Introduce Zara
Zara Intro
Zara, founded in 1975 by Amancio Ortega and Rosalia Mera in Galicia, Spain, is a leading clothing and equipment brand As the flagship brand of Inditex Corporation, the world's largest fashion retailer, Zara is part of a diverse portfolio that includes well-known names such as Massimo Dutti, Pull and Bear, Bershka, Stradivarius, Oysho, Zara Home, and Uterque.
Milestones of important historical periods
Zara began its international expansion in 1988, starting with Porto, Portugal The brand then entered the United States in 1989 and France in 1990 Throughout the 1990s, Zara continued to grow, opening stores in Mexico in 1992, followed by Greece, Belgium, and Sweden in 1993 The 2000s marked significant growth, with Zara launching its first stores in Japan and Singapore in 2002, followed by Russia and Malaysia in 2003 In 2004, the brand expanded into China, Morocco, Estonia, Hungary, and Romania, and in 2005, it entered the Philippines, Costa Rica, and Indonesia The expansion continued with stores opening in South Korea in 2008, India in 2010, and later in South Africa and Australia.
Zara launched its online store in September 2010, initially serving Spain, the UK, Portugal, Italy, France, and Germany By November of the same year, the service expanded to Austria, Ireland, the Netherlands, Belgium, and Luxembourg The online platform continued to grow, entering the United States market in 2011, followed by Russia and Canada in 2013, and later Mexico, Romania, and South Korea in 2014.
In 2014, Zara implemented RFID technology in its stores, embedding RFID chips in security tags that are removed upon purchase and can be reused This innovative technology enables rapid inventory retrieval by detecting radio signals from the labels, ensuring that when a product is sold, the stock system is instantly updated for replacement Additionally, RFID chips facilitate the easy location of items that may not be on display, enhancing inventory management efficiency.
In 2015, Zara was ranked 30th on Interbrand's list of the best global brands.
Documentary about fashion boss Zara
Amancio Ortega, the founder of the fashion brand ZARA, began his career working as a maid in fashion shops until the age of 30 In 1975, he partnered with Rosalia Mera to establish ZARA, transforming the fashion industry into a lucrative business After nearly 40 years, Ortega has amassed a fortune of $55 billion, making him one of the wealthiest individuals in the world, second only to Bill Gates and the Carlos Slim Helu family.
In the 1980s, Amancio Ortega's innovative business principles and ambitious vision for development were deemed "monstrous." He believed that advertising was unnecessary, opting instead to reinvest profits into opening new stores.
Figure 2: Billionaire Amancio Ortega, owner of fashion brand Zara
Inditex's reached 41% year-on-year and accounted for 10% of the group's total revenue-
Inditex, the parent company of Zara, also owns several other popular clothing brands that captivate fashion enthusiasts worldwide, including Massimo Dutti and Bershka.
Historical performance: (From the year of transition to selling e-commerce
Inditex, the parent company of Zara, has reported a surprising contrast in its recent business results, revealing that while the company’s profits rose by 7%, leading to over 562 million euros in bonuses for its 88,000 employees, sales have experienced a slowdown.
In 2017, Inditex reported a net profit of €3.37 billion, an increase from €3.18 billion in 2016, despite experiencing a sales growth of only 5%, the lowest in three years and a decline from 10% in the previous year Additionally, the company's gross profit margin fell from 57%.
2016 to only 56.3% in 2017 due to the appreciation of the Euro
Inditex manufactures approximately 60% of its products in Spain, distributing them globally Despite rising production costs due to euro appreciation, the company has maintained stable selling prices, which has impacted profit growth, although it remains profitable.
Inditex, the parent company of Zara, relies on only 30% of its products sourced from Asia, significantly lower than competitors like H&M, which outsource 80% This reliance on a smaller percentage makes Inditex more vulnerable to exchange rate fluctuations Additionally, the rapid growth of e-commerce has led to cheaper and quicker fashion item turnover, posing challenges for Inditex In response, the company has heavily invested in its online presence, opting to open fewer stores with larger, more upscale spaces However, experts believe these measures may not be sufficient to prevent a sales slowdown in the near future.
