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Brief Background, history and philosophy of the Retailer10%

Zara welcomes shoppers in 78 countries to its network of 1.540 stores in upscale locations in the world's largest cities. The retailer's international footprint proves that national borders are no hindrance to a shared fashion culture
Zara is in tune with its customers, who help it give shape to the ideas, trends and tastes developing in the world. This is the secret to its success among a wide range of people, cultures and generations, who, despite their differences, all share a special fondness for fashion

http://www.inditex.com/en/who_we_are/concepts/zara
Spanish fashion retailer Zara recently opened its first store in Sydneys Pitt Street Mall, followed

by a Melbourne offering (http://www.startupsmart.com.au/planning/2011-08-17/invasion-of-the-bigbrands.html)


with a three-level 1,700 square metre store located in the Bourke Street Mall in Melbourne.

When the first Australian Zara store opened earlier this year in Sydney, 80% of stock sold out within minutes. Its believed Zaras popularity among Australian consumers could prompt other international retailers to open shops here http://www.startupsmart.com.au/business/2011-06-08/the-news-wrap-zara-prepares-formelbourne-debut.html Local retailers are being warned to brace themselves for the impact of fast-fashion chain Zara, which has brought its aggressive pricing and unique business model to Australia new Zara store will clock up sales of up to $45 million a year thanks to the strong recognition of the brand among Australian consumers, many of whom have been introduced to the brand overseas. Zaras model, which is based on an extremely short supply change, allowing the company to get catwalk-inspired designs into stores within two weeks. The chain is part of retail clothing group Inditex, which has its own factories and distribution facilities in Spain and a team of around 200 designers.

There's no question there's a demand for international brands whether it be Zara, Gap or others," he says. "There's absolutely an appetite and pent up demand for these brands and Zara is a brand that many Aussies would be familiar with from travelling. They will benefit from that." expansion of international brands continue. "Consumers want it and the rise of online shopping has made ranges and brands far more accessible now," he says. "People are generally more alert to what's going on in the world as distinct from what's going on just in Australia." "On the other hand, these brands are getting smarter at operating in different geographies and hemispheres and can now bring product to markets in different areas. They need

expansion to fuel growth and profitability and so they need to expand into international markets." While international brands in Australia will attract shoppers to centres like Westfield, increasing their sales and giving consumers more choice in fashion, there are fears that smaller local fashion retailers may lose sales and market share to the international fashion frontrunners. Despite tough retail trading conditions worldwide, Zara reported an AU$1.88 billion profit at the AGM, which was $80 million higher than 2008 and announced a sales increase of 9% in 2009.
http://www.smartcompany.com.au/retail/20100714-zara-to-open-doors-in-australia-but-howshould-local-retailers-respond.html

Current (or potential) Customer Target Market(s) in Australia10%

Zara appeal from teenagers to grandparents, and is good value shopping for fashion at affordable prices. Just look at the Sydney store you see a much wider demographic of people.
http://www.smartcompany.com.au/property/20110615-zara-launches-in-melbourne-but-flow-on-effects-tosurrounding-retailers-may-be-limited.html Zara is known for interpreting runway fashion trends and having copycat looks in-store within three weeks. Store managers in Melbourne will analyse sales daily and order new stock twice a week, to arrive from Spain within 48 hours. Most stock is priced from $69.95 to $129.95.

http://www.news.com.au/business/spanish-fashion-giant-zara-to-open-bourke-st-mall-storenext-week/story-e6frfm1i-1226071059653 This allows the chain to constantly refresh its designs, with stores typically receiving small batches of items twice a week. Its annual range of clothing is between 12,000 and 15,000 items, much larger than the range any Australian fashion retailers can offer geographic isolation, has not experienced that kind of retail. You look at Zaras competitors in Australia they will take three or four months to get product through their stores.

analysts say the company will establish itself well due to its high-quality brand positioning and low prices, but local fashion retailers will need to prepare themselves for the new competition.
http://www.smartcompany.com.au/retail/20100714-zara-to-open-doors-in-australia-but-howshould-local-retailers-respond.html

