Founded in 1975 by Armancio Ortega, Zara is a very successful Spanish clothing and accessory realtor and the first business to start the Inditex Group empire. Starting in a small Galician city known as La Coruna in Spain, Zara has grown to be a retailer powerhouse with over 6,000 stores in 85 different countries. Although the number of stores and locations is constantly changing as Zara is known to open more than a store a day in past years. Zara has become the giant they are today because of their differentiated business model, this system has not been copied by any competitors which gives Zara a great competitive advantage.
With its own production and distribution channels, Zara specializes in quick fashion innovations based on customer changing needs and is known to develop a new product or design and have it on store shelves in less than a month. Competition will generally do this same task in about 6 to 9 months. This competitive advantage has helped Zara to become a fashion leader and always stay a step ahead of competition. This also allows Zara to copy competitor new designs and come out with a slightly deviated version in just a couple weeks. This has competitors distraught as they spend enormous amounts of money on research and design just to have it instantly copied without costing Zara anything in research costs. This business model has allowed Zara to recently produce 11,000 distinct items in a recent year and several hundred SKUs given variation in color, fabric and sizes. This is compared with 2,000-4,000 items for key competitors. They were able to achieve this by shipping products directly from their central distribution center to well-located, attractive stores twice a week, eliminating the need for warehouses and keeping inventories low as possible.
Zara has a policy of not keeping any items in their warehouse for more than a 72 hour period and are also known to only create a minimum of the same style to urge customers to buy it if they like it as it will not still be on the shelves in a couple weeks. This is necessary for their business to thrive because instead of thinking of the fashion world as 4 seasons, Zara believes there are 104 seasons per year. Meaning they change inventories in their stores 104 times per year instead of 4 times per year like most of their competitors. This strategy allows them to stay fresh in consumers’ eyes, which in return has customers visiting their stores about 6 times as often when compared to competitors. If you’re wondering how Zara comes up with so many successful designs in the course of one year, it’s through their properly trained employees. Zara trains their employees before they hit the sales floor to listen to customer opinions while checking them out or helping them pick out an outfit. They are trained to look for key comments something along the lines of “I would buy this if only this zipper wasn’t on the pocket” and then remember the information and either inform a manager or enter the new data into a nearby computer. This helps keep the inventory and business fresh to customer changing needs.
Even though Zara has plenty of strengths, there are of course some weaknesses to be noted. Customers generally aren’t shopping at Zara because of their brand name, but instead because of the assurance of changing styles. This leads to having disloyal customers. Companies like Nike or Apple are great examples of loyal customers, to a certain extent regular customers of these companies will line up outside the doors for days when a new product is about to be released. Since Zara releases new designs every couple of weeks, they do not get this same attraction to their stores. Zara also has a zero marketing strategy which significantly helps with costs, but is also a main reason why their brand image is weak. A weak brand image when compared to competitors brings an easy threat to the table. If...
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