Figure 3: Zara's e-commerce website in Vietnam
Overview of Zara's supply chain
SCM's organizational structure in Zara's enterprise
Supply Chain Management is abbreviated as CM Supply Chain Management (SCM) is a system for managing factories and the entire system of a company's customer supply points
There are at least three components to a supply chain management system:
2.1.1 Zara supply chain management system
There are at least three components to a supply chain management system
Comditel, a wholly-owned subsidiary of Inditex, oversees a vast network of over 932 independent fabric and raw material suppliers across Italy, Spain, Germany, Portugal, Greece, and the Far East To enhance supply chain flexibility and minimize dependency on individual suppliers, Zara ensures that no single supplier accounts for more than 4% of its total fabric requirements.
Inditex Asia, Ltd and Zara Asia, Ltd., both located in Hong Kong, are key suppliers of fabrics for Zara, primarily sourcing synthetic textiles and apparel from Asian vendors To enhance efficiency in their production processes, Zara collaborates with Fibracolor, an Inditex dye manufacturing subsidiary, from which it procures 20% of its dyeing and printing needs, enabling swift adjustments in operations.
Fabric is delivered to the distribution facility within five days of order placement, where Comditel processes gray cloth by dyeing, applying patterns, and finishing it for all Inditex brands, including Zara The final fabric is then distributed to both external and in-house producers, a process that may take up to a week.
Zara primarily targets women, who represent the largest segment of its customer base, while men constitute a smaller portion of the market Additionally, children's fashion accounts for the smallest share of Zara's overall target audience.
2.1.2 Components of the supply chain zara
There are six essential components that make up the supply chain Each component represents a different supply chain, functional group
Zara oversees the design of all its products through a dedicated commercial team that includes designers, market specialists, and buyers This collaborative effort focuses on the meticulous design of items, with designers playing a pivotal role Each year, Zara creates around 40,000 products, ultimately selecting 10,000 for production.
Zara's design teams simultaneously work on next season's and current season's collections to maintain a competitive edge, drawing inspiration from global sources such as catwalks, magazines, trade fairs, and discotheques Each year, Zara creates two main collections—fall/winter and spring/summer—beginning initial sketches about nine months prior to the season's launch These sketches are then developed using Computer Aided Design (CAD), with adjustments made to optimize weaves, textures, and colors Designers finalize the fabric and components while determining the product's future selling price Samples are presented to the sourcing and product development unit, which identifies product requirements and decides on insourcing or outsourcing This process ensures that the initial collection arrives before the selling season begins.
Market specialists serve a crucial role in connecting designers with retail stores, overseeing the process where only one-third of daily designed items proceed to production Due to time constraints, a limited selection is showcased in key stores to gauge customer reactions If feedback is overwhelmingly positive, these items are then manufactured on a larger scale Constant communication between market specialists and store managers is essential, as they discuss sales orders and new product lines, ensuring informed final decisions This collaboration contributes to a remarkably low failure rate of 1%, significantly better than the industry average of 10% Ultimately, the design team's responsibility is to monitor customer preferences and leverage sales data to inform their strategies.
Zara's supply chain management (SCM) involves a thorough analysis of the product life cycle, which informs the repetition of orders and the creation of new designs for both internal and external suppliers This collaborative approach allows design teams to work closely with market specialists, effectively connecting merchandising with backend production processes.
Zara swiftly removes designs that fail to perform in sales within the first week, canceling any future orders and replacing them with new offerings The brand closely monitors changes in discount policy preferences to adapt its strategies effectively.
ZARA strategically applies discounts during the launch of new products, signaling to customers that no further discounts will be offered once a new model is released This practice has conditioned consumers to recognize the timing of price reductions, allowing ZARA to remain focused on customer preferences and reactions while upholding its pricing integrity in the fashion market.
Positioning managers will decide where to look for raw resources for production and where to consume the most
Improving positioning can enhance the efficiency and speed of the production process Zara targets a diverse market, with over 50% consisting of women, while men and children make up the remaining 40% The brand is known for its affordable fashion aimed at young consumers A standout aspect of Zara is its ability to quickly refresh fashion trends throughout the season, setting it apart from competitors in the industry.
