ZARA The Driving Force in Fashion

ZARA: The Driving Force in Fashion

The Inditex’s group net profit in 2004 rose to Euros 628 million, a 41 percent increase compared to 2003 with an annual return of 11 percent. The group expanded its shops sales resulting in 54 percent increase in sales being made outside the home market. The total number of shops for the Inditex’s eight fashion distribution chains now stands at 2,244 in Europe, America, the Asia-Pacific region, the Middle East and North Africa. Overall, 322 new stores were launched in 2004 with 97 new Zara stores.

Zara designs majority of it cloth in Spain (about 80 percent). It focuses on shorter response time enabling it to meet the constantly shifting fashion trends. However such moves do not take months, but this process is complete within in 30 days; during which Zara identifies the latest trends, design it clothes and supply material to its stores. Such strategy means catching up a trend when it is in vogue in the fashion circles. On the contrary, even the smallest retailers take three to four months; while bigger retailers can take up to nine months to produce any item. It is this difference which makes Zara unique from others.

In the manufacturing environment, Zara’s product development teams watch fashion shows and catwalks and translate the ideas into latest fashionable products. Zara has teams in the international arena; who observe the latest fashion trends and report leads to head office; which are later on converted into products. The mangers are also involved in tracking customer demands through sales analysis; this process enables Zara to meet customer’s needs and be ahead of its rivals. Its research style is not traditional, but it includes consistent emails and phone calls from various stores to head office and responding to it instantly.

Normally any proposed item (apparel) is made in bulk, which carries the risk of failure. Zara reduces this risk by producing in lesser quantity, instead of going for bulk production, Zara prefers fewer items. This approach gives Zara’s double benefit, such as lesser risk and creating more demand by making artificial scarcity, which means it can charge more and earn extra profit.

It is natural with all objects especially fashion products; they become more desirable making them more profitable for the company. Normally it is very rare to find a product in its early launch days, a customer has to request such item, which is taken into notice by the store manager and produced within a shortest period of time. Another benefit of this approach is that if the product does sell well, it can be easily scarped back due to lesser quantity, which is not possible for other retailers or in some cases it is moved to another location, where it is selling well.

Retailers foresee profit in mass sale and bulk production. Zara instead produce more styles (new items) than any other retail store; generating profit through greater number rather than bulk production. For example Zara produces about 12000 items per year, the sooner one item is sold next is on the offer. This innovative technique makes Zara different from other retailers who plan for months and years, yet they come up with few items and limited choice, while Zara offers more choices to consumers to choose from. This also helps in pulling the consumers to visit store more often, as there is always some thing new on offer, compared to its competitors who will sell similar items for months.

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One main advantage Zara has over its competitors is the lower advertising costs. Zara advertising investment is only 0.3 percent of its total revenue compared to traditional retailers which normally form about 3 to 4 percent of the annual revenue. This marketing strategy allows Zara’s to reduce the cost and invest more in international expansion.

Zara does not target specific age group nor does it divide customers into segments, instead it markets to a broader market with its prestigious and elegant image. Thus by targeting the international market, Zara has an edge over its competitors, as it does not need to strip down into class and gender and age group; but focus only on one large group. Zara marketing philosophy is simple, target the global audience and if a product can sell in New York, it can also sell in Milan or London.