Zara’s History and Growth
Discuss about the Zara Fashion Retailers Company.
Zara Fashion Retailers Company is one the largest fashion international companies that trade in clothing and accessories. It is a Spanish company formed more than forty years ago by the cofounders Amancio Ortega and Rosalia Mera in Arteixo, Galicia, Spain. The store started as a small store that featured low-priced products but of popular high-end fashions. Zara has then grown into a large company with several stores in various parts of the world; entire Europe, USA, Mexico, Middle and even Far East. Currently, Zara is the main brand of the Inditex group and boasts of more than 2200 stores globally, trades online and with an annual revenue collection of approximately $9 billion. Such a growth from just a single store into being a multibillion dollar company has been characterized by tremendous changes, improvements and even errors in the process in a bid to satisfy the demands of the ever dynamic market.
The company has undergone various adjustments in their attempt to maintain and expand their market share in the fashion industry. Some of the main decisive factors in the industry has been the ability to adjust to the dynamics of the market in terms of the emerging trends and changes in the taste of the consumers. Zara Fashions Company, just like other companies in the industry has tried to do their business differently in order to lure customers into their stores and to maintain the existing ones (Gamboa & Gonçalves 2014). For instance, the time taken to develop and deliver a new fashion into the market is of great importance as the company that develops and delivers a new trendy model in the market has upper hand in acquiring and maintaining new customers. To achieve this milestone, Ortega in 1980s decided to alter the processes of design, manufacturing, and distributions to help reduce time and logistics involved in coming up with a new design and making it available to consumers. This development involved the use of technologies to identify any room for fashion design development and the use of group designers instead of individuals.
Through this adjustment, the company has been able to develop new product and deliver it to the stores in one week against the six-month industry average. The company has therefore been able to launch an average of 1200 new designs annually, producing more than 450 million products per annum. With this kind of fast process of developing, designing, producing, and delivering new products in to the market, the firm has been able to earn competitive share of the market as it has made most of the customers in the fashion industry believe that it’s only Zara the king in new fashions. It is believed that Zara is so efficient that if a new fashion does not perform well and maybe stays for a whole week without selling, it can be withdrawn from the shelves and new orders cancelled as explained by Caro, Gallien, Díaz, García, Corredoira, Montes, Ramos and Correa (2010). This fast adjustment allows them to be able to redesign the product and bring it back to the stores within a week.
Zara’s Business Strategies
Rinallo and Basuroy (2009) found out that the company adopted a policy of zero advertising and instead reinvest a fraction of the revenue in establishing new stores. This policy has favored Zara Company in various ways such as nondisclosure of the company future plans and intentions. Through advertisement, other competitors do have rough idea of the company’s yet-to-come products, and may tend to produce a similar product to counteract the advertised one leading to lower sales hence lower revenue collection. Zara as a company tries to get competitors off-guard in new fashion development. Establishment of new stores help in spreading the image of the brand and expanding the company while advertisement would have just spread the brand but not expanding the company.
Zara reduces production costs by producing most of its products within a given proximity. For example, most Zara products are manufactured in Spain, Portugal, Turkey, and Morocco. The company does not outsource most of its fashionable products like its competitors who outsource them from Asia but instead produce them at company-owned factories. The company established one of its factories in La Coruna a city well known for the rich textile industry. This concept helps Zara access raw materials easily hence lowering production cost which in the end has a reducing tendency on the price of the final product, (Rinallo, & Basuroy 2009). The low-priced high quality fashions help the company attain greater heights in market share in the industry as compared to its competitors. The strategic locations of the factories help in making the distribution process simpler and this makes response to customer demands faster.
There has been a lot of pressure from online shopping service providers who present a platform that enables customers to orders products and get them delivered at their door steps (Caro et al. 2010). Zara has reacted to this competition by focusing on sales and marketing as well. Through this platform, the existing and new Zara customers are able to order fashion products online.
Davila and Ditillo (2017) elaborate that in order to monitor and control the flow of stock in the company’s stores worldwide, Zara introduced the use of Radio-frequency identification (RDIF) chip. The chips are embedded on the security tags of the products but are removed ones the product is purchased. This process triggers a system that enables the company to detect a radio signal from the tags, the stockiest take inventory and replaced the sold item. The system also enables location of items that are not on the selves through the use of RFID tags. This technology has made it easy to know the stores that require restocking worldwide as the system is centrally managed (Caro & Gallien 2010). It also helps in identifying non-moving stock that needs recalling for redesigning.
Zara’s Production Process
Zara Company has always tried to better its trading process all the way from production, distribution to actual selling. In 2011, the company entered a dialogue with environmental campaigners such as Greenpeace and committed to eradicate the processes that lead to release of toxic and harmful byproducts within its trading structure by 2020, (Brunner & DeLuca 2016). The company went ahead to become the biggest retailer globally to participate in raising awareness for Detox Campaign and later switched to production free from toxic release.