Information plays a vital role in supply chain management (SCM) as it underpins decision-making processes The accuracy of data directly influences the effectiveness of SCM outcomes, making it essential for managers to gather information from diverse sources and refine it to meet their specific needs.
Zara utilizes an advanced information technology system that connects each store to a global ERP system, facilitating seamless information flow across its supply chain, from warehouses to production centers and suppliers This integration enhances forecasting accuracy, keeps the brand updated on the latest fashion trends, and effectively minimizes inventory congestion.
Inditex operates ten logistics hubs across Spain, strategically situated near the headquarters of its eight brands The distribution center for Zara's clothing is located in Arteixo, A Coruña, covering an impressive area of 464,500 square meters This facility, known as "The Zara's Cube," plays a crucial role in the efficient processing and distribution of Zara products in Northwest Spain.
Zara operates 11 highly automated production facilities within a 16-kilometer radius, all interconnected by an underground monorail system This efficient setup allows for the swift transportation of cut fabrics to manufacturers for dyeing and assembly, utilizing approximately 200-211 kilometers of high-speed rail tracks Each factory produces around 50,000 outfits weekly, which are then transferred via monorail to distribution centers for rapid delivery to stores.
Activities of Zara’s supply chain
Figure 6 : Zara supply chain model
Inditex aims to enhance sustainability by ensuring that 90% of the raw materials used across its eight brands—Zara, Zara Home, Massimo Dutti, Pull&Bear, Bershka, Uterqüe, Oysho, and Stradivarius—are sourced from cotton, linen, polyester, and viscose, with a commitment to making viscose more sustainable by 2023.
ZARA’s fashion designers demonstrate exceptional creativity and innovation, introducing new styles to stores biweekly The process from concept to retail takes only three weeks, highlighting their efficiency Central to their approach is the commitment to responsible fashion, which starts at the design stage ZARA’s designers are trained in circular design principles, ensuring that the lifecycle of garments is thoughtfully considered, aligning with the goals of the Global Fashion Agenda.
Zara has invested in a cutting-edge logistics center covering 10,000 square meters in Arteixo, enhancing its operational efficiency The brand strategically purchases a limited selection of fabrics in bulk—typically four or five, which may change annually—while managing garment design, cutting, and dyeing in-house.
This way, fabric manufacturers can quickly ship large quantities of fabric directly to Zara
DC - the Cube sources raw fabrics from suppliers in Italy, Spain, Portugal, and Greece, ensuring quick delivery within five days of order placement The domestic logistics are primarily handled by trucks, facilitating efficient transportation from suppliers to the company.
The Cube, spanning 464,500 square meters (5 million square feet), is a highly automated facility equipped with underground monorail lines connecting to 11 Zara-owned clothing factories within a 16 km (10 mi) radius This central hub handles all raw materials en route to the factories and facilitates the shipping of finished products to retail stores, exemplifying Zara's efficient supply chain model.
Zara's production strategy allows for rapid adjustments, resulting in reduced inventory levels and lower working capital requirements Unlike competitors who produce 80-90% of their stock in advance, Zara only commits to 50-60% ahead of time This approach enables Zara to make smaller, more accurate investments in short-term fashion trends, minimizing the risk associated with predicting annual trends.
➢ The module displays the Zara cube and the distribution flow from it
Zara's production facilities are linked to the Cube via underground tunnels that feature a high-speed monorail system, spanning approximately 200 kilometers (124 miles) of track This efficient transportation network delivers cut fabric to factories for dyeing and assembly, while also returning finished clothing items to the Cube for distribution to retail stores.
Zara focuses on flexibility and agility in its business model rather than competing on low costs and cheap labor The company employs approximately 3,000 workers in Spain for its manufacturing operations, paying an average wage of 8.00 euros per hour, significantly higher than the average labor cost of around 0.40 euros per hour in Asia.
• Zara's factories in Spain use flexible production systems for rapid changes in operations :
+ 50% of all items are made in Spain
+ 26% in the rest of Europe
Production is primarily concentrated in Northwest Spain, where the company's headquarters and the Cube are situated However, for efficient distribution and logistics, a centrally located facility in Zaragoza was chosen, leveraging its status as a major logistics hub established by the Spanish government Raw materials are transported from suppliers directly to Zara's production center.
