PROJECT REPORT ON
“Study Of Marketing Strategy Of ZARA” Submitted in the partial fulfillment for the award of Degree of Bachelor in Business Administration 2016-19
UNDER THE GUIDANCE:
SUBMITTED BY:
Ms. Hema mam
Neha Arora
FACULTY (Management), CPJCHS
ENROLLMENT No 35424201716……… BATCH NO. 2016-19
CHANDERPRABHU JAIN COLLEGE OF HIGHER STUDIES & SCHOOL OF LAW An ISO 9001:2008 9001:2008 Certified Certified Institute (Approved by the Govt of NCT of Delhi Affiliated to Guru Gobind Singh Indraprastha University, Delhi) Plot No OCF Sector A-8, Narela New Delhi -40
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DECLARATION This is to certify that Report entitle study of marketing strategy of zara which is submitted by Neha Arora in partial fulfillment of the requirement for the award of degree BBA(Gen.) to GGSIP University, Dwarka, Delhi comprises only my original work and due acknowledgement has been made in the text to all other material used.
Date:
APPROVED BY Teacher/Guide
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Name of Student
Neha Arora
CERTIFICATE This is to certify that Report entitled which is submitted by study of marketing strategy of ZARA which
is submitted by Neha Arora in partial fulfillment of the requirement for the award
of degree BBA(Gen.) to GGSIP University, Dwarka, Delhi is a record of the candidate own work carried out by him under my/our supervision. The matter embodied in this thesis is original and has not been submitted for the award of any other degree.
Date:
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Supervisor Signature
ACKNOWLEDGEMENT I offer my sincere thanks and humble regards to Chanderprabhu Jain College of Higher Studies & School School of Law, GGSIP University, New Delhi for imparting us very valuable professional training in BBA. I pay my gratitude and sincere regards to Ms. Hema mam, my project Guide for giving me the cream of her knowledge. I am thankful to her as she has been a constant source of advice, motivation and inspiration. I am also thankful to him for giving her suggestions and encouragement throughout the project work. I take the opportunity to express my gratitude and thanks to our computer Lab staff and library staff for providing me opportunity to utilize their resources for the completion of the project. I am also thankful to my family and friends for constantly motivating me to complete the project and providing me an environment which enhanced my knowledge
Student’s Signature
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Executive Summary Zara is one of the largest international fashion companies. It belongs to Inditex, one of the world’s largest distribution groups. It has overtaken Gap as the largest apparel retailer in the
world. The main competitive advantage of Zara is its quick response to the customer fashion trends and producing clothes often with short life spans and an d Zara’s mission mainly focuses on
domestic manufacturing. In order to sustain its competitive advantage, Zara adopts Just-in-time (JIT) manufacture system to implement high quality in-house manufacturing and conducts JIT inventory approach to maintain inventory level. Meanwhile, Zara conduct EOQ model to control setup cost. Moreover, Zara should make sure its worldwide retail store network running well by conducting JIT inventory approach, so Zara conducts an inventory distribution process involves a forecasting demand model and an optimization model to determine weekly shipment quantities from warehouse to every retail store and solve some problems about inventory coordination among retail network. Due to the success implementation of its current inventory management strategy, Zara gains the capabilities that quick response to customer trends and high speed to market, which is the fundamental factors to Zara’s success in the fast-fashion industry. Industria de Diseño Textil S.A., also known as The Inditex Group, is the world’s leading and
fastest growing fashion producer and retailer, headquartered in Arteixo, Spain. The Inditex Group is made up of more than 100 companies operating in textile design, manufacturing, and distribution, and is responsible for producing 840 million garments a year, with eight retail store formats: Bershka, Massimo Dutti, Oysho, Pull & Bear, Stradivarius, Uterqüe, Zara, and Zara Home. These retail formats collectively occupy 6,009 stores in 86 markets. Inditex faces competition from companies such as H&M and Benetton, but is set apart by its unique business model. Inditex controls the entire fashion process as well as retail. In the variable and fast changing fashion world, Inditex prioritizes time-to-market through vertical integration,making them the pioneer of “fast fashion.” Competitors Co mpetitors traditionally prioritize production cost and outsource manufacturing to China. This strategy is cheap but creates a long supply chain. Inditex, on the other hand, sources more than half of its products from Spain, Portugal and Morocco, creating a short, manageable, and more responsive supply chain. Despite the higher costs, in the fashion world the ability to react quickly is key. Other companies must predict trends, while Inditex can observe and respond. Inditex’s computerized inventory system, state-of-the-art production an warehousing, and a short supply chain cut lead-time to 10-15 days between design and distribution,compared to the 5-6 month mon th industry average.
