alysis of Zaras Marketing Plan and

Strategy
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Published: 23rd March, 2015

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Zara is a retailing chain with several stores situated worldwide. Its marketing
strategy is based more on expansion rather than advertising or traditional methods
of promotion. This report will provide a brief outline and a critical evaluation of Zara's
marketing plan particularly in relation to its environment. The report will also identify
and evaluate how technology and the new media could impact on Zara's future
marketing plans. The sustainability of Zara's marketing strategy and how it will affect
their reputation in the future will also be examined.
Zara has already begun the implementation of the marketing strategy so a brief look
at the current position and the results has also been included in this report.
2.0 Marketing Plan

2.1 Mission Statement

"Zara moves at the pace of society, fashion ideas, and trends that society itself has
natured. Hence its success among people, cultures and generations that, in spite of
their differences, share a special sensitivity for fashion".

2.2 SWOT Analysis

Zara's main strengths are its early development in technology which has resulted in
smoothly operated logistics, its ability to produce good designs and recent trends
promptly and efficiently, its investment intensity and its participative culture (see
appendix 1: Company background). Its main weakness is its customer service but it
has opportunity for growth in new markets, new countries and on the internet. The
firm's main threat is the possible effect of the worldwide economic recession on the
strength of the Euro which could increase the costs of Zara's outsourcing and
ultimately remove the competitive advantage gained by its pricing strategy.

2.3 Marketing Objectives

Increase customer equity
Increase purchase frequency among "plus size" customers
Continue to grow by extending the Zara fashion brand
Increase brand awareness and favourable attitudes among consumers
Zara's main corporate objectives are growth through store expansion in large highly
populated cities and maintaining a competitive advantage through the constant
release of a variety of new fashions regularly. The marketing objectives to increase
brand awareness and extend the Zara fashion brand will contribute hugely towards
achieving the overall objectives particularly the store expansion.

2.4 Marketing Strategy

The target group consists mainly of women aged between 18 - 40 who are either
working in big cities or pursuing higher education, have a mid-range income and are
generally interested in fashion trends as well as conscious about their looks. The
company has positioned itself as a store selling a variety of medium quality high
fashion clothing at affordable prices and has stores in about 70 countries worldwide.
The pricing strategy is to produce clothes that are typically inexpensive and
affordable by those who cannot spend much on fashionable clothing but want to
have appealing and comfortable outfits as well as wealthy consumers who like good
quality and style.
Zara's marketing strategy is to create a customer focused product that will
differentiate Zara from its competitors by bringing a fresh look to the plus size
segment, feeding on the existing Zara name and values associated with the brand
and stealing the variety-seeking customer from the competitors.

2.5 Marketing Mix

Product
Price
Promotion
Place
Physical Evidence
People
Process
Quality
Inexpensive
Store display
Logistics
Customers
Outsourcing
Appearance
Affordable
Public relations
Store atmosphere i.e. wide open spaces
Suppliers
In-house production
Brand
Inclusive (i.e not exclusive)
Advertising in high Fashion magazines e.g Vogue, Harpers etc.
Each line with its own section in the store
Store managers
Backward integration
Appeal
Internet
Designers
CSR initiative to create awareness e.g design competition for students
According to McDonald M, (2007), all organizations have a mix of products or
services that could be classified as either, a disaster, lowest cost, niche or
outstanding success products based on M. Porter's generic strategies matrix. But
Zara has very few disasters, in fact it has a new product failure rate of just 1% in
comparison to the industry average of 10% (Pearson, n.d.).
Through backward and vertical integration, Zara keeps its costs low and therefore is
able to maintain low prices whilst still retaining profitability. It does not particularly
aim to produce niche products as most of the designs are either a copy from the
catwalk or from other store designs. However most of the time it does have
outstanding success with its products as a result of its excellent supply chain which
enables it to produce new designs promptly. Zara can produce and distribute new
designs within two weeks of a new style appearing on the catwalk, a feat which has
given the firm a competitive advantage over competitors such as H&M (Hennes &
Mauritz) and Gap.
The firm's clothes are advertised mainly through the store displays in their numerous
stores located worldwide and through their attentive customer service. They also
advertise on the internet and very rarely in other forms of media. The products are
distributed through a complex technology based system which ensures that goods
are delivered to all the stores simultaneously and on a regular basis.
3.0 The Marketing Plan and its Environment

