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.
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.
Competition changes, somewhat, as a business grows. It could be said that Zara compass favorably with both the Gap and Benetton. These two are international companies which are primarily involved in the same business that Zara is, but they do not match as well as another competitor. In Australia, there is London's Topshop and smaller stores such as Black Sugar, but they also are not good comparisons. Hennes & Mauritz compares well to Zara for several reasons. As Craig, Jones and Nieto put it in a case study from 2004;
"The most interesting of Zara's competitors for comparison is Hennes and Mauritz (H&M), who as the case study states, "was considered Inditex's closest competitor, [with] a number of key differences." H&M differs from Zara because they outsource all of their production, spend more money on advertising, and is price-oriented. The key similarities for comparison between Zara and H&M are that they are European-based companies, are fashion forward at lower price retailers, and have a strong international expansion strategy."
The differences outweigh the similarities between these two retailing giants. Zara has teams of designers who work directly with company manufacturers to put out products at an astonishing rate. H&M outsources all of its designs, so they are forced to warehouse more of the clothing that they sell. Thus, the turnover of inventory is greater for Zara which works better for its marketing strategy. Since the company does not use advertising media, they need customers who want to patronize the store often to make sure that they are not missing something new. H&M follows a much more traditional model of retailing, which has proven successful over the long-term.
Competitors such as the Gap are not as closely related to Zara as H&M also because of Zara's emphasis on European styles. Gap sells more rugged clothing which is a hallmark of the American market. Zara copies European designers who have a more feminine bent even in their clothing for men (Evans, 2010). Benetton is not as closely competitive because it relies even more heavily on advertising, and because the company does not match financially with Zara as closely as H&M.
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…