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Zara, Inditex’s flagship retail format, generated 66% of the company’s overall sales in 2012. Currently, Europe accounts for 66% of group sales, though sales in Spain accounting for 22% of revenue have stalled due to the poor economy, causing the company to aggressively seek new markets. Inditex has doubled its store count from 3,000 to 6,000 since 2007 as it expanded its store space by between 8% and 10% a year. Recently Inditex has opened more than a store a day, or about500 stores a year. It is reported that this growth rate is to be maintained for the next three to five years, with an emphasis in Asia.1 Sales also benefited from a global rollout of online stores, starting with Zara Home in 2007 and each additional retail format in 2010. Zara is the most prominent online concept currently receiving more than 1.3 million unique visitors per day.2 Though Inditex has yet to provide more information about online sales, Credit Suisse estimates online purchases will generate over $782.5 million by the end of 2013, almost doubling 2012 levels.3
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Table of Contents Student declaration ……………………………………………………………………………… i Certificate from Guide ……………………...…………………………………....…............ii Acknowledgement ............................................ ........................................................ ............................................................. ..... .iii Executive Summary ………………………………………………………………..……. iv
CHAPTER- 1: INTRODUCTION 1.1 About the Industry 1.2 About Organization/ Company Profile
CHAPTER – 2: 2: Literature Review Literature Review
CHAPTER – 3: 3: RESEARCH METHODOLOGY 3.1Objective of the Research 3.2Survey Design 3.3Type of Research 3.4DataCollection Method 3.4.1Primary Data 3.4.2Secondary Data 3.5Sampling Methods 3.5.1Univerese 3.5.2Sampling Unit 3.5.3Population 3.6Sample size & Design 3.7Research Period 3.8Research Instrument 3.9Instrument for data collection………………………… collection……………………………………………………… …………………………… 3.10 Drafting of a questionnaire…………………………………………….
3.11Limitations of the Study
CHAPTER – 4: 4: ANALYSIS& INTERPRETATION 4.1 Income Statement 4.2Balance Sheet
CHAPTER- 5: FINDINGS & SUGGESTIONS 5.1 Findings ………………………………… …………………………………………………………… ……………………………………….. …………….. 5.2 Suggestions…………………..… Suggestions…………………..…………………..……………… ………………..…………………..……………… …..………………
CHAPTER- 6: CONCLUSION BIBLIOGRAPHY Bibliography…
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INTRODUCTION
Zara is a Spanish clothes and accessories brand, it is the flagship brand of the Inditex group. Few clothing brands keep up with the latest fashion, are of high quality and yet, affordable. It is probably the amalgamation of all these qualities that made Zara, the Spanish clothing brand become the go -to fashion brandd for bran fo r all. all . It is the world's largest apparel retailer. The fashion group also owns brands such as Massimo Dutti, Dutti, Pull&Bear , Bershka Bershka,, Stradivarius Stradivarius,, Oysho Oysho,, Zara Home, Home, and Uterqüe.. Zara as of 2017 manages up to 20 clothing collections a year .[4] Uterqüe Zara the brand which is described as possibly the most innovative and devastating fashion retailer in the world was originally the brainchild of The Inditex Group owned by Spanish business Tycoon Amancio Ortega. 8|Page
The group is headquartered in A Coruña, Galicia, Spain, where the first Zara store was opened in 1975, the city which saw the Group's early beginnings and which is now home to its central offices. This Spanish success story encompasses many different styles, from daily clothes, to casuals up to formals, thereby providing a complete one stop fashion solution for women, men and children. Starting with a single store, today Zara has as many as 1,520 outlets bringing exclusive fashion to all over the world and churning out annul turnovers of 6,824 millions Euros. Most important of which is to note that 75% of these total earnings are a part of there international sales. Zara was known, by industry players, to have an extremely particular business model, especially given the fast-growing and quick-response industry it acted in, where most companies outsourced garment manufacture to reduce costs and, supposedly, enable higher flexibility. Zara, however, as a vertically-integrated retail chain, controlled all its garment production and outsourced only “basic”
clothing that could be ordered in advance and easily adapted to future required styles. Stores had always been the key to Zara’s system: the face of the brand to the world
and its main source of information on what consumers wanted. Built with a minimalist environment environment and big windows; stores were comfortable and designed to “create an atmosphere of chaos and excitement24”, always located in prime, highly noticeable locations that were fully-owned by Zara (with a few exceptions where cultural and political factors could act as obstacles). Stores averaged at a size of 1,400 square-metres, and were furbished with clear lights, white walls and ceilings in order to draw all the focus on clothing. Store refurbishment occurred every 4 years and window displays were changed every month.
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Marketing Strategy Meaning:• The marketing strategy is the means of achieving the corporate objectives. • It gives messages to the stakeholders, s takeholders, or publics.It publics.It says:
• "This is where we are going", and
"When we will get there", and "This is our stance"
Marketing Strategies of zara Handling 7000+ stores across the world and successfully popularising 8 fashion retail brands globally under its umbrella brand architecture has helped Inditex (parent company of brand ZARA) in becoming one of the world’s largest fashion retail organisations. Zara’s 1st s tore was
opened on 1975 in beautiful European nation Spain
Segmentation, targeting, positioning in Marketing strategy of Zara –
the
Zara uses a mix of demographic demographic,, geographic and psychographic segmentation strategies in order to serve the growing needs of the customers. Zara has limited stores across the globe due to which it uses selective targeting strategies to make their products their products available in the market. Usage-based positioning strategies are used by Zara to highlight its customer’s centric approach to satisfy the changing fad needs of the
customers around the globe. Zara knows that its customers want new 10 | P a g e
and updated trends and accordingly it targets customers based exclusively on its designs
Competitive advantage in the Marketing strategy of ZaraStrong parent company: Inditex, the parent company of the brand
Zara have a strong portfolio of 8 brands which is helping the company in nurturing each brand with its experience and strong financial base. Turnaround time (TAT): In comparison to the other players in the
market Zara makes it new product available to its stores in just two weeks of launch whereas the average TAT of the industry is 3-6 months. Stronghold in the parent nation: Zara gets 60% of its sales (2015
data) from the European nation out of which 18 % comes from Spain. Advertising & store locations: The most important aspect of the
profitability in the retail apparel industry is the location of the stores and its advertising while in case of Zara all of its stores are strategically located in the major cities globally and advertising expenses of Zara is very low as compared c ompared to the peer companies in the industry.