The completed garment is transported from the Cube to the Zara logistics center in Zaragoza, where it is then distributed to stores worldwide via truck and plane.
Supply Chain Flows
Information flow, alongside product flow, significantly enhances the responsiveness of the supply chain Key data sources, such as customer orders and feedback, play a crucial role in shaping Zara's strategic decisions The ZARA center receives sales reports and order requests, which are informed by valuable customer insights.
Purchase orders are managed at the center alongside the supplier's quotation If the supplier consents, they will return the confirmation form and invoice to ZARA in case of unsatisfactory materials ZARA will then communicate quality complaints and requests for technical adjustments to the supplier Once satisfactory materials are received, they are forwarded to nearby factories with the necessary technical specifications, detailed designs, and product requirements.
Once the product is completed, the factory will generate a report for ZARA Upon receiving the merchandise, ZARA will then provide the delivery plan to the logistics distribution center to facilitate transportation to the store.
The logistics center will provide ZARA with a detailed shipment report, which ZARA will then forward to its stores for scheduling purposes Stores will manage sales and communicate with customers by sending notices and invoices.
ZARA's product flow is highly adaptable and efficient, with raw materials sourced from nearby countries like Spain, Portugal, Turkey, and Greece Suppliers deliver materials to ZARA centers within five days of order placement The company's factories, strategically located at its core, focus on printing patterns, cutting, and testing samples to minimize fabric waste Once the designs and fabrics are prepared, they are dispatched to partner factories for further production.
Partner companies handle the entire production process, from assembling fabric pieces and fastening buttons to creating finished items Once the products are completed, they are sent to the distribution center, where ZARA staff inspect, price, label, and package them for distribution.
Goods are transported in truckloads to the airport for distribution to local stores or directly to retailers across Spain Upon arrival, staff promptly display these items on the store floor, ensuring that customers have immediate access to the latest designs.
Cash flow is crucial for businesses as it reflects their profitability At ZARA, cash flow is generated through customer purchases in-store, with revenue flowing from these sales to corporate headquarters This revenue is then allocated to cover various expenses, including payments to suppliers, logistics coordination, and other operational costs.
Channel Administration Activities In The E-Trade Supply
An overview of the online ordering process on the company's website
ZARA has developed a comprehensive online ordering process that helps customers easily find products that suit their needs By visiting the website, shoppers can effortlessly browse designs and add their desired items to the cart for a seamless purchasing experience.
Zara offers a variety of color and body size options to assist customers in selecting the right fit while shopping Once customers have chosen their desired items, they proceed to complete their order by providing accurate delivery details, including their address and phone number Additionally, shoppers can choose to have their purchases delivered to their home or pick them up in-store.
To finalize their order, customers must choose a payment method, with advance credit card payment required for Zara online stores that do not provide cash on delivery (COD) options Once the payment method is selected, customers can review their order details before proceeding to a secure third-party payment interface to enter their payment information After successfully processing the payment, Zara will send an order confirmation email to the customer.
Figure 8: Online ordering process of Zara
Model of Zara's distribution chain functioning
3.2.1: Model of Zara's distribution chain functioning
Figure 9: Model of Zara's distribution chain functioning
➢ The supplier of materials: Inditex, a textile firm, provides a diverse and readily available supply of raw materials
• Producer: 50% of the product is made in
Spain, 26% is outsourced throughout Europe, and 24% is made in Asia and Africa
• The principle of "just-in-time" manufacturing.: “The correct product – in the right quantity – in the right location – at the right time,”
• In Spain, there are 14 high-end automation factories with contemporary robotic equipment
• More than 11,000 goods are produced each year
• Mini truck and air system
• Deliveries to European retailers arrive in less than 24 hours, while deliveries to US and Asian locations arrive in less than 40 hours
Many users favor shopping directly on Zara's website due to the lack of additional costs associated with intermediaries However, purchasing from the Spanish site can be challenging for some, primarily due to various obstacles related to payment and shipping policies.
Customers can now conveniently purchase Zara products online through the Zara trial website, with a shipping fee of 99,000 VND and delivery within 3 to 7 days Simply choose your size and enter your personal information to complete your order.