Competitive Analysis15% Zara, on the other hand, has turned control over garment factories into a competitive advantage," said Ballinger. The Spanish firm not only sells clothes but also designs and makes them. It has never run an advertising campaign, yet has more than 1,000 shops worldwide. As it makes the clothes itself, it can react quickly to changing market trends. While others, including rivals Gap and H&M, take up to nine months to get new lines into their shops, Zara takes just two to three weeks. Its success has led to it being described as "possibly the most innovative and devastating retailer in the world," by LVMH fashion director Daniel Piette. "It's really quite exciting to see a new model like this -- one that actually breaks all the rules of the apparel industry as it has developed over the last two decades: contract out all production and spend obscene amounts to advertise your brand," added Ballinger. Zaras other competitive advantage is its pricing, with early reports indicating jeans will sell for around $70 while dresses and coats will go for around $130. Clothing prices in Australia have been always more expensive than in Europe and North America, but its good to see they are staying true to their brand, he says. Walker says Zara is sending a strong message to the Australian market in that it will be very, very aggressive. Walker expects Zara wont really hit its stride in Australia until it has three or four stores here, which might give locals retailers some breathing space. One positive for local retailers is that the launch of Zara stores will entice shoppers back into city centres and big shopping centres and away from online shopping, at least temporarily http://www.startupsmart.com.au/planning/2011-04-20/zara-launch-set-to-impact-localretailers.html

So what is Zara's secret?


The company's success lies in it having total control of every part of the business. It designs, produces and distributes itself.

Everything is co-ordinated from its headquarters on an industrial estate in Sabon-Arteixo, outside La Coruna in Spain. By controlling the entire process from factory to shop floor, Zara can react quickly to changing fashion trends and customers' tastes, providing a "newness" that has taken Europe by storm. It designs, picks and cuts the cloth before sending it to workshops and co-operatives in northern Portugal and the surrounding area of Galicia for sewing. The clothes are finished off at La Coruna before being shipped out twice a week to all its shops. "Investment banks used to say that this model did not work, but we have shown that it gives us more flexibility in production, sales and stock management," said Inditex chief executive Jose Maria Castellano. Shoppers addicted to the Zara brand know exactly when the deliveries will be arriving at their local shop and some even turn up before opening time on delivery days to be the first to pick up the latest lines. With its range of clothes constantly being updated, one or two unpopular items are unlikely to hurt its profits and customers are more likely to visit its shops regularly to see new stock. Zara shop managers report back every day to designers in La Corua on what has and has not sold. The information is used to decide which Inditex 28% product lines and colours are kept or altered and whether new lines are H&M 9.2% Gap 17.5% created. All this happens in the space of just a few days.
Increase in sales in 2000 Sales in 2000 Inditex $2.43 billion H&M $3.2 billion Gap $13.6 billion

The efficiency of the system means the company can keep costs down by keeping stocks low. Its design team produce an incredible 11,000 different designs a year. Customers also have direct input into what the shops sell as their feedback is sent back to the designers too. Castellano has called this the "democratisation of fashion."

No advertising
The other trend-bucking aspect of the company's business model is its approach to advertising. Fashion retailers spend on average 3.5% of revenue on advertising their products, while Zara's parent company Inditex spends just 0.3%. Have you ever seen a Zara commercial on a billboard or on TV? The company's founder, Amancio Ortega, believes advertising is a pointless distraction. Once when a famous Spanish actress asked to do a photo shoot in one of his shops, Ortega said no and scolded the

newly appointed executive who suggested it would be good for the firm. "You haven't got the idea yet have you," he said. The company believes that its shop windows, the contents of which are also decided in La Corua, are all the advertising it needs. The philosophy seems to have worked. As of late last year, Zara had 350 shops in Europe, 18 in the Middle East, 52 in the Americas and five in Asia. With roughly 40% of Inditex shops, Zara brings in about 80% of the group's revenue. There are now about 1,100 Inditex stores in the world, and a new one opens every other day. The company's success is proof that it is still possible to build a massive brand by doing no more than meeting a market need. It has achieved this without any advertising or promotion and without outsourcing its manufacturing to countries where labour is cheap.