BCG Matrix in the Marketing strategy of Zara – Zara primarily deals in products lines such as clothes & accessories for Women’s, Men’s and Kids. Among the 3 line of business of Zara,
Women segment is a star on the BCG Matrix. Matrix.
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demand of the products yet Men’s segment is also star due to high demand tough competition in the market. Kids section is question mark because there are many brands for kids which are much more famous. Kids section is a line of business which is a question mark in the BCG matrix of Zara. Men and women’s segment is driving the growth for
Zara.
Distribution strategy strategy of Zara –
in
the Marketing
Right from design to distribution to sales of its products through their 2100+ stores around the world, Zara operates all the business and make the newly designed products available in their stores within the span of 2 weeks. Apart from the Zara exclusive stores, many multi-brand retail chains sell Zara’s clothing and accessories items which are helping the
company in penetrating in the leading cities of the nations globally. The supply chain of Zara is one of the biggest competitive advantage to the brand because where other retail stores take 21 days to even 2 months to get new designs in the store, Zara gets it done within 2 weeks. Plus, the stores have these new designs only for a destined period of time or till stocks last, hence movement of material is very impor Brand equity of Zara –
Valued at $ 10.7 bn (May 2016 data) this fashion industry retail giant has bagged 53rd position in Forbes list of world’s most valuable brands.
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Brand equity of Zara – Valued at $ 10.7 bn (May 2016 data) this fashion industry retail giant has bagged 53rd position in Forbes list of world’s most valuable brands.
Competitive analysis of Zara – The fashion clothing retail industry is highly competitive with various brands such as H & M, Mango, Gucci and many other national and international brands fighting with each other in the same segment. However, the designs made by Zara are based on the consumer & market feedback which they continuously work upon to be more of the consumer-oriented brand.
Market analysis in the Marketing strategy of ZaraThe clothing retail industry is highly competitive and the changing fads, socio-economic socio-economic and behavioural culture possess a major challenge for the companies operating in this industry. Back end integration, high raw material cost and advertising cost are the other factors that affect the apparel industry companies by and large.
Customer analysis in the Marketing strategy of Zara – In men’s and women’s clothing segment customers of Zara are in age
group of 15-40 years. Recently it also launched kids section in their stores across the world. 13 | P a g e
HISTORY OF ZARA Amancio Ortega opened the first Zara store in 1975 in downtown A Coruña, Coruña, Galicia, Spain. Ortega initially named the store Zo Zorr ba after the classic film Zorr ba the G r eek , but after learning there was a bar with the same name two Zo
blocks away, they rearranged the letters molded for the sign to 'Zara.' It is believed the extra 'a' came from an additional set of letters that had been made for the company. company .[5][6] The first store featured low-priced lookalike products of popular, higher-end clothing fashions. Ortega opened additional stores throughout Spain. During the 1980s, Ortega changed the design, manufacturing, manufacturin g, and distribution process to reduce lead times and react to new trends in a quicker way, which he called "instant fashions". The improvements included the use of o f information technologies and using groups of designers instead of individuals
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Óscar had been Zara’s director for years, witnessing the opening of stores in over 10 new markets6, the continuous expansion of Zara’s e -commerce stores (available in 21 countries by the end of 20137) and the 2012 cutting-edge refurbishment, design and implementation of Zara stores worldwide. He knew that the stores were the key to Zara’s business model; the millions of euros invested annually in
locating stores and designing each interior carefully explained why Zara needed no further advertising – the the stores were the voice of Zara’s offer.
Inditex Timeline 1963
-Amancio Ortega, founder of
Inditex, launches a clothing manufacturing business. Over Over a decade the business steadily evolves to a number of owned textile factories, selling merchandise merchandise across Europe.
1975
Zara is founded with a store in La
1976
Coruña’s central street Zara’s store network expands to major
Spanish cities after the acceptance and success of its concept. 15 | P a g e
1985 1986
1988 1989-1990 1998
2000 2008 2010
2011 2012 2013 2014-2015
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Inditex is founded as the head of the corporate Group. Group manufacturing manufacturing companies sell all their output to Zara and lay the groundwork for a logistics system capable of addressing expected rapid growth. Opening of first international Zara store in Oporto. Zara expands to US and France, opening stores in New York (1989) and Paris (1990). Launch of new chain, targeting a younger female market
Inditex’s HQ moves to a new building
in Arteixo, La Coruña. Inditex opens its 4000th store in Tokyo. Inditex reaches 5000th store, launching a new eco-efficient Zara store in Rome. Start of online sales through Zara.com, available in 16 countries by the end of the year. All Inditex chains have online stores. Refurshibment of Zara’s store image
worldwide. Inditex opens its 6000th store. Zara opens 1st store in Algeria. Inditex continues to expan its brands online in new markets. Zara introduced the use of RFID of RFID technology in its stores in 2014. In 2015, Zara was ranked 30 on
Interbrand''s list of best global brands. Interbrand 2016
Zara can offer more choices in more current fashions than many control, it
does have to contend with higher people costs, of its competitors. It delivers merchandise to its stores twice a averaging 17-20 times the costs in Asia.