You have two options for receiving the goods: pick them up in person at a
Zara shop or choose a shipping method You must pay a shipping cost of
VND 99,000 and wait 3-7 days after selecting a shipment method (except for remote areas) Free shipping is available on orders above 1,299,000
Figure 11: Online order processing in Viet Nam
Zara Vietnam's website currently has several items that are not yet in stock To stay informed, you will need to provide your email address, and Zara will reach out to you within two weeks if the items become available.
• Another significant feature is that Zara VietNam's trial shopping website is fully Vietnameseized to provide customers with the best possible buying experience
• There are over 2100 retail outlets in 88 countries throughout the world
• Set in the world's most important and expensive locales, including the most prestigious locations in major cities across the world
• There are over 2100 retail outlets in 88 countries throughout the world
• Set in the world's most important and expensive locales, including the most prestigious locations in major cities across the world
Zara aims to attract fashion enthusiasts by offering stylish garments and accessories at competitive prices, fostering customer loyalty The brand emphasizes backward vertical integration over manufacturing efficiencies to anticipate customer demand, ensuring timely delivery of new designs while maintaining strict inventory control Merchandising and store operations play a crucial role in achieving these objectives Zara enforces strict ordering deadlines worldwide; stores must place orders by 3 PM on Wednesdays and 6 PM on Saturdays in Spain and Southern Europe, and by 3 PM on Tuesdays and 6 PM on Fridays elsewhere A centralized IT system meticulously tracks these orders, ensuring a seamless flow of inventory across all locations.
Figure 12: Zara store in Seoul, Korea
• Each design has a limited number of goods
• The new model is only available for a month on the stores
• Data is processed in the center 24 hours a day, seven days a week
• The sales data is rapidly digitized and forwarded to the design and production departments
3.2.2 Processing orders on zara's website
Figure 13: Processing orders on Zara's website
• Shipping options may vary depending on your shipping address, time of purchase, and product availability
• At the time of order processing, we will notify the available delivery methods, fees and delivery times
• Possible delivery methods: i) Pick up at Zara stores – FREE
✓ Within 3-7 working days at the store have selected
✓ Note that the recipient only needs to present the QR code on the e-invoice of the order if they are also the person who directly purchased the goods
In case someone else comes to pick up the goods for you, that person will have to present additional identification ii) Delivery to home
✓ Standard Delivery - 99,000 VND / FREE (Orders over 1,299,000 VND )
✓ Estimated delivery time will range from 3-7 business days, depending on the shipping address
✓ The above delivery deadlines may be longer for island and remote areas
✓ Please note that deliveries are made only on business days
• You will receive the latest updates on the status of your order via email
• You can also access this information in the "My Account" section If you are not registered, click the "Order Information" link in the Order Confirmation email to follow up
At Zara.com, we are committed to shipping to all global locations During your purchase process, we will inform you of any delivery restrictions that may apply to your address.
Your order has been shipped! At Zara.com, we are committed to delivering to every corner of the globe During your purchase, we will inform you of any delivery restrictions that may apply to your address.
Vertical connectivity to proactively supply raw materials, manufacturing facilities, and labor, develop products that meet consumer needs, reduce inventory, and so on
Connect with European manufacturers, Asian manufacturers, and African manufacturers to lower labor expenses and lower the cost of delivering products from the factory to the store
Collaborate with technology firms to implement current technologies in production and information systems
Work with carriers to improve transportation processes, cut costs, and assure quick product response times
Taking part in the supply chain of the world's largest fashion brand, which consumes over 11,000 goods per year and generates approximately 16 billion dollars in revenue
Enhance the company's reputation by leveraging the Zara brand's global reputation, which is known not just for great quality but also for its outstanding fast response supply chain.
Evaluation of advantages and disadvantages in Zara e-commerce
Advantages and disadvantages of zara supply chain
➢ Design phase and finished product stage reach consumers quickly within 2-3 weeks, while conventional fashion brands take up to 6 months in this period
➢ Optimizing the design stage by responding to customer needs about the product:
Zara employs a pull model in inventory and supply chain management, producing up to 1,000 new designs each month that reflect current trends and store sales By closely monitoring customer spending, Zara gains insights into popular designs, enabling them to refine and iterate on future collections effectively This approach ensures that their offerings remain aligned with consumer preferences, enhancing their market responsiveness.
