ZARA

BRANDING PROJECT

COMMUNICATION AND MEDIA

ZARA

by Gunnlaugur Arnar Elíasson, Sandra Ósk Kristbjarnardóttir and Clara Sofia Escobar Lopez

BRANDING PROJECT

COMMUNICATION AND MEDIA

COMPANY OVERVIEW Zara is a Spanish chain store of Inditex Group, one of the world’s biggest retail store in the world, who are also owners of brands like Massimo Dutti, Pull and Bear, Oysho, Zara Home, Uterque, Stradivarius and Bershka. Founded by Amancio Ortega, he first opened a Zara store in 1975 in downtown A Coruña, Spain, where it’s still home to it’s headquarters today.

At the beginning Zara sold low price clothes that resemble designs from the couture designers. Then he changed the design, manufacturing and distribution so he could make clothes quicker, and that way react to trends faster. This strategy proved so successful that between 1976-1984 Zara extended its network and opened stores all over Spain. In 1988 they opened their first international store in Oporto, Portugal, and have been ever since expanding their stores. In 2007 Zara’s shop number 1000 was open and in December 2008 they opened their first Eco-efficient store in Athens, Greece. On 17th December 2009 an application for mobiles came out and it wasn’t until last year on the September 2nd 2010 that merchandise became available online. Today there are 1688 stores in the largest cities in over 70 countries in Europe, Asia, Africa and America.

What is the key to Zara’s success is that it has a quick constant exchange of information. All is managed in one design and production centre in Coruña, where there is 3 spacious halls, one for women, one for men and one for children; it’s much more expensive but they can work more efficiently.

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COMPANY IMAGE Zara is a fast industry but it’s unique business model is based on innovation and flexibility. They design and distribute a garment to market in just fifteen days. They have always-new products but in limited supply. The costumer feels there is an “exclusivity”, since only few items are on display even thought stores are spacious; they feel they have to buy it because they won’t find it again.

Zara’s designers create approximately 40,000 new designs annually of which 10,000 are produced. These designs resemble latest couture creations or classic pieces. They are giving the costumer the same products made with less expensive fabrics and lower prices. Their production is massive, of each design they normally make 5 – 6 colours and 5 – 7 sizes.

They also care about the environment, animals and workers. Two years ago they demanded their Bangladesh jeans supplier to close their factory and built a new one with better conditions for their workers after they found about the poor conditions in which they where working.

As well, Zara stores are eco-friendly, is against fur and they use ecological fabrics, organic cotton and PVC-free footwear.

Mr.Ortega transmits the values of the company which are freedom, perfectionism, responsibility, rapidness, flexibility and respect to others to his Zara team.

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VALUE DRIVERS Increase net margin on operation and their market capitalization and increase customer loyalty and brand recognition. Zara’s business model provides great value to shareholders and makes them different from their competitors.

MARKETING POSITION / COMPETITION Right now Zara is well positioned in the market globally. They produce women, men and children articles.

They are giving the costumer quick choices regarding fashion.

Comparing quality against price, Zara sells a good quality for it’s value, plus current fashion trends.

At more or less their same level of quality vs price, their main competitors are the other high street fashion brands, such as Mango (also from Spain), Top Shop and H&M. H&M differs from Zara because they outsource all of their production, spend more money on advertising, and is price-oriented. The key similarities for comparison between Zara and H&M are that they are European based companies, are fashion forward at lower price retailers, and have a strong international expansion strategy.

STOCK MARKET INFORMATION Inditex, whose other brands include youth label Bershka and the upmarket Massimo dutti, posted a net profit of 1.18 billion euros (1.52 billion dollars) during the first nine months of 2010, a 42 percent jump over the same time in the previous year.

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NUMBER AND LOCATION OF STORES Their first store was opened in Spain, then Portugal, USA, France and the rest of the world.

They had 1,688 stores by the end of October 2010, in 77 countries all around the world and counting.

They are opening stores all the time because they prefer to invest in expansion better than in advertisement.

For 2011 Inditex is planning on opening their first store in Australia and South Africa. They are also expanding the number of Zara stores available in the Asian market.