ZARA Indutsry
1925 stores in 86 countries Created in 1975 For women, men, youth and infants up to age 50 Accounted for 66.11% of Inditex’s sales in 2012 “Zara is always striving to meet the needs of its customers at the same time as helping to inform their ideas, trends and tastes.”
Website: www.zara.com
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Size of the industry In INDIA Domestic market size of the clothing and fashion industry: 68 billion dollars.
Geographical distribution Mumbai, Delhi, Kolkata, Bangalore ZARA MUMBAI - PALLADIUM
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ZARA NEW DELHI - SELECT CITYWALK ZARA NEW DELHI - THE PROMENADE
Output per annum ZARA Inditex made sales of €7.2bn and earnings before taxes, interest, depreciation and amortisation (EBITDA) of €1.6bn, compared with forecasts of €7.1bn and €1.6bn.
Type: Clothing - Kids, preteens, teens, men and women Accessories - Women accessories which includes chains, necklaces, and bracelets
COMPANY PROFILE
Zara España, S.A.
Type Industry
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Sociedad Anónima Retail
Founded
Arteixo, Galicia (Spain) Arteixo, (24 May 1974; 43 years ago)
Founder
Amancio Ortega
Headquarters
Arteixo,, Spain Arteixo
Number of locations
2169 stores [1]
Area served
Worldwide
Products
Clothing
Revenue
US$15.9 US$ 15.9 billion (2016) (2016)[2]
Parent Website
Inditex zara.com
VISION Our stringent commitment to Global standards of Quality has seen us grow phenomenally over the last decade, to create a niche of our own, in the highly competitive world markets. ZARA Textile has been the name of one of the most innovative and leading textile producers. Our technical perfection, quality standards and innovative impacts are unique. ZARA Textile has become one of the leading symbol of quality products in the textile industry. Behind all this success, Directors and their team have a complete vision in thier mind to make their organization as one of the top ranked company. Following is our vision statement.
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MISION ZARA Textile is devoted to achieve consistent improvement in the system of providing products & services to the customers through On Time Delivery & Enhancing Customers Satisfaction by means of Quality and Value."
Key Objectives Zara´s aim is to make fashion accessible for all by offering the latest fashion in medium quality at prices, affordable for everyone. Zara’s business model operates on having a
very low turnaround time, and reducing the advertising spend by using its store as the point of information. Zara’s vertical integration of design, JIT manufacturing system, delivery and sales;
flexible organizational and work structure, management of stocks on as-needed basis; quick response policy to fashion trends and advanced information technology to support operations combine to enable quick response to customer’s chang ing demands.
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Zara Values
Voice: The Trust is committed to ‘speaking truth to power’ by Voice: enabling the unfiltered voices of people’s real lived experience to influence those in power Collaboration:: Recognising that we can achieve little on our own, the Collaboration Trust works in partnership with others to build movements for change
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Engagement: The Trust aims Engagement: aims to use the power that having independent money gives us and to work with all our partners respectfully in the interests of our shared goals. Independence:: The Trust sees a strong civil society, of which we are Independence a part and which we will nurture, as a key mechanism for holding the powerful to account. Learning: The Trust seeks to learn from all the work we undertake and support – and to share that learning widely to increase impact. Innovation and evidence: The Trust will work over a sustained period of time to find and build an evidence base for new solutions to old problems Quaker values: The Trust respects its historical roots in Birmingham and in Quaker values, although now embracing all faiths and none
ZARA Logo
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ZARA SWOT ANALYSIS, USP & COMPETITORS SWOT Analysis of Zara with USP, Competition, STP (Segmentation, Targeting, Positioning) - Marketing Analysis
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Zara Parent Company
Inditex Group
Category
Apparel and Accessories
Sector
Lifestyle and Retail
Tagline/ Slogan
Zara
USP
Zara offers perfect combination of high end, chic clothing at premium prices
Zara STP Segment
Clothes for people with a combination attitude of work and play
Target Group
People with Medium to high purchasing power who love to look glamorous at all times
Positioning
Zara offers classy high quality clothes based on consumer trends
Zara SWOT Analysis
Strengths
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1. Zara have more than 2000 stores all over the world 2. Part of one of the most biggest Spanish retailers in the world 3. Zara have a well established brand name worldwide 4. Their supply chain management is extremely low cost as well as most of their processes like operations, manufacturing are all
vertically integrated 5. Strong online presence through their own website and other ecommerce platforms makes Zara a popular brand name. 7. Zara offers extremely trendy, well designed and fast delivery of new products 8. Apart from clothes, Zara also offers handbags, shows etc 1. Limited marketing and advertising as compared to some other brands
Weaknesses
2, High competition for Zara means limited market share and high brand switching 1.There are more global markets which Zara can explore 2.They can also enter into segments and expand those areas where they haven’t
Opportunities
3.Online marketing and ecommerce is gaining importance which can be tapped by Zara 1. The high end fashion merchandisers can be a major threat to them 2. Economic downturn can also be a threat to their target segment 3. There is a large amount of consumer switching taking place
Threats
4. Fake imitations can decline the sale of Zara products and hurt business
Competition 1.Chanel 2.Christian Dior 3.Burberry 4.Ralph Lauren Competitors 26 | P a g e
5.Prada 6.Gucci 7.Louis Vuitton 8.Hugo Boss 9.Hermes International 10..Versace 10 11..Valentino S.P.A 11
TODAYS PRODUCTS OF ZARA
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Zara includes variety of products under these categories :
Womens Mens WOMENS
1. TOPS
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2. TROUSERS
3. BAGS AND HANDBAGS
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4. HIGH HEELS
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MENS
JEANS
SHOES
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SHIRTS
JACKETS
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BUSINESS OPERATIONS
2012 EUROPE 1296 AMERICA 219 ASIA AND 410 REST OF THE WORLD 33 | P a g e
2011 1280 207 343
2010 1245 199 279
2009 1204 188 216
2008 1188 173 159
2007 1092 149 120
TOTAL
1925
1830
1723
1608
1520
1361
Channel Of Distribution The prime of object o bject of production is its consumption. The movement of product from producer to consumer is an important function of marketing. It is the obligation of the producer to make goods available at right place, at right time right price and in right quantity. The process of making goods available to the consumer needs effective channel of distribution distribution.. Therefore, the path taken by the goods in its movement is termed as channel of distribution. The goods may be sent to the consumer directly or indirectly through middlemen. The channel of distribution may be classified as: Selling through direct channels This is the oldest, shorter and the simple channel of distribut distribution. ion. The producer sells the product directly without involvement of any middle man. The sale can be made door to door through salesman, retail stores and direct mail. Certain industrial and consumer goods such as clothes, shoes, books, hosiery goods, cosmetics, household appliances, electronic goods etc., may be sold through direct contact. Perishable goods such as vegetable and fruits can also be sold directly.
