Abstract
This chapter details the various strategies used by Zara, a leading apparel company, to manage and influence the behavior of its customers. The chapter starts with a brief history of Zara and an overview of the apparel industry. Then it details how Zara delivers realistic and achievable fashion for its customers, and it analyzes the revolutionary concept of “fresh” fashion that Zara has been the first to implement in the fashion business. Next, the chapter provides an in-depth analysis of the pivotal role of the store and the employees in the marketing strategy of Zara for managing and influencing its customers' purchasing behavior. Afterwards, the chapter considers the unique advertising and branding strategy of Zara and the influence of its strong and powerful brand on the fashion consumers. Finally, the chapter reflects on the challenges that Zara is currently facing with its expansion strategy in the Chinese market and on the Internet where consumers may have different expectations and behaviors.
TopA Brief History
In 1975, Amancio Ortega opened the first Zara store on a street in downtown La Coruña, Spain. The expansion strategy which turned the small Spanish clothing firm into the undisputed worldwide leader in apparel can be divided into three phases: First came national expansion inside Spain, then international expansion in Europe, the US and Latin America (1988-2003), and finally the global surge in Asia and the rest of the world. There were about 1,750 Zara stores in 80 countries. Zara was also extremely successful in China and an online Zara shop was planned to be launched in the summer of 2012 for the winter season opening in China. As illustrated in Figure 1 the rise of Zara and Inditex has been extraordinary, from 1991 to 2003 Zara sales grew more than 12-fold from €257 million to €3.220 billion. From 2003 to 2008, the company managed to double in size yet again. By August 2008, sales edged ahead of Gap, making Inditex the world’s largest fashion retailer and Zara the leading brand worldwide in the apparel industry.
From 1991 to 2011, the compound average growth rate was about 18.5%, meaning that Zara had managed to double its size almost every 4 years! This commercial success reflects the importance of growth in the Zara culture. The founder Ortega likes to repeat that “a company that does not grow will die”. Ortega stepped down as CEO in 2011 leaving his seat to Pablo Isla, but he is still very much involved in the company's strategic decision making. In 2012, Zara sales were still up by 18% but in 2013 they grew only by 2%, a first in the history of the brand, but 2014 was starting good with an increase of 12% year to year in February (Brooke, 2014).
Figure1. Inditex sales and net income from 1975 to 2013
TopThe Competition
The apparel industry is still very fragmented geographically, but Zara’s main global competitors are H&M, Gap and Benetton.
Hennes & Mauritz AB, also known as H&M, is an apparel and accessories store founded in 1947 in Sweden known for offering the latest fashion trends. H&M is the world's second biggest-selling clothing retailer and it has proven to be a very aggressive competitor for Zara. H&M specializes in taking advantage of the season’s latest looks inspired by design houses around the world and offering women, men, and children contemporary clothing styles at low prices. Targeting the 18- to 34-year-old market, the company manufactures affordable, stylish clothing. H&M operates more than 2,500 stores in 43 countries, with more than 200 stores in the U.S. Its brand has strong recognition worldwide.
Gap built its iconic casual brand on basics for men, women, and children. It first started offering jeans, khakis, and T-shirts and had become the standard fashion in the U.S in the 1990´s from hip teens to suburban moms to Sharon Stone, who wore a Gap turtleneck to the Oscars in 1995. The group expanded with the urban chic chain Banana Republic and chic at a discount Old Navy. The diversification was initially successful but things went wrong in the mid 2000´s as the brands went too deep in their concept and frustrated customers who switched to fresher competitors.
Key Terms in this Chapter
“Fresh” Fashion: Sometime called also “fast fashion”, this concept described a market driven model which quickly moves fashion from the design phase, presented on the “catwalk” to the customers. It relies on a fast (or “quick response”) supply chain.
Fashionista: This term describes someone who is very interested in fashion. It should not be confounded with “fashion victim” which describes someone who is lacking of style and is following any new fad of the year when dressing.
Store Window: Also called “shop window”, it is the front side of a store facing the street and designed to attract customers. It usually contains mannequin in the case of fashion stores.
“Quick Response” Supply Chain: It defines a supply chain organization which minimizes internal and external lead times for sourcing, manufacturing, storing and delivering products.
Apparel Industry: This sector encompasses companies that design and sell clothing, footwear and accessories, from basics products, for example underwear, to luxury item.