METHODS OF TRADING The stores are company owned, unless the countries regulations say otherwise and in these cases they franchise the store.

The business model they have, avoids the main fixed costs associated with international expansion because they don’t have distribution centres per country and they don’t advertise when entering a new market.

They have in-store shopping and launched their online store last year.

They have a web page where you can browse their catalogue, lookbook and all the new garments that are arriving every week. It also has a Store locator with directions and maps. All this information is also available in their application

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for iPhone and iPad. Zara online sales began just for France, UK, Italy, Germany, Portugal and Spain, then Austria, Ireland, Belgium, the Netherlands and Luxembourg. They have a strong commercial proposition and have had a satisfactory customer reception since they went on-line. They are planning to open online shopping for Japan, South Korea and Canada this year.

TARGET CUSTOMER DEMOGRAPHICS In their company profile presentation, Inditex has an age target for Zara that goes from 0 years to 40+ years because they produce clothing for every age.

Zara’s main target is women, and their primary age group is between 25 to 40. They are looking for the women that likes to be fashionable but at a low cost. The everyday woman that wants to go well dressed to work. They are supervisors, junior managers, and skilled manual workers. They work near busy streets, that’s why the majority of the stores are around this areas. They can be single, or recently married, no children yet. They browse the store every week or every two weeks to see what has arrived new.

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The secondary target customer for Zara could be man in the same age range, 25 to 40. Classic men that like fashion but that are not going to the extremes. They want to be well dress to work and in their leisure time.

TARGET CUSTOMER PSYCHOGRAPHICS Zara’s customer spends their weekdays busy in the office or in their workspace and likes to hang out with their worker friends or with other couples on the weekends. They are classic but understand about fashion and don’t want to take it to far. They like comfort and good fitting but don’t care that much about quality because they can wear what is new at a low cost.

TARGET CUSTOMER BUYING BEHAVIOUR Zara’s customers are early majority. They love fashion, they are aware of fashion but they are more conservative in their dressing. Zara has been characterized for having the latest trends on their collections, many times criticised for doing garments similar to other top European designers.

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PLACE •

LOCATION

Their shops are always situated in a prime location, in the middle of the most commercial streets in Barcelona, that way they can attract their prime costumer into the store. Zara's target market is comprised of urban, fashion-conscious consumers who shop frequently for the latest trends.

Normally Zara It’s easy to reach by the metro, bus or walking. On weekdays the stores are packed with people that come for shopping, and also from the people that are just passing by in their way to work or study. On the weekends it gets really busy with people not only from Barcelona but also from the surroundings that comes for window-shopping, shopping and just to hang around for the day.

The store locations are always located at prestigious, high-traffic locales. The stores are designed with wide-open spaces and welldefined layouts to insure customers enjoy their shopping experience at Zara.

Particularly Passeig de Gracia with Arago shop is very important for Zara because it gives her a little more of prestigious and also catches costumers that have a little more economic capacity in their shopping around Passeig de Gracia.

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STORE DESIGN

The stores are huge, with big window displays. They are always very modern and very well organized.

Zara has always characterized because they don’t advertise so their windows are really important. They always have an amazing display to make the costumers come in, and you can notice they spend a lot of money in it. You just have to walk by to see their ultimate collections and be tempted to come in.

The doors of the store are big to let in and out the large quantities of shoppers that come daily to the store. They are placed in all the corner of the to streets so it is accessible really easy.

As soon as you get in you get a good vibe, it is kind of a boutique, but huge. The inside always goes with the window display. It looks luxurious.

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The lighting is yellow, comfortable, it invites you to stay and look around. The colour of the store are classy, they use brown and beige tones. They play music not so loud and melodies that are singed and that are relaxing.

The store materials are shiny silver metal, glass and glossy wood. They have mirrors everywhere so people can try on things if they are in a hurry. The dressing rooms are easy to find and they use curtains and have good space inside for trying outfits. •

METHODS OF MERCHANDISING AND DISPLAY

You can find mannequins that support the windows display everywhere showing the costumer how they can combine the different garments and showing what they have available.

The clothes are separated by brand.