All 1,900 Zara stores received shipments with new items twice a week; centrally managed in Arteixo and ordered by store managers worldwide. Zara had, like all Inditex chains, its own Distribution Centre (henceforth (henceforth DC): a 40,000 square-metre building located in Arteixo paired with smaller facilities in Southern America. Regardless of origin, all merchandise passed through Arteixo’s DC before being shipped to their respective locations. The warehouse was known as a “place to move merchandise and not store it21” , most garments only stayed for some hours and none would stay for more than three days. 75% of shipments were made by truck to stores across Europe and arrived typically between 24 and 36 hours after the order. Countries outside Europe received merchandise 48 hours after ordering, typically by airfreight or boat. 34 | P a g e
Introduction Of Department There are many different functional departments all create the create the prime of object of production is its its consumption. consumption. The movement movement of product product from producer to consumer is an important function of marketing. It is the obligation of the producer to make goods available at right place, at right time right price and in right quantity. The process of making goods available to the consumer needs effective channel of distributio distribution. n. Therefore, the path taken by the goods in its movement is termed as channel of distribution. The goods may be sent to the consumer directly or indirectly through middlemen.
Contrarily to the rest of the industry, Zara opted to keep around half of its merchandise production in-house under the operations of 20 fully-owned factories. Inditex purchased undyed garments from countries such as Italy, Turkey, India and China with the help of two purchasing offices, one in Barcelona and another in Hong Kong. Fabrics, and non-core items, were purchased as a finished product in small quantities through frequent orders, allowing allowing Zara to quickly react to consumer demand by manufacturing and distributing at a high speed to stores (a new item could be in store shelves only 3 weeks after its need was detected). Moreover, outsourced production came as no obstacle for Zara’s quick response
system: 80% of all outsourced manufacturing was done in Europe and 20% came from Asia and low-wage countries, where only the less fashionable and basic items were ordered.
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There are many different departments involved with ZARA
• Marketing and Sales •
Finance
•
Administration and IT support
•
Operations
•
Research and Development
• Human Resources • Cutomer Services
1. MARKETING AND SALES
Zara is known as the Coca Cola of fashion. Such is the craze of this brand among the fashion enthusiasts. One of the major strength of the company is that it is able to respond very quickly to the changing needs of the customers. The company does not outsource its manufacturing process, process , making it fully in control of the products it produces. Its unique selling preposition is to create the latest trends. In most cases, new styles are normally available on the sales stores within two weeks, four weeks maximum. If a product is not selling in the stores, it is immediately pulled from the stores. However, when it comes to India, it has a few problems to sort out, prominent among those being the lack of seasonal variations in their range. Secondly, it needs to tackle and cope up with the cultural needs of the local people which is a big challenge and Zara is working to reach out local people by coming up with designs that integrate modernism with local traditions.
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2. FINANCE
This is where Zara, with its highly responsive supply chain, excels. Although the company’s flexible supply chain means its price points are slightly higher than its
competitors, it allows it to be the most responsive to chabegan as a small Spanish clothing company, founded by Amancio Ortega in 1975, has h as transformed into a global business and market leader. Boasting over 6,000 stores, it has a presence in nearly 88 countries, with total net income rising to €2.5bn ($2.8bn) in 2014 nging
fashion trends.
3. ADMINISTRATION AND IT SUPPORT
Administration Administration and IT support department have been keeping things clean, taking orders, ensuring all material is of a good quality. Zara was, curiously, a late bloomer in the online online business. Having had a website website since 2010, 2010, the brand only began to sell online online almost one one year later. The brand’s managers had always been hesitant in entering the online realm but with the increasing user activity on the internet, and due to Zara’s high reliance on word -of-mouth, they believed that creating an online site would help increase chann els for consumers’ pre -purchase interaction.