3.1 Pestel Analysis

Zara originated in Spain and with over 500 of its stores currently located there, the
market has become rather saturated. Hence it has expanded to 63 countries and
consequently faces various challenges usually presented by unfamiliar
environments. Zara has a policy of establishing its stores only in the city centre of
large cities and each store must have a minimum size of 1000 square metres. In
certain countries obtaining this can be a challenge which resulted in Zara partnering
with one of its main competitors, Benetton in an attempt to penetrate the Italian
market. The joint venture failed after two years as they were unable to secure the
required property size in an appropriate location.
Furthermore Zara originally had a policy of owning all its stores which it has had to
review following the entry into various countries with a restriction on total foreign
ownership. Zara was forced to consider joint ventures and franchises to combat this
problem and currently has several co-owned stores.
The worldwide recession is also an economic factor that could create challenges for
Zara's marketing plan. The credit crunch has left the populace with less disposable
income and for many people, keeping up with the fashion may not necessarily be a
priority in the face of rising prices and costs. In addition, inflation in the less
developed countries that Zara operates in could create a risk as the profits may be
less than expected.
Part of Zara's corporate objectives, is to protect the environment as much as
possible, which includes producing less waste, recycling where possible, the use of
ecological fabrics, production of PVC footwear and use of biodiesel fuel. Ensuring
that this objective is achieved is quite crucial as the company's image could be
affected by the activities of pressure groups or stakeholders who might raise
environmental issues in the countries that Zara operates in.
There are also cultural considerations to Zara's international expansion strategy
which forms the basis of its marketing plan. Despite overwhelming success in
Europe over the past few years, Zara has been unable to penetrate the American
apparel market successfully. It could be as a result of a difference in tastes and
preferences added to the fact that the firm has not developed a strong supply chain
strategy as they have in Europe. Nevertheless, cultural differences in tastes and
styles could remain a challenge for a company focusing on diversification to foreign
countries.
In Moslem countries, Zara adds extra length to the hemlines of its dresses and in its
corporate web page, it states that "our international presence allows us to conclude
that there are no frontiers that would impede a shared culture of fashion". Efforts will
have to be made to ensure that sensitive cultural issues in foreign countries are not
ignored.

