Apparel Industry Outlook
The global apparel chain was a typical buyer-driven chain in which upstream structure was fragmented, locally owned, dispersed, and often tiered production whereas downstream structure was relatively concentrated intermediaries. The industry was coordinated and dominated by downstream intermediaries like retailers and branded marketers. A short summary of the apparel industry characteristics was as follows:
Production: Very fragmented apparel production. Developing countries had an unusually large share, about one half in total exports due to cheaper labor and inputs. Proximity was important since it reduced shipping costs and lags. Despite China's existence as an export powerhouse, regionalization was the dominant motif of changes in apparel trade in the 1990s.
Retailing: The increasing concentration of apparel retailing in major markets was thought to be one of the key drivers of increased trade. In order to improve speed and flexibility, large apparel retailers played the leading role in promoting quick response (QR). Retailing activities remained quite local with respect to other industries.
Customers: Per capita spending on apparel tended to grow less proportionately with increases in per capita income, so that its share of expenditures typically decreased as income increased. Significant local variation in customers' attributes and preferences was an issue not only between regions but also within regions.
ZARA'S BUSINESS MODEL
We mainly analyzed Zara to recommend on Inditex's strategy since it was the flagship of Inditex and the generator of a huge percentage of financial results by itself. Zara used needs-based positioning, targeting a specific segment of customers and providing a tailored set of activities that can serve those needs best, in developing its business model. Its selling ideas was giving middle class customers an exclusivity feeling in its stores with fashionable products, service, store design, and store locations.
Zara's well-designed marketing mix was in consistency with its "medium quality fashion clothing at affordable price" positioning and its selling idea
Target Customer: It targeted fashion-conscious customers who were at the same time price-sensitive and have frequent shopping behavior.
Product: Zara offered designer-style garments and accessories with broad, rapidly changing product lines; relatively high fashion content; and reasonable but not excessive physical quality.
Place: It invested heavily on store locations. They were typically located in highly visible locations, often including the premier shopping streets and upscale shopping centers.
Price: The prices of products were affordable.
Promotion: Zara spent only 0.3% of its revenue on media advertising, compared with 3%-4% for most specialty retailers. It relied on centralization of store window displays and interior presentations in using the stores to promote its market image. Its new items were first displayed in stores. The rapid turnover reflected the freshness of its offerings, the creation of sense of scarcity and an attractive ambience around them, and the positive word-of-mouth that resulted.
Competitive advantages of Zara were mainly the key attributes of its unique business model and the perfect fit of all activities in this business model. The competitive advantages are as follows:
Strong real estate network: As mentioned in marketing mix, Zara located its stores at premium districts. The stores functioned as both the company's face to the world and as informations sources. The promotion and advertising were executed through window displays and interior presentations. However, finding available real estate in these locations was a matter of relations and brand name in addition to financial power which made it difficult to replicate for many competitors.
Quick Response(QR): Despite the global trend was...
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