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ZARA
Zara, a globally recognized fashion retailer originating from Spain, has carved a niche market through its unique approach to customer service and operational efficiency. The company'
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Vivianna Atala
OSM
MIM Section 2
Hi professor, and class!
The company which I have chosen to analyze today is the popular Zara Company. It is a Spain founded company that I believe through their target niche market, unique philosophy, and customer service experience helped to revolutionize and promote the growth of Zara industry.
I am familiar with Zara concerning their customer experience, however, through further research, I discovered that Zara's success is based on its ability to put the customer first, and also lean operational practices have helped drive their success.I hope you enjoy this mind map journey on the analysis of Zara.
January 21, 2020.
A company founded in Spain by Amancio Ortega, who's main aim is to build a fast retail store all over the world by enhancing its customer service experience by placing its customers first. They work all the time to make sure is market strategy is updated with the current trends. As well, they are always working to make their new product better and finding solutions to its challenges all the time for the company to grow.
Their operational strength strongly lies in their inventory management which helps them to reduce excess waste and avoid having too many inventories lying around occupying valuable space on the floor of the store.
The real question is, how would we survive without Zara in our lives?
Zara encounters many challenges which seem to bring a small set back to the company in some countries like India. The challenges are mainly focused on political issues, product, weather, social issues, and legal challenges.
Zara is facing two major legal problems in India. One is that they are afraid of franchising their Stores in India as other company like Next, Marks, & Spencer, Accessories etc. did in the past. Secondaly, the lack of implementation of copyright law in India. It is known that any new brand that enters the market will be reproduce illegally a couple of days later and then their clothes will be sold with cheaper prices in the local stores.
Due to political issues in India, Zara finds it difficult and reluctant in investing more in Indian cloth industry which is going at a faster rate of about 9% GDP.
Weather in Europe differs from that in India. Indians have a warmer summer and their Winter season is not cold. So Consumers needs depends upon the current local weather. At Zara’s retail store the possibility of finding clothes for cold weather is easy, but many parts of India don't have cold weathers, so it hard for Indian to buy in Zara when the store is full of winter fashion apparel.
Zara operates 22 stores in India, in cities including Mumbai, Bangalore, Surat in Gujarat and Chennai. Zara encounters problems in India because they do not provide customers in New Delhi with Indian dresses which are what customers want. Their designs are more of European origin. This occurs due to cultural differences existing in India and Europe which has a great impact on the sale of the product in India. For example in Honduras, Zara send in the same European clothes, but there are not cultural barriers between both cultures, while in India it is hard for customers to adapt to a culturally different fashion trend. As well, it faces difficulty finding space for new stores, because traditional high streets are a rarity in India's chaotic, congested cities.
Zara have to compete with local rivals who offer a similar mix of Western wear and ethnic Indian styles at even cheaper prices. Zara does not change their colors and fashion, not adapting to customers preferences on their region and cultural practices. They are not conversant with Bright colors which are of high demand among Indian consumers because they use it for party and occasions. Most of their clothes or embroidery work is lacking 'bright colors''.
This is all about planning, implementing, and controlling the competent forward and reverse flow. It deals with the storage of goods and other associated data from the product origin or service to the period of consumption, thus keeping customer’s requirements in mind.
Zara’s thereby maintains its success by:
As we saw in Session 7, in any retail business, the inventory management strategy is crucial in helping the business owners to achieve a good financial position in the business. Inventory is the largest asset on the balance sheet at any given time. Inventory can be difficult to convert back into cash. Zara's model is designed to have small amounts of inventory left over, enabling them to produce less waste in the company.
Unlike its competitors like H&M, Zara does not use Asian outsourcing. 80% are manufactured in Europe. The company designs and cuts its fabric in-house and it acquires fabrics in only four colors to keep costs low. Inventory optimization models are used to help determine appropriate volumes of merchandise at each retail location. With these supply chain practices at play, merchandise lines at Zara don’t stay on the shelves for long. The company captures 12 inventory turns per year, compared to the industry norm of 3-4 per year.
