- “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.
When talking about shopping, I am actually the kind of need-driven customer. However, in terms of business and marketing, I consider that fashion brands, because of their desirability, are fascinating. The case of Zara is particularly interesting. The omnipresent goings and comings of its blue 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 an “affordable luxury”. An oxymoron that describes 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’s image is largely inspired by the one developped by established luxury brands. The result is that its own products are often stylish, fancy, and have become a synonym of design. It is actually common to see celebrities wearing its products during public appearances.
I admit being a little embarassed posting this…
In addition, Zara’s stores location in prestigious streets rubbing shoulders with Canali or Louis Vuitton, and sometimes in renewed historical buildings, allows the brand to gain in terms of visibility and accessibility and 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 stress the “experience” dimension because, in an increasingly digitalized world, it 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 customers throwing clothes everywhere with any sort of direction inside Z stores, the brand succeeded to settle a “boutique” concept with fade lights and spacious stores. The employees wear oxford shoes and suits, and the visual merchandising – the impressive shop windows and strategic product display – is innovative and sophisticated. 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 meeting local trends in order to adapt the global brand codes to 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]
We talked about the creation of a shopping experience as the heart of a whole in retail. However, in the case of Zara -and Inditex- it is also the neuralgic center of an hiper efficient supply chain, able to detect what works and what doesn´t extremely quickly. Instead of producing its products in China, Zara plants are located in Morocco, not too far from its HQ (in Spain). All the supply chain and logistics are directly managed by Inditex, allowing a complete control of the complete process, and allowing to reduce the delivery times to minimums. Already in 2007, Zara produced approximately 11,000 different products per year, while its major rivals only produce 2,000 to 4,000. The Spanish company spent four to five weeks on the process of designing a new product and getting finished products in its stores (Inditex, 2007). At that time, Zara could redesign existing products in no more than two weeks.[v]
Making shorter product life cycle allows to meet consumer preferences, and to provide him what he is willing to buy. This capacity of reaction allows also to minimize unsold stocks.[vi]
This system also explains the inexistence of an advertising budget. This is quite exceptional for global fashion brands that usually spend millions in ATL. 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 extremely lucrative.
Bringing added value to customers
Thanks to its placement and product marketing, Zara has succeeded to become a synonym of fashion and style. 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 pace of product renewal is perceived as positive: creating the “now or never effect”, costumers feel they are buying, in some way, trends (in a positive way). But yes, of course… what makes Zara Zara is its price ceiling…
When we 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 mere coincidence…