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Partner Links. Related Articles. Investopedia is part of the Dotdash publishing family. Bricks and mortar retailers around the world have been forced to re-evaluate their business models during the pandemic, amid expectations of lower footfall in stores for a significant amount of time.
In the UK fashion brands Monsoon Accessorize and Quiz said on Wednesday they would close branches, with hundreds of jobs lost. The company also owns the Wagamama chain, which is unaffected. Larger stores will act as distribution hubs for online sales. The company also runs Join Life, a scheme which helps consumers identify clothes made with more environmentally friendly materials like organic cotton and recycled polyester.
Additionally, Inditex takes wide-ranging measures to protect biodiversity, reduce its consumption of water, energy and other resources, avoid waste, and combat climate change. For example, it has outlined a Global Water Management Strategy, specifically committing to zero discharge of hazardous chemicals. It has also been expanding its waste reduction programme through which customers can drop off their used clothing, footwear and accessories at collection points in 2, stores in 46 markets today.
Zara has a very entrepreneurial culture, and employs lots of young talent who quickly climb through the ranks of the company. Zara promotes approximately two-thirds of its store managers from within and generally experiences low turnover.
The brand has no fear in giving responsibility to young people and the culture encourages risk-taking as long as learning happens and fast implementation the mantra of fashion. The variable component amounts to up to half of the total compensation — making store level employees heavily incentive-driven.
The organizational structure is also flat with only a few managerial layers. Customers are the most important source of information for Zara, but like any other fashion brand, Zara also employs trend analysts, customer insights experts, and retains some of the best talents in the fashion world.
The creative team of Zara comprises of over professionals. For example, while many companies struggle with long lead times in discussions and decision making, Zara gets around this challenge by getting various business functions to sit together at the headquarters and also by encouraging a culture through structures and processes where people continuously talk to each other.
The sales and marketing teams who receive trend feedback talk regularly with designers and merchandisers. The production scheduling is also closely coordinated so that there is no time wasted on approvals. The design team structure is very flat and focuses on careful interpretation of catwalk trends that are suitable for the mass market — the Zara customer.
The design and product development teams, who are based in Spain, work closely to produce 1, new styles every month. Zara has no chief designer. All its designers are given unparalleled independence in approving products and campaigns, based on daily data feeds indicating which styles are popular.
Due to the unwavering focus on the customer, the entire business model is designed in such a way that the pattern of needs for the finished goods dictate the terms of the production process to follow, instead of having the raw materials determine the nature of the production process — something that is very rare in multinational companies of similar scale. Zara has used almost a zero advertising and endorsement policy throughout its entire existence, preferring to invest a percentage of its revenues in opening new stores instead.
It spends a meager 0. This is indeed the mark of a truly successful brand where customers appreciate and desire the brand, which is over and above product level benefits but strongly driven by the brand experience.
Instead of advertising, Zara uses its store location and store displays as key elements of its marketing strategy. By choosing to be in the most prominent locations in a city, Zara ensures very high customer traffic for its stores.
Its window displays, which showcase the most outstanding pieces in the collection, are also a powerful communication tool designed by a specialized team. A lot of time and effort is spent designing the window displays to be artistic and attention grabbing.
To tap into the emerging e-commerce trend, Zara launched its online boutique in September More recently in March , the brand launched online in Australia and New Zealand. Today, its online store is available in 66 countries. As a fast fashion retailer, Zara is definitely aware of the power of e-commerce and has built up a successful online presence and high-quality customer experience. Inditex has announced that it will be closing between 1, to 1, stores worldwide, focusing on smaller ones in Asia and Europe.
Amancio Ortega plans to spend USD 1. To achieve this goal, Zara will need to think of new ways to engage its customers digitally, not just through its online store, but through online communities and social media. Mobile commerce: Zara woke up late to the potential of mobile commerce and needs to catch up fast with competitors. Different forms of market analysis strongly point towards a scenario wherein spends on mobile commerce will overtake desktop based ecommerce by Price is not an advantage anymore: Offering the latest fashion lines at affordable prices continues to be a strategic advantage for Zara, but cannot continue to be the only one.
Across the world, and closer to home in Europe, competitors are cutting prices and refining their business models to cut the competitive advantage that Zara has. Again in its home market, it now faces increasing competition from brands like Mango, which cut prices and started focusing on fashion segments in which Zara enjoyed popularity.
Also with the rise of e- and m-commerce, the number of indirect competitors has mushroomed. We now have online fashion aggregators that bring in multiple brands under one single online platform and cut through borders and price segments. For Zara to effectively compete and maintain its strategic advantage, the focus needs to shift away from price but towards quality. Even today the Zara brand enjoys high levels of appeal, which is evident by the serpentine queues outside its stores when it launches in new markets.
There is a need for Zara to start investing in building a strong brand positioning and aggressively communicate it. Additionally, Zara needs to adopt, imbibe and leverage social media and digital platforms in its advertising and communication strategies deeper going forward. Need for marketing strategy to evolve: As discussed above, Zara does not engage in advertising and instead uses its store locations as a marketing strategy. However, brand communication is crucial in attracting new customers to the brand to support its growth.
Without advertisements, Zara relies heavily on word of mouth or social media. This causes the perception of potential customers towards Zara to be heavily shaped by family and friends, which may not be accurate.
Its videos on YouTube are also seeing very low viewership in comparison with its follower count, which is not ideal as videos are a powerful medium for brands in the fashion industry. This is a gap that Zara needs to plug immediately as the reach and impact of social media marketing gets stronger. Family business planning and succession: With various technological and business disruptions in the past decade, leadership in the 21st century will be influenced by constant change, geopolitical volatility, and economic and political uncertainty.
Most fashion trends often start unexpectedly, originate from uncommon places and grow out of nowhere.
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