One of Zara's operational strength lies strongly in their inventory management. In Session 7, we say the 8 types of wastes in Lean. Zara keeps its product selection lean as well as its inventory levels, they do not have excess products. The benefit of this is that they do reduce excess waste and avoids having excess inventory laying around occupies valuable space on the floor of the store. They also do not need to stock as much inventory in their retail locations. This also will result in less unsold stock which keeps then from having to discount their product as much as other retailers. It will also give the customers the impression that an item they may have seen and liked in a store may be gone if they wait long to their next visit to buy it.
Overall Zara's inventory turn is very quick without too many leftover products thus meaning that they do not have to keep a "sale'' section in retail locations. The merchandise items with their regular price and also helps in maintaining a more high-end appeal.
Abhijeet , P. (2018). Zara generic and intensive growth strategies. Retrieved December 30, 2018, from
https://notesmatic.com/2017/08/zara-generic-and-intensive-growth-strategies/
Martin, R. (2019). https://martinroll.com/resources/articles/strategy/the-secret-of-zaras-success-a-culture-of-customer-co-creation/. Retrieved December 29, 2020, from https://martinroll.com/resources/articles/strategy/the-secret-of-zaras-success-a-culture-of-customer-co-creation/
Nathan, R. (2015). How Zara used Lean to become the largest fashion retailer . Retrieved November 20, 2015, from
https://www.linkedin.com/pulse/how-zara-used-lean-become-largest-fashion-retailer-nathan-robinson
Pamela, N. (2018). Why Zara Succeeds: It Focuses On Pulling People In, Not Pushing Product Out . Retrieved April 23, 2018, from
Ukessays (2016). Marketing Problems And Issues Faced By Zara Marketing Essay . Retrieved December 5, 2016, from
Zara is fast fashion retail maintaining its position as one of the successful fashion brands in the world. Zara was founded by Amancio Ortega and Rosalía Mera in 1975 as a family business in downtown Galicia in the northern part of Spain. Zara's main purpose is to create fast fashion retail, spread across different cultures, and around the world. After Ortega's preferred name, Zorba that he wanted to give to his company was taken he went ahead to name his fashion retail store, Zara.
After eight years, Zara fashion and business model approach attracted Spanish consumers. This resulted in the opening new nine stores in the major cities of Spain. The company did a good job by defining the company and building a strong brand's culture from the beginning.Their ability to put their customers first is one of their key strength of being a successful fashion retail brand all over the major cities of the world.
The Zara brand offers men and women’s clothing, children’s clothing (Zara Kids), shoes and accessories. The sub-brand Zara TRF offers trendier and sometimes edgier items to younger women and teenagers. Today, Inditex is the world’s largest fashion group with more than 170,000 employees operating more than 7,400 stores in 202 markets worldwide including 49 online markets. The revenues of Inditex was USD 29.4 billion in 2018.
Zara has a deep understanding of the entire value proposition it exchanges with their customers. They offers fashionable and affordable clothing by continuously presenting styles that are trendy and "hot" for the season. They are trend-setters in the field with excellent response in trends, whether it is style, cut, or color. Zara's design team generate approximately 1,000 designs per month that is then sent to their manufacturing plants.
As seen in session 12, Zara adopts the 10 Schmitt principles in their practices inside the firm. For example they plan the experience inside the stores, every store has a different layout, so customers have different experiences when walking into a Zara store. Their main priority is customer experience, the have a consistent methodology because they are always communicating with their customers. As well, they are always trying to offer holistic experience, by adopting new tools including big data, augmented reality and artificial intelligence, the Spanish clothing retailer has managed to outpace its direct competitors. While it took Zara longer than most other fashion retailers to enter the online channel, once it overcame this barrier, it designed a unique high quality online customer experience.
