ZARA'S

ZARA'S



ZARA'S

Zara, the most profitable brand of Inditex SA, the Spanish clothing retail group, opened its first store in 1975 in La Coruña, Spain; a city which eventually became the central headquarters for Zara's global operations. Since then they have expanded operations into 45 countries with 531 stores located in the most important shopping districts of more than 400 cities in Europe, the Americas, Asia and Africa. Throughout this expansion Zara has remained focused on its core fashion philosophy that creativity and quality design together with a rapid response to market demands will yield profitable results.

Analysis

Zara's unique approach to advertising and marketing is an additional factor within their business model that adds to their success. Zara spends 0.3% of total revenues on advertising and marketing. This is significantly less then their competitors who on average spend 3-4% of their total revenues on similar expenditures. Hence, Zara maintains a cost advantage to their competitors in marketing activities. In order to effectively complete with their peers Zara uses location, store layout, and product life cycles to act as their marketing tool to consumers. For instance, Zara strategically locates all of their stores in prime retail districts for visibility marketing. Additionally, because of the product development cycles mentioned earlier, customers are trained to visit Zara stores often because new items are presented weekly and are often not restocked. This feeling of scarcity encourages customers to come to the stores and buy frequently. Lastly, in order to keep the stores looking fresh and trendy; Zara invests heavily in their store layouts. They have a testing facility nearby their headquarters in Spain where different types of store layouts are tested. Each Zara store is remodeled every 5 years in order to keep up with current trends. Zara does not invest heavily in direct marketing, though their efforts in image/brand marketing do a great deal to attract a loyal customer base. Their cost advantage and ability to maintain brand recognition and customer loyalty are essential elements of Zara's capabilities that build value in the company.

Information and Communication Technologies

Zara's information and communication protocols are significantly different from its competitors. Zara spends less than 0.5% of total revenue on IT and IT employees account for only 0.5% of Zara's total workforce. This differs from their competitors who spend on average 2% of total revenue on IT expenditures and have 2.5% of their total workforce devoted to IT. Zara utilizes human intelligence (from store managers and market research) and information technology (such as their PDA devices) in order to have a hybrid model for information flow from stores to headquarters. For example, managers at Zara stores use handheld devices to send standardized information regarding customer feedback and ordering needs directly to in-house designers. This not only keeps Zara's designers informed of fast-changing customer trends and demand, but also provides the company with insight on less-desirable merchandise. Unlike Zara's hybrid model (which incorporates human intelligence and IT applications), competitors rely almost completely on information ...