Zara's marketing strategy and international retail expansion

Retail Marketing Operation Management

Zara is a company that has used exciting marketing strategies to enable the company to grow into the mega-merchant that it is today. From humble beginnings Zara has become a world and industry leader. This report concerns how Zara began and who shops there, along with a section about major competitors. Important business elements such as value proposition and its delivery, how Zara accommodates "green" ideas, supply chain collaborators, presence in the retail market, and how promotions are used by the company.

Zara began as a small storefront in a medium sized city in the small Spanish state of Galicia in 1975. Amancio Ortega and Rosalia Mera dreamed of helping the average person buy designer look-alike clothing. Zara began as a store that sold to customers who wanted the look but not the price of some of the high end designers of the time. The store was a success despite the fact that they put no money into advertising.

Throughout the last half of the 1970's and through the 1980's Zara stores were seen to popup with surprising regularity in Spain. However, Ortega had bigger plans for the clothing manufacturer and seller. Ortega wanted to take his idea to international markets, and began with a store in Portugal in 1980. This was the first of many stores started in foreign markets. The company has grown so fast that as of today they have a presence in 73 countries around the world. Most of the stores are owned by Inditex (the parent company of Zara), but when a country does not allow foreign ownership, the company franchises its stores.

Zara also thrives in a crowded market because they have a very unique marketing strategy. Early, it was decided that the stores and word of mouth would be the only advertising needed to promote the name. Instead, the company put all of the millions of euros that would have gone into advertising toward the continued expansion of the company. Also, the company has moved away from big name designers who would also tie up a lot of capital, and utilizes design groups instead. This change allows the company to take a design from concept to store in about two weeks. The average time that most companies spend in this process is six months. This has given Zara a reputation for giving its customers the freshest looks in the industry.

Consumers

Zara's target customer's two primary qualities; they are frugal and they are fashion conscious. "Zara's target market is very broad because they do not define their target by segmenting ages and lifestyles as traditional retailers do. Zara's target market is a young, educated one that likes fashion and is sensitive to fashion" (Craig, Jones, & Nieto, 2004). Many customers who walk into a Zara store know that they are going to see innovative design, such as that which shows from windows bedecked with renowned designers, but they also know that they are going to find fashion quality at a low price (Evans, 2010). The store does not try to limit itself to a typical customer because, as with any retailer, they want to continuously expand their customer base. Therefore, Zara caters to a wide variety of people who want to be up-to-date, but are not willing to spend exorbitant prices to get there (Evans, 2010). Customers also realize that a particular article may on the shelves for very long because Zara turns over its inventory so rapidly. Thus, another quality of the company's customers is that they value exclusivity; meaning that the customer wants to be the only person they know with a particular style blouse or pant.

Approach to Greening Operations

The company has adopted an extensive policy regarding social responsibility. It has become one of the buzz phrases among people around the globe, but all companies can help make sure that the world is around, and livable, for future generations. The fact that Zara has included their social responsibility as a major portion of their mission statement shows the commitment that they have made to the effort.

The company has a threefold policy with regard to environmental policy. The three major arms of the policy are how the company conducts business in its many stores, how the products are manufactured, and how the product is transported to the store. The stores themselves are now undergoing changes across the board the will make them more eco-friendly. Lighting, heating and cooling, and waste are all dealt with in a manner which is environmentally safe. Store employees receive specific training with regard to how they can reduce their footprint while working in the store. As for the products, the company is making a push to increase the amount of cotton it uses that is organically grown. The company website says "Zara supports organic farming and makes some of its garments out of organic cotton (100% cotton, completely free of pesticides, chemicals and bleach). They have specific labels and are easy to spot in our shops" (Zara, 2011). They also do not use any petroleum-based products in the shoes that they sell. Transportation equipment is being switched to biodiesel and other sustainable fuels as rapidly as possible. "Zara's fleet of lorries, which transport more than 200 million items of clothing a year, use 5% biodiesel fuel. This allows us to reduce our CO2 emissions by 500 tons" (Zara, 2011). These policies help make sure that the company is assisting with the worldwide goal of reducing unsustainable products and practices.

Customer Relationship Management Strategy

The strategy that Zara employs is enmeshed with the way that the company sends product to its stores. Since the company wants to make sure that it is always in tune with the latest fashion developments, they try (and often succeed) to beat even the high-end designers to market with new designs. Because Zara is able to quickly put together a design, and manufacture a small run of the product for its stores, customers expect that they will be able to find the latest designs at Zara stores. This creates a relationship that the company wishes to maintain.

The company's website talks about the primary goal of the company being to establish relationships with customers (Zara, 2011). This can only happen if the store is consistent in the way that it both hires and trains the people who work in the stores. Since one of the main goals of the company is to make sure that every customer can get what they want quickly, they have been able to establish this relationship.

Another layer of customer relationship building is seen at the corporate level. The company established the way that they interact with customers from the example set by their founder. The company is committed (Zara, 2011) to ensuring that customers can buy the most up-to date fashions at affordable prices. This is a strategy that seems to expand their customer base exponentially every year as can be seen with the international growth that the company has experienced.