• Save costs, reduce inventory by mass production of small quantities, do not mass produce 1 product at a time
This allows for rapid insights into successful designs, facilitates the discovery of new concepts, and enhances understanding of product acceptance in the market Additionally, it significantly minimizes the risk of mass-producing items that may not meet customer preferences.
Zara effectively minimizes inventory and storage costs through strategic discount programs on its e-commerce platform, showcasing its ability to maintain low inventory levels This approach not only enhances customer satisfaction by continuously introducing new fashion models but also reinforces Zara's commitment to efficient inventory management.
➢ Attract customers, better meet customer needs
Zara, a leading fast fashion brand, is renowned for its frequent introduction of new models, providing customers with a diverse range of choices The brand prioritizes customer satisfaction by actively listening to feedback and continuously enhancing its products to meet consumer needs.
➢ Modern technology, exploiting RFID technology
Zara leverages cutting-edge technology to efficiently manage online orders, enabling same-day or next-day deliveries through its warehouses Utilizing RFID and integrated management systems, Zara operates in 25 markets, ensuring a streamlined process for customers In 2020, the company announced plans for all countries with fulfillment centers to adopt this advanced management system, enhancing their service capabilities.
In 2018, Inditex revealed its commitment to staying ahead of technological advancements and marketing trends by investing in logistics robots This initiative aims to enhance their brands' online presence and accommodate the increasing volume of orders Zara, as a leading brand, is at the forefront of this transformative shift.
➢ Increase competitive advantage over competitors
Zara has established itself as a leader in the young fashion industry by embracing the fast fashion trend, significantly outpacing competitors like H&M Its agile product supply chain allows for constant updates and rapid inventory turnover, which increasingly attracts customers to the Zara brand.
Zara's extensive product range, with over 450 million items and approximately 12,000 new designs introduced annually, can lead to defects in some products The rapid turnover and variety often result in stock shortages, which can negatively impact inventory and product quality Consequently, during major sales events, consumers, driven by discount psychology, may inadvertently purchase lower-quality items.
Zara operates a vast and diverse range of models and products, necessitating a substantial workforce to ensure the smooth functioning of its supply chain With approximately 7,500 stores spread across 88 countries prior to the pandemic, Zara's operational scale highlights the importance of efficient human resource management in its global retail strategy.
• In order to quickly respond to customers' needs effectively and satisfy customers in terms of time with a strategy to identify customer needs in
Zara's supply chain management operates on a short-term cycle of 2 to 6 weeks, necessitating a seamless and efficient exchange of information to prevent disruptions, particularly during the critical phase of importing new merchandise to stores.
Zara's rapid production cycle often leads to the perception of its products as outdated, which can result in less popular items being sold at discounted prices in developing markets This strategy not only contributes to unsold inventory accumulating in customers' wardrobes but also raises concerns about waste and environmental pollution.
Zara's sales policy is designed to be flexible, allowing the brand to adapt to diverse markets across various countries For instance, while Zara Australia offers autumn and winter collections in July, its stores in Vietnam feature spring and summer styles simultaneously.
Zara's ownership of a closed distribution channel presents significant challenges for expanding its supply chain, making the process both time-consuming and costly for the company.
Zara's manufacturing facilities are predominantly situated in Europe, with some operations in Africa, limiting the brand's ability to leverage the abundant and cost-effective labor available in Asian countries like China and India.
The annual production of a vast number of products has significant environmental repercussions, impacting consumer psychology In response, Zara is compelled to evolve by adopting eco-friendly production methods, which include utilizing recycled materials and implementing sustainable practices These practices encompass the use of organic, recycled, and handmade materials, as well as efficient production processes that minimize water consumption, employ safe dyes, ensure worker rights, and properly treat wastewater.
Zara's future supply chain development strategy
By the end of Q1 2020, Zara operated only 965 stores, a significant decline from 7,500 locations prior to the pandemic, leading to the closure of up to 1,200 facilities Recognizing these challenges, Zara has begun to adapt and transform its business model to prioritize e-commerce platforms.