Zara also apply the 10 lessons of delivering excellent service. Even though Zara practices all of the lessons, the ones that Zara practices the most are that they always base their decision on what the customers wants and expects and they think and act in terms of the customer experience. They are continuously improving all parts of customers experience (ex. augmented reality) and they create and sustain a strong service culture.
It would have been difficult for Zara to grow as a brand and market base in the major cities of the world it has entered without being highly efficient in product development. Zara’s highly responsive, vertically integrated supply chain enables the export of garments 24 hours, 365 days of the year, resulting in the shipping of new products to stores twice a week. The sole aim of the company to develop a new product is to get the attention of more customers both new and existing ones. In session 11, we saw how Zara tries to integrate design with sales to close the loop and follow trends. Zara was able to achieve this by:
As a brand, their speed and responsiveness to the latest fashion trends are key to Zara’s competitive advantage. Time to market as seen in Session 13, is the period of time from when a product idea has general agreement and resources are committed to the project, to when the final product is built and out the door to a customer. ara sticks to a deep, predictable and fast rhythm, based around rapid deliveries to stores. Each Zara outlet sends in two orders per week on specific days. Trucks leave at specific times and shipments arrive in stores at specific times. Garments are already labeled and priced upon arriving at their destination, meaning they’re immediately ready to be sold. As a result of this clearly defined rhythm, every staff member involved in the supply chain – from design to procurement, production, distribution, and retail – knows the timeline and how their activities impact other functions. This way Zara overcome Silos, because all departments communicate with each other, avoiding lack of interaction with the processes and employees.Which, also extends to Zara customers, who know when to visit stores for fresh new garments.
Zara’s reliance on centralized order fulfillment is what enables the company to maintain incredibly efficient workflows: from initial design right through to delivery to stores and customers. The company’s approach is just another example of why streamlined operations and supply chain management are critical to profitability and achieving scale.
This quick in-season turnaround, from production facilities located close to Zara’s distribution headquarters in Spain, allows Zara to ship more often and in smaller batches. Connecting it to the Flexible Approach that we saw in class, Zara workers have the liberty to high margin of error. For example ff the design that they create in an attempt to chase the latest trend does not sell well, little harm is done for the company. Giving them a lot of freedom to design new clothes and due to their quick turnaround, they are able to ship their new inventory to the store quickly.
In 2018, Zara was ranked 25th on global brand consultancy Interbrand’s list of best global brands. Its core values are found in four simple terms: beauty, clarity, functionality and sustainability. The secret to Zara’s success has largely being driven by its ability to keep up with rapidly changing fashion trends and showcase it in its collections with very little delay. Today, the company is proud to be present in about 93 countries of the world with more 2200 stores. Their market has expanded so big, having the largest market I Spain with 436 stores. Zara was able to expand so fast due to its eye on market development to engage both their real potential customers and new customers.
Marketing strategy at times determines the growth of a business. Zara uses a mix of demographic, geographic and psychographic segmentation strategies in order to serve the growing needs of the customers. Zara has limited stores across the globe due to which it uses selective
targeting strategies to make their
products available in the market. The company only spends about 0.3% of sales on advertising, and doesn’t have much marketing to speak of. Consider that the industry average marketing spend for retail is 3.5%, you can see how much of an odd duck Zara is with this approach. But what appeals to customers is its exclusivity and the fact that the brand isn’t plastered on every billboard.
The fact that the store stocks little inventory helps with that exclusivity factor. Usage-based positioning strategies are used by Zara to highlight its customer’s centric approach to satisfy the changing fad needs of the customers around the globe. Zara knows that its customers want new and updated trends and accordingly it targets customers based exclusively on its designs. The most important aspect of the profitability in the retail apparel industry is the location of the stores and its advertising while in case of Zara all of its stores are strategically located in the major cities globally and advertising expenses of Zara is very low as compared to the peer companies in the industry.
