Saturday, February 6, 2016

Brand Story - Zara || Daksh Bhagat || IIM Shillong || December 2015 edition


It comes as no surprise that Zara has become the world’s largest retailer and its founder, Amancio Ortega, has become the 4th richest man in the world. The brand started off as a small dress-making factory in Spain in the year 1963. 10 years later, Ortega opened a small store named as Zorba in La Coruna, Spain with a budget of a just 30 Euros. The store was later named – “Zara”. By 1989, more than one hundred Zara outlets had opened up in Spain, all of which became renowned for the choice of their location.

Imagine yourself in an apparel store with an entirely new collection, matching the latest fashion trends and completely different from what was on the racks when you visited the store two weeks back! Seems possible in a utopian world? Zara has turned it into a reality.
When Zara entered the midrange clothing market, the market was already dominated by players such as Corte Inglés and Cortefiel. In this scenario, Zara’s positioning of quality with affordability worked well, as neither of the two existing players appealed to youthful fashion sense. The company's first annual report, which was produced in 1999, outlined Ortega's goal, stating, "Zara's aim was to democratize fashion. In contrast to the idea of fashion as a privilege, we offer accessible fashion that reaches the high street, inspired by the taste, desires, and lifestyle of modern men and women". To realize this goal, the company followed the fast-fashion model, which involved bringing clothes from design stage to stores in a matter of few weeks where most other fashion brands would take a whole six months to get their new designs into the market.
Zara has a unique policy of “Zero investment in marketing”. Instead, the money saved here is used to open new stores. The striking feature about Zara is that it has noticed differences that matter to the consumers and used them to differentiate itself from the rest of the competitors. In other words, its key marketing strategy is based on exclusivity, experience, differentiation and affordability. In essence, the company relies heavily on the word of mouth advertising. The products’ target population lies in the age group 18-40 years and lives in the urban areas. Specifically, the market segment comprises of women (65%), men (25%) and children (15%) all of them being fashion conscious and falling in the educated middle class category.
Zara’s branding strategies were executed keeping in consideration the fact that clothes are a perishable commodity that people love to use and throw away. The designs were mostly spotted in fashion shows and then copied by in-house designers. The strategy was to ship fewer pieces, in greater variety, while trying to avoid high inventory costs and the frequent clearance sales common amongst most fashion retailers. The company produced only what would sell in its shops.
One of the things that make it a stand out brand is the fact that it is a vertically integrated retailer. From designing to manufacturing and distributing the products, it does everything by itself. This approach seems to be working for it because it has managed to establish itself as one of the leading Spanish fashion stores globally.  90% of Zara stores are owned by the company and the rest are joint ventures of several franchises. This means that customers experience the same environment when entering one of the Zara stores be it in London, New York, Paris, Rio de Janeiro, New Delhi etc.: the stores are spacious, well-lit, modern and walled with mirrors.

Zara has an official IPhone APP. This application is designed to have the ability to let browsers search through the latest information regarding new collections. In 2010, there was a lot of negative feedback regarding the functionality of the application. Zara has taken all of the negative review in consideration and immediately improved. The application now includes prices, locations, GPS map, and contacts to the specific shops you select to browse in.

One of the things that speaks volumes about Zara’s strong culture is the fact that it that it hires young designers and trains them to make quick decisions. In other words, while good decisions are encouraged, bad decisions are not severely punished. Facing several problems related to rent space, every mall owner in the World is ready to provide free space to Zara, owing to the popularity of this brand in urban areas and the long way it has traveled.
The culture of an organization like Zara takes years to hone and requires leaders with more than an understanding of numbers-they need to have a feel for the human component. It’s a classic example of a successful supply chain network and a learning for many budding entrepreneurs venture in the domain of merchandising.

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