The layout of the store displays clothes against the wall in a very particular way with some clothes hanging and accessories on the bottom and in the top. They alternate a lot of their clothing with shoes so the people want them even thought they where there just to buy clothes. The garments are displayed in racks all around the floor mixed with tables that have clothes folded on top. Their hangers are of metal and wood or the combination of both.

The clothes are display by theme nor by trend or by colour. They look for clothes that can make a good combination and place them together. They have a section of formal clothes, other with more lay back clothing. They combine pants, blouses, t-shirts, tops, shoes and jackets in each section. The clothing is really well display making it easy to reach. The shops are comfortable to walk and to shop.

PRODUCT •

BRAND

Zara has 5 brands: 1. Zara Woman, that it is a brand a little more formal. For women at their work or for women that go out but they like their looks to be more serious. They also have clothes that go with the trends and that are fabulous.

2. Zara Basic (woman), it is a brand that has all the basics.

3. Zara TRF, for younger women, it has the trendy clothes for young girls who love to be up to fashion.

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4.

5.

Zara Men, with all the clothes for men. Both casual and formal.

Zara kids

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PRODUCT MIX

In Zara they sell almost everything. Jeans, blouses, skirts, trousers, jackets, knitwear, coats, t-shirts, shorts, shirts, sunglasses, shoes, scarf, belts, hats, handbags, leggings, head accessories.

As part of this corporate concept, the stores try to hold very low levels of inventory, often having their entire inventory out on display, in order to sell out and make room for the next wave of fashion.

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MAIN FASHION TREND

Zara's global strategy is to offer cutting edge fashion at affordable prices by identifying which styles are "hot" at fashion shows and moving simulations into production even before the original designer can.

They always have the latest trends. You can find the trendiest pieces mixed with the basics.

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SIZE AND QUALITY

Zara has sizes that go from the XS to the XL. Their quality is good; all their clothes are made in Europe with the exception of some pieces and jeans. They are well known for promoting better quality for the workers and they where involve with the improvement of installations in the fabrics that made their garments in Bangladesh.

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PRICES

Zara's pricing is lower than its competitors, but profit margins are higher due to direct efficiencies gained from a shortened, vertically integrated, supply chain.

Zara's global target market is a young, educated one that likes fashion and is sensitive to fashion, but is price-conscious.

Zara is a brand that it is really well positioned. They give to their costumer high fashion at low prices. Their quality it is in a good price for the value.

They use the psychology of prices by ending their price tags in .99.

• Jackets from 139 to 49.99 • Outwear from 49.99 to 39.99

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Knitwear from 19.99 to 14.99 Dresses from 119 to 25.99 Skirts from 39.99 to 29.99 Trousers from 35.99 to 19.99 Shirts from 39.99 to 19.99 T-shirts from 25.99 to 9.99 Shoes from 79.99 to 29.99

PROMOTIONAL ACTIVITIES •

ADVERTISING

Zara doesn’t advertise. Zara's advertising expenses are minimal (avg.

0.3% of revenue) compared with 3% to 4% for other specialty retailers.

These helps lower expenses and preserve strong profit margins. Zara prefers to invests more money in renovating its storefronts and buying prime real estate for store locations where it gets all the promotion that it needs as visibility marketing.

They just use posters in their windows whenever they are in sale with just a small word that reads sale and post it on Facebook and online.

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SALES PROMOTION

Zara uses the same sales period as the other brands, but Zara stock it’s low, and it is always being renewed, so the sales aren’t that important. Recently they have been posting on Facebook and on their web page whenever they have sales.

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P.R.

They get a lot of publicity from the fact they don’t advertise and because they are helping the people in the industries.

Zara also has a Facebook page where they currently have 7’818.477 people who “Like” them or follow them. They post videos, photos of new arrivals, making of the photos for the lookbook and catalogue, invitations to new stores opening events, sales information, new countries with online shopping available, etc.

This way they are getting into the social network trend and reaching new and old costumers, strengthening their core values which are to Increase customer loyalty and brand recognition.

STRENGTHS AND WEAKNESSES STRENGTHS • • • • • • • • •

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Amazing locations.