4. OPERATIONS
Operations management is in regard to all operations within the organization related activities including managing purchases, inventory control, quality control, storage and logistics. A great deal of focus is on efficiency and effectiveness of such processes. An example of successful operations management in retail sector is obvious in Zara business model which is elaborated and discussed here by a team of MBA Strathclyde students. From one shop in La Coruña, the Zara empire has expanded to more 50 countries. While other giants in the business squeeze their profit margins by manufacturing in bulk and and lowering prices, Zara understood that most of the customers are willing to pay for clothes if they feel they are getting exclusive and fashionable clothes. 37 | P a g e
5. RESEARCH AND DEVELOPMENT
Zara is a spanish chain store in Inditex group, one of the worlds biggest retail store in the world who are also owners of zara home. Zara is a fast industry bt its unique business model model is based on innovation innovation and flexibilty. they design and distribute distribute a garment to the market in just 15 days. they always have new products but in limited supply. the customer feels there is an 'exclusitivity', since only a few items are on display even though stores are planned spacious; they feel they have to buy it because they wont find it again. Zara's designer create approximately 40,000 new design annually in which 10,000 are produced. these design resemble lateset couture creations of classic piece.
6. Human Resources One of the key roles of this department is the ability to keep everyone happy; they are concerned with the welfare of the staff, people whom come in contact with the company and welfare of the business by following employment employment laws and ensuring health and safety. When you have happy h appy staff you have motivated staff and this helps to achieve the objectives. HR is also responsible for all training that has to be taken to ensure the company are up to date with the way the company functions and that all health and safety is being met.
7.
Customer Service
About 75 million people, or one-third of the total Internet population, buy goods online to be shipped to them over the course of a quarter. Of those, about one-third make 1 transaction and half make 1-2 transactions. About a quarter make 3-5 purchases, and the other quarter make 6 or more. Zara provide vast customer service 24/7 as they treat customer satisfaction as an major factor.
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LITERATURE REVIEW Zara’s innovations in IT, supply c hain management and merchandising merchandising has pushed
it to become one of the most recognizable names in the world. The brand has set the industry’s norms and become a miraculous “exception” in the world of fashion.
However, in the beginning of 2013 the brand faces severe pressure in its sales due to the ever-changing dynamics of its industry, the economic constraints set by the European recession and the force of its competitors, specifically the Swedish fashion retailer H&M. Unlike its competition, Zara had never pursued an intensive based strategy, focusing focusing more on consumers’ demands demands and their advertising- based experience with the brand in its points of sale. Relevant talking points: – i.e. consumers’ perception of the brand. Students may What Zara represents – i.e. lean toward the following: Style Quality Good price-quality ratio Clean, simple image The “Zara Way”, interesting discussion topics could be: Zara’s design-to-manufacturing system Store operations For the Zara brand, a possible positioning statem statement ent could be: Zara is a clothing and accessories fashion fashion brand (frame of reference) For men, women and children (target audience) That brings the most fashionable and trendy clothing at affordable prices (point of difference) Because they know where their items come from and guarantee the best quality. (reason to believe)
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Research Methodology Research methodology, selected in view of the research objectives, pros and cons as well as details on its use will form part of this chapter. We will also outline the research method used, information collection procedures, information sources, sources, and how this information will be analyzed in light of the research objectives This chapter presents how the image developed by a brand, corporate or behaviour, specifically stand-alone over-the- years impacts consumer’s behaviour, answering the question concerning factors customers look for in a brand, prior to purchase in the apparel industry. Based on these factors, we can narrow down the facets available with these two companies and how they succeed / fail in the overall strategy to attract or carry along positive consumer behaviour, in influencing their sales
Objective of the Research
The purpose of this research is to describe on a specific way how Zara can address the expenditure on global online sales by providing a customer friendly shop portal, which allows an easy ordering process and an cost-effective shipping and return method. The key of this strategy is based on every single customer who had a satisfied experience by purchasing fashion online and who wants to repeat online shopping. Furthermore, it’s not all about increasing the economical profit; moreover to create an added value of Zara’s brand as an intangible asset.
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PREPARING THE RESARCH DESION
Research Design Young Designers (26 average) draw the design sketches then discuss it with market specials and planning & procurement staff. Designs inspiration is copied from different sources (trade fairs, catwalks, magazines) magazines) from all around the world. It is worth to mention that out of 40,000 designs only 10,000 are approved. This illustrates the flexibility of ideas generation and on the other hand the huge number of designs reflects the ability to meet almost all the fashion requirements by customers of all ages (up to 55). ZARA business is organized around processes not functions, to close the information loop. All team is involved in all processes. This method minimizes the time as decision is conducted in one room, and in direct proximity to the information. 41 | P a g e
RESEARCH PLAN ZARA is a member of the INDITEX group, a Spanish group. ZARA have established its stores all over the world, Europe, America, the Middle East, Asia Pacific and among its 5000+ stores (from the INDITEX group), Hong gong 8ZARA stores from the whole wide world. Zara offers the latest trends in international fashion in an environme environment nt of thought-out design. Its stores located in the main commercial areas of cities across the Europe, America and Asia, offer fashion inspired in the tastes, wishes and lifestyles of today's men and women. Zara’s clothing has identified a significant underserved segment within it. Zara’s clothing is uniquely positioned to serve this segment s egment of the market because of its fast paced fashion ideas, its latest technology technology,, its efficient business strategies and its affordable prices. Due to the growing of the clothing industry and the enormous unmet need in the clothing market we see the long-term exppotential of Zara throughout the world. We are visionaries who see Zara as an extreme financial launch. By achieving its sales targets, Zara will position itself for exceptional profitability and self-funded growth. ZARA’s Plan is to maintain and develop its position in the market by giving well in time response to changing trends in consumer tastes through creating new designs that are suitable for all customers at an affordable price. “Zara constantly updates its range”. The company takes its inspiration from the catwalks, targeting the fickle, fashionable young, one of the riskiest parts of the clothing market. Unusually Unusually for a clothes retailer, Zara designs all its own clothes, makes most of them in Spain and distributes all of them itself.