Zara has been considered one of the best innovative company when it comes to expanding into a new market. The company uses a well calculated approach to handle every market it expands to. The Asian market has been challenging to many foreign companies but Zara formulated its way in, a strategy that lead o very rapid growth (Davila & Ditillo 2017). The company’s success in Asia has been attributed to the company’s mastery of its chain of supply. The fact that it manufactures its own products which makes the chain shorter as compared to other competitors who outsource the products.
Zara opened its first flagship store in Shanghai in 2006 and the brand grew fast, the company had more than 120 stores in the country by 2011. The company has made use of local manufactures to partner in production of its products, a move that made the Chinese population accept the company as part of them. They viewed Zara as their own as compared to other foreign companies that tried to venture into the market with totally foreign products. The concentrated on differentiation in the Chinese market to make its products more distinctive. This move made consumers clearly identify the products and the stores in the cities. Zara’s ever dynamic fashions made the female customers a desire to visit its stores more than other stores in the country. The company also ventured in homewares and partnered with the local manufactured who were good at designing and manufacturing but poor in marketing and distribution. The company located the homeware stores in the stylish departmental stores that attracted the above average and the rich class of customers.
However, the company faced stiff competition from local competitors who it partnered with but later brock out after understanding the game of industry. It is said that some multinational retail giants have been fighting Zara to a point that some even corrupt the local administration to frustrate Zara (Gamboa & Gonçalves 2014). Another major challenge in the Chinese market has been betrayal by the local partners who tend to take some acts against their code of contract and sometimes violet the Chinese labor laws. Such violations have always damaged the image of Zara Company as mostly media talk about Zara not the local partners.
Zara’s Online Sales and Marketing
India has a policy that any foreign company has to partner with a major local brand to operate in the country. Zara achieved this by partnering with Tata Group to approach the Indian market. The company has been trying to lure the Indian elusive customers by regularly updating its stores with new fashions (Davila & Ditillo 2017).
Opening new stores was a challenge due to lack of spaces o open large store. The designing of the buildings do not favor large store like the ones Zara operates.
Majority of the population wear traditional clothing. This cultural practice has been a challenge to Zara as there has been a shy off from new fashions in the country.
Indian clothes are colorful, and this has been a challenge to Zara designers who have been restraining color palette.
Zara has achieved a lot from the time of its establishment to date. The company has conquered many market challenges including the Asian market challenges. In India and china, Zara has taken defensive position against most of its competitors, but on a serious note the company brand has been performing well so far. More are planned, however, it’s very unlikely that Zara will achieve the same growth in stores as it has achieved in China. At the same time, old rivals such as Gap and H&M have now entered the market. This adds to competition for available retail space, as well as a share of the customer attention and wallet. Zara’s clearly optimistic though.
List of References
Brunner, E, & DeLuca, K 2016, ‘The Argumentative Force Of Image Networks: Greenpeace’s Panmediated Global Detox Campaign’, Argumentation & Advocacy, 52, 4, pp. 281-299.
Caro, F, Gallien, J, Díaz, M, García, J, Corredoira, J, Montes, M, Ramos, J, & Correa, J 2010, ‘Zara Uses Operations Research to Reengineer Its Global Distribution Process’, Interfaces, 40, 1, pp. 71-84.
Caro, F, & Gallien, J 2010, ‘Inventory Management of a Fast-Fashion Retail Network’, Operations Research, 58, 2, pp. 257-273.
Chatterjee, Sayan. “Simple Rules for Designing Business Models.” California Management Review 55, no. 2 (Winter2013 2013): 97-124.
Davila, A, & Ditillo, A 2017, ‘Management Control Systems for Creative Teams: Managing Stylistic Creativity in Fashion Companies’, Journal Of Management Accounting Research, 29, 3, pp. 27-47.
Fuchs, C, Prandelli, E, Schreier, M, & Dahl, D 2013, ‘All That Is Users Might Not Be Gold: How Labeling Products as User Designed Backfires in the Context of Luxury Fashion Brands’, Journal Of Marketing, 77, 5, pp. 75-91.
Gamboa, A, & Gonçalves, H 2014, ‘Customer loyalty through social networks: Lessons from Zara on Facebook’, Business Horizons, 57, 6, pp. 709-717, Business Source Premier.
‘Global Commodity Chains and Fast Fashion: How the Apparel Industry Continues to Re-Invent Itself’ 2014, Competition & Change, 18, 3, pp. 246-264.
Rinallo, D, & Basuroy, S 2009, ‘Does Advertising Spending Influence Media Coverage of the Advertiser?’, Journal Of Marketing, 73, 6, pp. 33-46.
Rinallo, D, & Basuroy, S 2009″From Armani to Zara: Impression formation based on fashion store patronage.” Journal Of Business Research 65, no. 10 (October 2012): 1487-1494.
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