Beautiful windows display.

Well displayed inside the store. Boutique style.

Great range of sizes.

Give the ultimate trends at a budget and quickly.

They use their money in opening new stores.

They get free advertisement helping the people in Bangladesh.

They bring new items twice a week.

By focusing on shorter response times, the company ensures that its stores are able to carry clothes that the consumers want at that time.

Offers its customers a unique mix of affordability, exclusivity and differentiation.

The company keeps its operating income elevated, has a strong and unique business model, and has various opportunities for expansion in the retail industry.

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COMMUNICATION AND MEDIA

They have developed a very successful vertically integrated company which can design, manufacture, and distribute garments to retail stores in just two weeks.

By owning its in-house production, Zara is able to be flexible in the variety, amount, and frequency of the new styles they produce Not advertising makes the costumer go by the store to check out what they have new and knowing that they don’t have the same every week this make the costumer buy it immediately.

The Zara costumer goes more than 17 times per year to the store.

Having little stock makes it more “exclusive”.

Zara stores have men’s, women’s and kids clothing, shoes and accessories.

Great variety of colours and sizes.

Design and produce products really quickly (only 2 weeks).

Supply their stores twice a week with new products.

Accessible prices for every one.

Up to the trends.

50% of the products Zara sells are manufactured in Spain, so they give a lot of work to people in their country.

They have an environmental and animal welfare policy.

They tune with the customer.

Make the customer feel they are buying exclusivity.

They care about the workers of their suppliers It’s a well-known brand around the world; the people recognize it and buy there.

They know the product.

WEAKNESSES • • • • • •

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There is a lot of competition around their locations.

Sometimes it’s not easy to find the displays from the windows inside the store.

After certain time of the day the store gets really messy and it is difficult to find the garments you are looking for.

By not advertising they are missing people that don’t like going to the store just to see what is new.

They have little stock available and when you go you cant find your size.

Zara only has one manufacturing plant and distribution centre in the world, which can be a huge weakness and threat, if something goes wrong.

Not good quality can’t be worn for long.

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A lot of waste in their massive production because all their stuff can’t be sell unless they have sells all the time.

They use designs from other designers.

Monopoly markets with low cost clothes, affecting smaller brands.

SUITABILITY OF MARKETING MIX Zara take a faster approach at producing clothing items that customers want at the present moment. They find current popular trends and ask consumers what they want and need instead of predicting future trends and spending the average of 5-8 months to develop a collection for a season like other brands do.

The one thing that makes Zara different is the designs that make it to Zara store racks are low in quantity, which cause items to sell out faster. Keeping store inventory low and clothing in demand is key to Zara. Also the styles on store racks are changed every week in order to keep people wanting to come back to see what is new, which in turn keeps customers buying.

Another major advantage that makes Zara strong in its market is that it targets the young fashionable consumers who are always looking for the latest hip trends and the older consumer who is looking for a bargain plus a good quality clothing item.

BIBLIOGRAPHY • • • • • • • • • •

Zara (clothing), Wikipedia. www.zara.com Zara’s secret for fast fashion by Kasra Ferdows, 21 February 2005, Harvard business review.

Zara is launching online shopping – it’s about time! By Bee Shyuan, 17 September 2009, on-line article.

Fashion novelties of Zara and Zara Home, 12 December 2009.

Improving working conditions in Bangladesh garment factory, 20 January 2010, BBC radio. www.inditex.es Inditex company profile http://www.facebook.com/#!/Zara http://icheersapp.com/ipad/lifestyle-ipad/zara-shoppingonline.html

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http://www.bbc.co.uk/news/business-11155437 - Web page news http://www.inditex.es/en/press/press_releases/extend/ 00000800 -Web page news http://news.yahoo.com/s/afp/20110110/bs_afp/ spainretailfashiontextilecompanyearningsinditexzara - Stock market information on Zara news http://www.modernights.com/shop/zaraclothing/ - Article <http://www.123HelpMe.com/view.asp?id=97642> "Zara’s Business Model, Information and Communication Technologies, and Competitive Analysis."