3.2 Five Forces Analysis

The relationship of Zara's marketing plan with its environment can be further
analysed with the use of Porter's five forces model. Zara's main competitors are
Gap, Benetton and H&M. Zara has maintained a competitive advantage over its
competitors through its ability to control its supply chain. It does not share most of its
suppliers as it has acquired some of them through its parent company, Inditex and
unlike its competitors, most of its operations are executed in-house such as fabric
manufacturing and part of the cutting and sewing processes.
Indeed Zara competes with its rivals for customers but through its creation of a
brand has secured customer loyalty. Its customers visit the stores on average 17
times a year compared to the industry average of 3 times and on most of those
occasions purchases are made. Zara releases around 10,000 different designs
every year and deliberately produces styles in small quantities to create an aura of
scarcity. This ensures that customers visit regularly to see the latest designs and
purchase immediately because there is no certainty that the style will be there the
next day.
There is always a threat of substitution, as competitors will all release the same
design eventually but again, Zara's speed gives it an advantage and it would have
sold out its top designs, long before the competitors who have a longer lead
production time (usually five months compared to Zara's two weeks), can put the
designs on the market.
There are no real barriers to entry into the industry that Zara operates in other than
the fact that Zara has differentiated its product. It is not a pure differentiation
however since it does not charge a premium price for its products nor is it a cost
leadership as it does not have the lowest possible price and does not really aim to
be the lowest cost producer. What Zara has, is a combination of differentiation and
cost leadership which translates to a very successful product that new entrants
would have great difficulty competing with.
4.0 Zara's Marketing Plan and the Impact of New Media and Technology
In the past few years social media has become increasingly popular as a mode of
communication between consumers and companies or institutions. It provides a
forum for conversations about a company's actions and also a means for companies
to test the public's level of awareness about their activities as well as the people's
perception of them. Social media such as Twitter, Facebook and other blogs or
discussion groups can also provide companies with a unique platform to raise
awareness of their corporate responsibility activities.
Many brands are cautious about online interaction because they are uncertain as to
how they will be perceived and also the limited control they would have over
dissenting views and negative reactions voiced publicly. Many CR managers are
hesitant to highlight corporate responsibility issues and enable debates because
they feel that they may be inviting unwanted attention. (WGSN, 2009). Yet online
environments actually offer companies a broader space in which to connect with
customers, NGO's and peers around sustainability issues.
Social media can also be used for advertising purposes which most of the
companies in the retailing industry seem to use it for including Zara and its
competitors. Zara has an impressive "movement" on Facebook where latest designs
are advertised and consumers comment on each post with an average of 400 - 700
comments and about 10,000 "likes".
However Zara's stance on corporate responsibility issues are not highlighted in the
social media like their competitor H&M who have detailed positions on corporate
responsibility in every country they operate in. They also have a full sustainability
report in relation to their activities and its impact on the environment with a section
inviting the public to email them with feedback and questions. Interestingly they do
not have a public forum for the public's responses and views to be aired but
addressing the issues publicly is a first step in the right direction.
Zara could use the social media to have a more positive impact on the public by
opening up discussion boards to debate ethical and social responsibility issues in
relation to their activities in all the countries they operate in. Sustainability has
become a core issue for business operations and widespread stakeholder
participation is critical. The social media is a relatively cheap method of
communicating with a vast number of people worldwide and presents an opportunity
that no company should overlook. Zara has a small blog which outlines a few
sustainability and global issues or activities that the firm has engaged in such as
global warming, climate change and more recently help given to the victims of the
Japanese tsunami. However, this blog is not widely publicised and is more likely to
be stumbled upon rather than sought out as a Facebook or Twitter page would. Zara
has in the past found itself in the midst of a corporate responsibility storm such as a
link to a supplier with a "sweat shop" factory in Bangladesh, (Procurement Leaders
Forum, 2008) and another factory (also in Bangladesh) occasionally used for
production which collapsed killing three people. In each incident, Zara responded
swiftly and offered reparations which has earned it a high rating in terms of social
responsibility. Zara's timely and effective response was further emphasised by the
fact that competitor firms who also used the same factory, offered less and in some
cases refused to accept responsibility altogether.
Zara would however benefit immensely from having a social site where such issues
could be discussed publicly and potential dangers could be highlighted to prevent
such disasters from recurring.
5.0 Sustainability of Zara's marketing Strategy
The sustainability of Zara's marketing strategy depends on two major factors that
could have a crucial impact on Zara's activities in the long term. Unlike most of its
competitors, Zara tends to avoid outsourcing to developing countries where labour is
very cheap. The main reason for this is to have more control over its suppliers and
to enable a rapid delivery process in addition to contributing to the employment
market of its home country Spain. The result of this is that the labour costs are
higher than those of its competitors but this is compensated by the speedy
production of the latest styles with reasonably consistent quality. Zara does produce
some generic lines in developing countries but 60% of its outsourcing is in Spain or
Portugal. The current worldwide recession may however have a serious impact on
this strategy.
With rising labour costs and the effect of the recession on the Euro, Zara may be
forced to increase the outsourcing to developing countries. This would make them
lose the competitive advantage of speed and may affect their corporate image as a
result of the stigma attached to the use of cheap labour in "sweat shops". Pressure
groups and international campaigns are constantly demanding an improvement to
working conditions for employees in developing countries. Consequently even
outsourcing to the Far East may cease to be a profitable option in the long term too.
Another factor that could have an impact on the marketing strategy is the ever
increasing focus on environmental issues. The major environmental impacts in the
fabric sector arise from the use of energy and toxic chemicals which are utilised
widely in many manufacturing stages such as pre-treatment, dyeing and printing.
Zara currently executes most of these tasks in-house and could therefore face
pressure from consumers making demands for environmentally sensitive production.
This may mean that Zara would have to invest in research to find alternative
materials or recycling options that could reduce the threat to the environment.
Zara's marketing strategy could also face other challenges which might arise from
the use of the new media. As discussed earlier, Facebook is used quite extensively
for advertising and other forms of promotion. The question is how sustainable is the
use of this new media for marketing purposes? Seth Godin, author of Meatball
Sundae, in his presentation14 Trends No Marketer Should Ignore (XXXX), described
the web as a "world of new marketing" which requires various trends for its
successful implementation. He stressed the importance of communication between
consumers and the manufacturers and also suggested that with the advent of the
internet, everyone is now a critic that cannot be avoided or ignored. One picture on
Youtube showing a serious lapse "could undo millions of dollars of advertising". The
underlying message is that the internet is a new world that companies could
embrace for their marketing potential at low cost or ignore at their peril. If a company
is not on any of the social media, they may be unaware if a campaign is carried out
against them and consequently unable to execute a damage control program. Any
sustainable marketing strategy should include a role for social sites.
Zara's marketing strategy is mainly based on expansion which the internet could
play a vital role in. Last year the company launched its first tranche of websites for
some of its European markets including the UK and two weeks ago it also launched
websites for Denmark, Sweden, Monaco and Switzerland. It plans to open further
sites in two of the world's largest e-commerce markets, US and Japan later this year
which will increase its presence online.
Seth Godin believes that "we are in the middle of the next, possibly biggest industrial
revolution" and that "the internet represents a tremendous opportunity for people
who understand it." The reality is that any marketing strategy that does not include
expansion online may not be sustainable in the long term.
Robert Hellar (Internet Selling, ) stated that shopping has already begun to move in
some force out of the high street and onto the Website. Traditional retailers will have
to join this revolution that will cut costs, increase variety and make home deliveries.
This development however exposes the investments in high streets to a new
vulnerability and risk. As part of its expansion, Zara purchased several properties
where stores are owned and these assets may in future become liabilities. The
Amazon experience and the internet banking developments have shown that stores
as we know them could become quite redundant and possibly mutate into nothing
more than showrooms and warehouses.
The sustainability of the high street stores cannot be determined; however the
expansion of the websites is likely to be a sustainable strategy and a good fall back
option in the event that shopping on the high street does eventually become
unfashionable.
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