Value Proposition

Value proposition can be a difficult element to quantify as relates to a retailer. It is necessary to see what the mind of the customer is, and determine if the specific seller has met the expectation of the seller. Most times, a retailer tells its customers what it is from the beginning and then the company just has to stay true to what it told customers in the first place. The term is also more complicated than that in light of the changing face of the world. Customers in today's retail marketplace want to make sure that the people they buy from are socially responsible also. This was not a concern even two decades ago, but it has become one of the biggest selling points a company has.

From the beginning, Zara told customers that they were a store which would deliver high-end fashion at an affordable price. Not only has this not changed, but it has become more true as the company has grown. Because of their place in the retail clothing market, Zara is now able to deliver fashion that it may not have been able to when the company was young. Designers from all over the world can be gleaned from, to some extent, whereas Zara was confined to local design early on. Zara's value proposition also has to do with how it interacts with the environment, and the fact that a major part of its mission statement involves the ethical treatment of animals and the environment.

Supply Chain Collaborators

The main thrust of the unique model that Zara has adopted is wrapped up in its supply chain. Supply chains have always been recognized as possibly the most important part of a company's continued viability. This realization came from a view of military history in which an army was only as strong as its supply chain (the best example of this may be when Napoleon tried to take Russia without an adequate supply chain). The same is true of a company. Without an adequate plan for supply chain, the company cannot thrive; it may not be able to survive.

Zara calls their supply chain system "fast fashion." This system;

"depends on a constant exchange of information throughout every part of Zara's supply chain -- from customers to store managers, from store managers to market specialists and designers, from designers to production staff, from buyers to subcontractors, from warehouse managers to distributors, and so on. Most companies insert layers of bureaucracy that can bog down communication between departments. But Zara's organization, operational procedures, performance measures, and even its office layouts are all designed to make information transfer easy" (Ferdows, Lewis & Machuca, 2005).

The communication system itself is multilayered, but, due to extensive use of electronic media, it is always connected to top levels of management. The collaboration happens within the company at all levels, and it happens between the customer and the employees who serve them The efficiency of the chain depends on the fact that there is never any breakdown in communication at any level.

To ensure that this happens, Zara employs social media, phone apps, and other innovations that rapidly get ideas through the chain. Social media is a way for customers to react to different designs that they have either seen or worn. This valuable information ensures that Zara is always on top of what the customer wants. Everyone from top executives to store employees use all forms of electronic device to keep in contact with warehouses and designers. This also makes it easier to get a product to market as quickly as possible. This is the reason that a product can go from concept to sales floor in just two weeks.

Retailing Presence

Zara, as an extension of Inditex, has that presence. Inditex has a several brads that it sells so that it can be seen in different markets (Inditex, 2011). The presence that the company has in different markets only enhances what it is able to do with its Zara brand. The exclusion of traditional marketing may seem like a bad move on the part of the retailer when it comes to recognition and presence, but Zara uses a different means of getting the same presence that competitors such as H&M receive through marketing.

Zara has promised it customers, through an unwritten contract, that the store will carry the latest fashions at lower prices. This contract has established the presence that Zara wishes to maintain. Customers do not need to see advertisements of the latest styles Zara is offering; the customer knows that they just have to go to one of the many retail outlets Zara maintains. Presence in this sense is managed through the number of stores they have and the number of countries that they have a presence in.

Explanation of Promotions

Zara does not advertise like traditional retailers, but they are able to use current methods of dissemination to make sure that people understand what they are offering at a discounted rate. The company uses both social media and print media to ensure customers know when there will be particular promotions at their stores. Lately, Zara had a promotion that advertised reduced perfume prices for a specific period of time in Singapore. This was advertised in their website, through print media sources, and through the company's Facebook page and twitter account (Singapore, 2011).

The reason that the company chooses to market in this manner is that they realize that their customer base is strongest among young people who use this type of media. Therefore, the company realized that they had to have a very strong presence among consumers who would use this media. Also, using this type of advertising is much less expensive than traditional media advertising. The company can maintain a Facebook page and a twitter account for free, and use the information both for promotions and to see what the buzz is about their product lines.

Value Proposition Delivery

Value proposition that a company has is forged much the same as any other contract that it makes with its customers (Lake, 2011). Zara deals in clothes that is the height of European fashion as far as looks are concerned. However, the company cannot sell clothing exactly the same as some of the top designers because the fabrics are too expensive. Therefore, when Zara designers create something new, they will not use the finest silks or fabric woven to a high thread count. The clothing has to be of a certain quality that will make it last and maintain its integrity and look, but the fabrics will not be of the same exotic quality used by some of the name designers.

This proposition also extends to the supply chain. A customer at Zara expects to see designs that they cannot get at other retailers because of the turnover generated by the company. Executives at Zara have made an agreement with their customers that they will constantly be putting out new products that appeal to the fashion conscious customers they want.

Another part of the proposition is the environmental stance that the company maintains. In today's global society it is important to make sure that all reasonable effort is made to make sure that the environment is cared for. Zara has made that a major part of their mission statement, so customers come to expect that from Zara as a company. Welching on this or any other part of the proposition may mean that Zara will see a drastic reduction in customers.

Of course to the retailer this proposition that tells of their commitment to being a valuable retailer and their customer relationship are both primary methods of maintaining a base. A company that forgets who it is delivering the proposition to will likely not be able to succeed. In a market which is as cutthroat as clothing retail, Zara has made sure that they are always cognizant of the way customers view their company.