20 percent.
The problem that they are facing, is that they are having a tough time when they expand into new markets and countries because it provides a risk of losing the rapid progress they make and will have to work extra hard to keep providing new products for their customers. On top of this, they are trying to figure out the best way to make their presence online while still using their current business model.
Key Issues
1. What are the demographics and psychographics of the ideal Zara customer? Justify your analysis.
Like most companies, a demographic is very specific because it is easy to market to people of all ages and different mindsets but for Zara, they try their very best to market to a very specific demographic. The demographics for Zara a men or women between the ages of 18-40, with a mid-range income, and are interested in fashion trends. This specific age group is because that is the typical age group of working people that can provide for themselves. I believe that Zara markets to this specific demographic that is interested in fashion trends because they are always providing new fashion styles for consumer interests.
With demographics, there are always psychographics that go along with those specific segments. Psychographics are the mindsets of the consumers and specifically, Zara’s consumer psychographics are people that live a very hectic lifestyle, are small sized customers, and like plus sized shaped garments. I think that Zara chooses people who live a hectic lifestyle because of the way that the company constantly puts out new products at a rapid pace, meaning that the consumers keep up with the rapid trends, thus living a hectic lifestyle. I feel that they choose to target small-sized customers because with living a hectic lifestyle, their consumers are always on the go and active, which helps with having a slimmer figure and helps the consumer purchase by instinct. Lastly, I feel that they target people who enjoy plus sized garments because more often than not, people feel comfortable wearing larger sized clothes.
2. What are the strengths, weaknesses, opportunities and threats of/to the Zara business model? Justify your explanation with a SWOT Analysis.
Strengths:
1. Zara has more than 2000 stores all over the world.
2. One of the largest Spanish retailers in the world.
3. Zara holds a cost-friendly supply chain management, which helps with their operations, manufacturing, and also means they are vertically integrated.
4. Zara has taken their popular brand and applied it online, which has allowed them to gain advantages over their competitors.
5. The company’s products are made at a competitive price, which is huge for innovative and fashionable designs. This is something that many other companies are trying to recreate but have not seen the same success as Zara.
Weaknesses:
1. Zara has a very limited marketing and advertising department, which prevents them from gaining a comptetitive advantage over their competitors. This is not good because you must maintain a complete balance, in order to keep building upon your brand’s name and making sure it is reputable.
2. Because there is high competition, this means that they see a limited market share. Market share is huge because Zara is one of the most notable brands within clothing and the more they keep slacking within the marketing industry, the more the competition is going to keep taking business from them.
Opportunities
1. Zara can explore more global markets, allowing them to create more business and expand their segmentations.
2. Zara can expand upon their online marketing and ecommerce, which is huge because most of business is done online and if they can gain an advantage on there, then they will stay above their competition.
Threats
1. High-end fashion merchandisers can be a major threat because if they start being more innovative and figuring out how to become more cost efficient for consumers, then they could overthrow Zara and take their business.
2. Consumer switching happens every day and with that, Zara could potentially lose business but I think they should keep up with research and development in order to make sure they do not lost their customers to other companies.
3. Fake imitations can reduce the sale of Zara products because if third-party companies are producing fake versions of Zara’s products, then customers may feel that Zara is not that premier and the company will start seeing the decline of sales.
3. Who are Zara’s competition and why? Justify your analysis.
Zara’s top competition is H&M because they are a well-known brand globally and have seen greater success compared to Zara. The two brands’ number are arguably close but H&M generates approximately $29.5B more revenue than Zara. For Zara to become remotely close to this competition, I think they need to simply start attacking the online game and figure out how they can attract more customers through experiences and reach them on a personal level. If they do this, then they will start reaching the heights that H&M has and they will see the same success.
Zara has beaten the competition and is enjoying its leadership in latest fashions. The founder of Zara is the richest person of Spain. The well-taken strategic decisions have provided a strong and reliable foundation for the organization. Strategic decision-making and introducing change in strategy are extensive activities requiring many efforts, but for Zara, it is need of the hour. In order to maintain the growth rate and excellence of the company, Zara needs to bring new changes in its strategies. A variety of strategies and some changes in the objectives may renew the company growth cycle. Zara in itself is a result of strategic thought. However, it is highly recommended to not implement all the decisions taken in one go. It would be more suitable if Zara introduces some change, afterward wait for some time to analyze the response and then can decide further steps. Exhaustive evaluation of the circumstances should be done prior to implementation of any decision.