"lifesavers" of retail businesses, especially during the pandemic, Zara is no exception to that rule Zara is expecting online sales to account for 25% of all sales by 2022
Zara is set to accelerate its e-commerce growth over the next two years, backed by a €1 billion investment aimed at enhancing its online platform through a three-year roadmap Additionally, the company is investing €1.7 billion to upgrade its stores with digital integration Zara anticipates that online sales will constitute 25% of its revenue by 2022, a significant increase from 14% in 2019 Inditex, Zara's parent company, reported a 50% surge in e-commerce sales in the first quarter, with online revenue reaching 14% last year The brand's strategy focuses on fulfilling online orders globally faster than its competitors, which it considers the key to its online business success.
The company has strategically opened warehouses in various locations and developed online sales platforms, successfully winning customer loyalty through high product quality and swift service This expansion into online business has facilitated the growth of its children's clothing brands, including Massimo Dutti, Oysho, and Uterque Zara, which launched its online store in September 2010, is now operational in 66 countries, with online sales accounting for 14% of its total global sales by 2019 Currently, the company accepts online orders from 21 countries across Europe, Japan, China, and North America, with plans to further expand into markets in Mexico and South Korea.
4.2.2 New digital strategy during the COVID-19 crisis
Zara, heavily reliant on offline shopping, faced significant challenges during the COVID-19 pandemic, resulting in a 44% drop in sales and a reported loss of $482 million in the first quarter compared to the previous year Although online sales surged by 50% during the same period, this increase was insufficient to offset the overall impact of store closures.
Amancio Ortega is set to invest $1.1 billion in enhancing digital strategies and online capabilities by 2022, alongside an additional $2 billion for store improvements to better integrate online and offline experiences This initiative aims to provide faster delivery and real-time product tracking, with a target for online sales to represent at least 25% of total revenue To reach this objective, Zara must develop innovative strategies to engage customers through both its online platform and community interactions.
Most brands currently receive approximately 15-20% of their website traffic from mobile devices, a figure that is rapidly increasing To remain competitive, Zara must expedite its mobile commerce initiatives, especially as rivals are already gaining an advantage in this area Enhancing the mobile shopping experience is essential, as it not only offers convenience and ease but also engages and delights customers.
4.2.4 Shift focus to product quality
Zara's competitive edge lies in offering the latest fashion lines at affordable prices; however, this advantage is being challenged as global competitors, particularly in Europe, are lowering prices and enhancing their business models H&M, which ranks just behind Zara on Interbrand's list, gained a foothold by launching an online store in Spain in 2014, surpassing Zara in its home market Other rivals like Mango, Gap, and Topshop are also vying for a share of the fast fashion retail sector To enhance customer engagement, Zara employs virtual reality to enrich the "window shopping" experience.
To maintain its competitive edge, Zara must transition its focus from price to quality by investing in strong brand positioning and effective communication Additionally, the brand should leverage digital and social media platforms to enhance its communication and advertising strategies.
4.2.5 Need to improve Zara's marketing strategy
Zara adopts a unique marketing strategy by prioritizing 'premium' store locations over traditional advertising, yet effective brand communication remains crucial for attracting new customers and fostering growth Without conventional advertising, Zara relies heavily on word-of-mouth marketing (WOM) and social media presence However, their social media platforms, including Facebook and YouTube, primarily serve as update feeds rather than interactive spaces for consumer engagement Additionally, Zara's YouTube videos receive low viewership relative to their follower count, highlighting a significant gap that the brand must address to enhance its social media reach and impact.
4.2.6 Family business plan and inheritance
Zara, founded by Amancio Ortega, has thrived for 36 years under his leadership In 2011, Ortega passed the presidency to Pablo Isla, who has been with the company since 2005 Industry experts anticipate that the brand will soon be led by Marta Ortega, Amancio's 35-year-old daughter and the senior creative consultant for Zara's Women's Collection.
Zara's leadership must navigate succession planning by adhering to the brand's commitment to consistently deliver "new clothes" for fashion consumers They need to strike a balance between short-term profits and long-term growth, aiming to expand their reach to a broader audience Additionally, despite Zara's global presence and standardized products, it is crucial for the brand to continually adapt to local fashion preferences and consumer needs worldwide This challenge will be pivotal for Zara's leadership in the coming decade.