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LIMITATIONS OF THE STUDY Zara excels by targeting technology investment at the points in its value chain where it will have the most significant impact, making sure that every dollar spend on tech has a payoff
The facilities move about 2.5 million items a week, with no item staying in-house in -house for more than 72 hours. Ceiling-mounted racks and customized sorting machines patterned on equipment equipment used by overnight parcel services services whisk items from factories to staging areas for each store. Clothes are ironed in advanced, packed on hangers, with security and price tags affixed.”
Would you advise WalMart or Target to move in the direction of Zara’s Fast Fashion approach to manufacturing, distributing, and selling clothing? – Why Why or why not? – If If so, what specific tactics should they adopt? How disruptive would this be to their business? Why? – If If not, are there parts of the Zara approach they
should learn FROM?
or a small fashion startup founded by four recent CMU grads that sells masscustomized clothing online.
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SECONDARY DATA
The secondary data is mainly concerned with raw data and published summaries (Saunders et al. 2007). Secondary data used in this study, mainly from books in the university library and academic weekly online through keyword search, such as differences in marketing strategy in order to gather more material, the researchers “ZARA in china “,” brand loyalty “to obtain more comprehensive data, and compare the data obtained from multiple web pages to determine the authenticity of the information about ZARA business model, sales conditions. In addition, ZARA’s official website is also important way to market data. Particularly, Saunders et al (2007) argued that when researcher conducted a qualitative research in an organization, secondary source would facilitate a triangulate finding depended on the primary data collected. If two or more sources explained a phenomenon as well as it would conclude that the information is reliable (Stokes, 2000).
Fututre Strategy Zara is the meaning of "instant fashion". Instead of creating demand for new trends and using fashion shows- Zara uses another method. They study the demands of the actual customers in their stores and then delivers that design at very high speeds. They saves tons of money on their delivery methods(you can find in the article link). I would say they are very much ahead of the fashion market in terms of production and sales.Zara is the #1 most profitable out of 8 other companies in the Inditex Group. Their production cycles are much faster than H&M! In 1 year Zara launches 11,000 new items compared to 2,000-4,000 from H&M!
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This all sounds like Zara is doing just fine, right? Yes, that is right but they want to do even better! Over the next 4 years the brand plans to double in size opening over 4,000 new shops! They plan this expansion to mostly start out in Europe before pushing anywhere else. They have already opened a new distribution center to get the ball rolling with expansion plans!
I believe this this will be a g reat s ucc ess es s ful for Zara Zara and and they they are profitable profitable enoug enoug h now I think they they s hould hould g row. That That is 1,000 s tores every every yea y earr for 4 yea y earr s . That i s an extreme ex treme g oal and even if i f they make make half half of i t, they they will still be be s ucces s ful. ful. Y ou can view much much more informat information from fr om this thi s artic arti c le, jus t c lic k on the link lin k below
Segmentation Zara’s segmentation of customers who are most appreciated is on a demographic point of view, a female women up to 35 years of age, who prioritize fashion as lifestyle, who earns up to $60k per year and graduated school. Furthermore, on psychographic 45 | P a g e
aspect Zara’s customers are ambitions and want to demonstrate it by fancy trends, have dreams in life and want to look as a V.I.P
Targeting: One of the target markets will be China, currently 3.2% visitors by country for Zara.com and based on the GDP growth in Asia, it will increase. The market target defined by the visitors from China has to achieve 8% by end of 2013.
By considering the google.com and facebook.com as the major up- and downstream on zara.com page, it presents a more specific online target market from search engine or social media. On one hand, the upstream visitors from Google and Facebook have to achieve 10% and on the other hand, the downstream to H&M of 2% has to be reduced to 1.5% by end of 2013.
