- “Inditex is one of the world’s largest fashion retailers, welcoming shoppers at its eight store formats -Zara, Pull & Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home and Uterqüe – boasting 6.009 stores in 86 markets.”[i]
- “Inditex’s main rivals are way behind. Arcadia Group, which owns Topshop, among others, has about 3,000 stores worldwide; H&M, based in Swede[ii]n, has 2,500 (when you include its smaller lines of stores); and Mango, based in Spain, 2,400.”
- Zara accounts for nearly 70% of Inditex’s income, and, therefore, makes it the pillar of Amancio Ortega’s –the 3rd richest man- emporium.
Firstly, I’d like to clarify that I am not a huge fan of Zara, nor a huge fan of fashion, and a mall-hater. When talking about shopping, I am actually the kind of need-based customer. However, in terms of business and marketing, I consider that fashion brands, because of their desirability, are just fascinating. The case of Zara is particularly interesting. The silencious goings and comings of its omnipresent paper bags hide a business model that has revolutionized the fashion retail industry and that represents a headache not only for its direct “fast fashion” competitors, but also for the most prestigious luxury fashion brands. Zara is indeed the embodiment of a kind of “affordable luxury”. An oxymoron that describes accurately a fascinating brand that is changing the way we think about fashion and retail. How Zara is succeeding to be the fastest growing fashion retail brand?
The luxury look
Zara is known for inspiring itself from established luxury brands. Some people even accuse the brand of imitating openly some products from prestigious retailers. The result is that Zara’s own products are often stylish, fancy, and have become a synonym of design. It is actually not uncommon to see celebrities wearing its products during public appearances.
I admit being a little embarassed posting this…
However, luxury influence doesn’t apply exclusively to product marketing, but also when talking about the brand’s placement strategy. Zara’s stores location in prestigious streets rubbing shoulders with Canali or Louis Vuitton, and sometimes in renewed historical buildings, allow the brand to gain in terms of visibility and accessibility but also to contribute to build a signature associated to a chic and authentic experience.
Zara store in New York
Zara store in Melbourne
I’d like to insist in the concept of experience because, in an increasingly digitalized world, this remains the big opportunity that retailers can exploit in order to offer an added value to its customers, and also because Zara masters it so well. Although it is common to see an important amount of Zara customers throwing clothes everywhere with any sort of direction inside its stores, it succeeded to settle the boutique concept with fade lights and spacious stores. The employees working there wear oxford shoes and suits and the visual merchandising – the impressive shop windows and strategic product display – is innovative, classy and sophisticated. Here everything is rigorously calculated, from the products to be displayed to the scent, and it represents the success of the “glocal” business model: international design standards meet local trends in order to adapt the global brand codes to the local markets.
Spectacular store in Rome, Italy
A successful business model
“Zara, the Spanish fast-fashion retailer, experienced a sharp increase in brand value this year (18%). Zara’s long-admired business model has kept customers happy and the company in top form, despite harsh global economic conditions. Zara continues to leverage its enviable logistics system, which enables store managers to communicate directly with designers — providing them with valuable information on what is and isn’t selling. In turn, Zara’s customers are able to find (and purchase) clothes that keep them looking fashion forward.”[iv]
Above, we talked about retail as a possibility to create a shopping experience as the heart of a whole. However, in some way, it is also the brain of an hiper efficient supply chain able to detect what works and what doesn´t quickly. Instead of producing its products in China, Zara plants are located in Morocco, not too far from its HQ in northern Spain. All the supply chain and logistics are directly managed by Inditex, and this ensures that Zara controls and coordinates perfectly all the process and allows reducing the times to minimums. Already in 2007, Zara provided a considerable number of products, which were more than rival corporations in the fashion industry. It produced approximately 11,000 different products per year, while its major rivals only produce 2,000 to 4,000. Zara spent four to five weeks on the process of designing a new product and getting finished products in its stores (Inditex, 2007). So, Zara already was the leading brand in `fast fashion’. Zara could redesign existing products in no more than two weeks.[v]
Making shorter the product cycle life makes easier to meet consumer preferences and to provide him what he wants/ he is willing to buy. This capacity of reaction allows also to minimize unsold stocks.[vi]
This system also partially explains the inexistence of an advertising budget. This is quite exceptional for global brands that usually spend millions in ATL as this is one of the most powerful ways to brand a fashion brand, transfer brand values and therefore to positionate products. Zara’s “collection” is evolving permanently in opposition to the seasonal proposal of other fashion brands, and its placement and product strategy has proven to be way more lucrative.
Bringing added value to customers
Thanks to its placement and product marketing that creates a luxurious experience Zara has succeeded to become a synonym of fashion and style. As we said Zara learnt from the luxury world that design, an exclusive brand image, and the shopping experience are decisive factors to create desirability for a fashion product. In addition, the rhythm of product renewal is perceived as positive: creating the “now or never effect”, costumers feel they are buying, in some way, unique products. But, of course, what makes Zara Zara is its price ceiling.
When you put all this together –unique design products at low prices- the result is irresistible, and customers perceive they are paying less for more, and that they are getting real value. It is evident that everything is scooped and that the price, the supply and the margins are not a gift from the brand to its customers…