Forces driving their international retail expansion15%

Being good may not be good enough anymore. That's not just driven by overseas entrants but they are a critical element in the equation Need good strategy, good operating model and established brand, if they provide a compelling customer experience and build good relationships with customers, they will be fine. They will be fit for business
http://www.smartcompany.com.au/retail/20100714-zara-to-open-doors-in-australia-but-howshould-local-retailers-respond.html
more international retailers, attracted by a relatively strong economy, are considering opening up shop in Australia "In the past it has been hard for international fashion retailers to work the southern hemisphere because of the seasonal change But with Zara trialling Brazil with success before coming to Australia, I think it will encourage others to do so." http://www.news.com.au/business/spanish-fashion-giant-zara-to-open-bourke-st-mall-store-nextweek/story-e6frfm1i-1226071059653

Market entry strategies used in Australia15%

In year 2011, Zara officially enters Australia market with the opening of its first shop in Sydneys Pitt Street Mall, followed by a three-level store in Melbourne.(Hammand,2011,Cain 2011) The first shop was a huge success with 80% of stock sold out within a very short time.(Hammond, 2011)

Zaras stores in Sydney and Melbourne are likely to turn over about $45 million in their first year of operation, with the Sydney opening said to have been the second most successful in its parent companys history
Evaluations of the retailer's current situation and recommendations for its future development15%

Zara is a huge success story in what is reported to be a cautious market and that its growth is sustainable. There are 1700 Zara stores worldwide s looking for at least 800 squares metres in the Queensland capital, with the main target the Queen Street Mall precinct, home to high end retailers including Tiffany & Co and Swarovski.

cheap and cheerful retailers such as Bardot and Forever New, but is likely to nab market share from department stores and Country Road. Neighbouring retailers offering complementary food and goods are expected to benefit from Zaras presence.
http://www.smartcompany.com.au/retail/20110713-zara-aims-at-brisbane-as-australian-expansionramps-up.html http://www.propertyobserver.com.au/south-australia/zara-to-launch-in-adelaide-innovember/2011072150881 http://www.heraldsun.com.au/ipad/spaniard-label-comes-to-town/story-fn6bn4mv-1225951324875

Appendix Table 1 Zara: mode of entry and number of stores by country, January 2006 (Lopez & Fan, 2009)
Country Spain Portugal USA France Mexico Greece Belgium Sweden Malta Cyprus Israel Argentina Great Britain Japan Kuwait Lebanon Turkey United Arab Emirates Venezuela Bahrain Brazil Canada Chile Germany The Netherlands Poland Saudi Arabia Uruguay Andorra Austria Denmark Qatar Czech Republic Iceland Ireland Italy Jordan Luxembourg Puerto Rico Dominican Republic El Salvador Finland Singapore Switzerland Malaysia Russia Slovenia Estonia Hong Kong Hungary Latvia Lithuania Morocco Year 1975 1988 1989 1990 1992 1993 1994 1994 1995 1996 1997 1998 1998 1998 1998 1998 1998 1998 1998 1999 1999 1999 1999 1999 1999 1999 1999 1999 2000 2000 2000 2000 2001 2001 2001 2001 2001 2001 2001 2002 2002 2002 2002 2002 2003 2003 2003 2004 2004 2004 2004 2004 2004 established Mode Own stores Own stores Own stores Own stores Own stores Own stores Own stores Own stores Franchising Franchising Franchising Own stores Own stores Joint venturea Franchising Franchising Franchisingb Franchising Own stores Franchising Own stores Own stores Own stores Joint venturea Own stores Franchising Franchising Own stores Franchising Own stores Own stores Franchising Own stores Franchising Own stores Joint venturea Franchising Own stores Franchising Franchising Franchising Franchising Franchising Own stores Franchising Franchisingb Franchising Franchising Own stores Own stores Franchising Franchising Franchising Number of Stores 259 46 18 90 39 38 18 4 1 3 14 6 45 18 4 2 13 5 9 1 14 14 5 41 6 11 16 2 1 8 4 1 3 1 5 36 1 2 1 1 1 4 3 8 3 6 3 1 4 2 1 2 1

Panama Romania Costa Rica Indonesia Monaco The Philippines Total

2004 2004 2005 2005 2005 2005

Franchising Franchising Franchising Franchising Own stores Franchising

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