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Positioning: ZARA SWOT analysis ZARA is the main success factor of Inditex's growth and plays the leading role of the group's sales and profit. For this reason, we will go into details with the regard to ZARA s success factors or rather its strategic advantages, before we start to analyse ZARA s issues concerning its supply chain and its possible opportunities and threats in the future. ZARA is not has not only a different market positioning as to its direct competitors (see figure 1.1) but also has a unique business model which is one of the world s most successful. ZARA is positioned more fashionable compare to its competitors but b ut surprisingly with a relatively low price behaviour. Unlike H&M or GAP chasing low production costs by b y outsourcing its complete ’
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production, ZARA produces nearly nearl y half its merchandise in-house. Rather than utilize its factory s capacities to maximize their output, the company leaves some capacity left on purpose. Instead of take the benefits of economies of scale, the retail giant does manufacturing and distributing in small batches. Not relying on extern service providers, ZARA manages design, distributing and logistic operations by itself. It leaves even empty shelves in its retail shops allows occasional stock-outs and waives the advertising completely. In short, ZARA s business model defies the past and current conventional practised supply suppl y chain operations. Even because of that some of Zara's practices concerning its supply chain activities seem to be questionable. 1.1 Strategic advantages (Strength) As already mentioned, Zara s strategy seems first to be a disadvantage regarding to their competitors. Zara s most interesting and at the same similar successful competitor is H&M. Both companies are European based, are leading fashion retails in the middle-low price segment and have a strong and global expansion strategy ’
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Possibilities for failure (Threats) European production facilities Like Zara s direct competition, the company has some threats for failures what can stop its future growth. If the European common currency becomes stronger concerning the US dollar, the production costs will increase generally for European manufacturers and thus Zara s production costs. The increased costs will and must be covered by the customers what may decrease Zara s sales because the new prices will be too high for a typical Zara s customer. Another fact threatens Zara s success is the quota elimination under the World Trade Organization agreement in 2005 on textiles and clothing expiring. Retailers using the outsource strategy will benefit from greater access to cheaper production opportunities. Zara will have its difficulties to counter a high euro impact and its competition lower prices for merchandise. Direct competition Zara's largest threat is of course its direct competition, especially when entering new global markets. Due to Zara s broad field of merchandise offering almost every retailer can be a threat especially when offering only one certain category of products. Very quick and effective due to international expansion, allowing the company to gain successfully sales outside Sweden is Zara s most threatening competitor H&M. ’
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4 P’s P’s of ZARA :
Product:
Zara’s position in the affordable fashion industry clearly states it’s not a luxury
brand. The target customers are eager eager to purchase fancy fashion while while still sensitive to the prices. They want to be different and unique. The most important 49 | P a g e
thing is (instead of more quantities per style) that Zara produces more quantities of styles. Zara will also consider new product and develop features such as a product line for a charity or or VIP presents in its collection collection
Price:
Zara is providing fashion for people with a lower income, therefore the prices are very reasonably that everybody can afford it. Cost effectively influences also the supply chain management which requires a fast decision making process.
Place: — the The constant flow of updated data mitigates the so-called bullwhip effect — the tendency of supply chains to amplify small disturbances. A small change in retail orders, for example, can result in wide fluctuations of factory orders after it's transmitted through wholesalers and distributors. distributors. In an industry that traditionally allows retailers to change a maximum of 20 percent of their orders once the season has started, Zara lets them adjust 40 to 50 percent. In this way, Zara avoids costly overproduction and the subsequent sales and discounting prevalent in the industry. However, it will not allow having all products online. The decision making process, of which products will be distributed online, needs to be defined up front. The supply chain has to evaluate the stock availability by forecasting sales and consider the needed production capacity. Another important point is the shipment process to the customers and the return handling process. As a high priority, the shipment costs have to be above a minimum ordering volume free and the return guarantee has to be customer friendly oriented. An additional service for express (24 hours) delivery, which will be charged correspondently, must be installed in addition.
Promotion: In the competitive clothing industry, Zara has successfully built a worldwide famous brand by a unique management system of design, production production and supply
chains. The “fast fashion” concept and operation allow Zara to always provide the
most fashionable clothes to their customers and the always renewing collections definitely help build a brand loyalty. Zara is focussing focussing on internet online marketing opportunities such as e-commer e -commerce ce strategy and social media to promote traffic on Zara.com as well as attracting visitors to the online shop. From the original focus on the central European 50 | P a g e
market Zara is expanding to the Asian market.
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PRODUCT LIFE CYCLE OF ZARA The problem of optimally purchasing new products is common to many companies and industries. This thesis describes how this challenge was addressed at Zara, a leading retailer in the "fast fashion" industry. This thesis discusses the development of a methodology to optimize the purchasing process for seasonal, short life-cycle articles. The methodology includes a process to develop a point forecast of demand of new articles, the topdown forecast at the color and size level and an optimization module to produce recommendations to define the optimal quantity to purchase and the optimal origin to source from. This thesis is the first phase of a two phases purchasing optimization process. The focus of this thesis thesis is: a) the outline of of an enhanced purchasing methodology methodology b) the development development of the the most important input in the system: a point forecast of demand at the article, color, and size level, and c) the development of an IT prototype to automatically automatically manage the purchasing purchasing methodology. methodology. The second phase of the purchasing optimization process 51 | P a g e
focuses on the optimization module. The optimization module is beyond the reach of this this thesis.
ANALYSIS AND INTERPRETATION
INCOME STATEMENT : Regarding the financial objectives we defined merely the sales as a key performance indicator because of the low-budget investments of online sales compared to the expensive flagship stores. The financial objectives are based on the first half year of 2012 on global level and presented a positive trend in sales of +17% compared to 2011. Our estimated share on online sales was in the first half year of 2011 approx. 5% and rose in the first half year of 2012 to approx. 6%.
INDITEX SALES 52 | P a g e
1H2012
1H2011
%
( MILLIONS EUROES)
CHANGE12/11
SALES (PRESS RELEASE)
7239
6209
+17%
ONLINE SALES(ESTIMATED)
434
310
+40%
FINDINGS AND SUGGESTION FINDINGS :
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We provided an interesting read regarding Zara’s main business
strategies and the challenges it faces to sustain its competitiveness and success in the next years. In conclusion, we found an example of how companies, regardless of industry, do not always follow strategies that are academically taught. We found out that zara has a wide product range on street fashion for the fashion f ashion street. Zara is a way a fashion could be described it includes integrated strategies and the development development of departmental at even basic basic material is of best found quality.
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