If earlier fashion reminded a pyramid with the top of haute couture, followed by ready-to-wear clothes from design brands (prêt-à-porter), then perspective young brands with mass clothes at the bottom, today fashion designers and analysts of the fashion industry note the emergence of new styles. Often such styles as, for example, sportswear, street clothes or semi-couture cannot be ranked as one of the levels of the settled hierarchy. Therefore, due to the decline of an era of the fetishism of fashion brands, the combination of a jacket by Zara or H&M with Channel bag is a usual thing.
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Considerable money and extensive experience of Zara’s founder composes the cornerstone, leading to success. The first company’s store was opened in 1975. In several years the numerous stores were opened throughout Spain. In 1988, the company entered the international market – the first store was opened in Portugal, and a year later – in the other world countries, including the USA.
The main features of Zara clothes include a specific approach to design at the preservation of democratic prices. This brand belongs to the most sold brands in the world. The brand is characterized by the speed with which new collections pass from development to sales – usually no more than a few weeks. Besides, new collections appear regularly. Hundreds of designers tirelessly work at the concept of a new collection, while Ortega prefers to produce new designs fast. Zara belongs to the concept of “fast fashion”. If some goods are not sold very well, they are withdrawn from production. This brand is exclusively popular and does not need mass advertising. Zara’s show-windows replace the billboards. Moreover, most part of the production is concentrated in Spain. The Swedish brand H&M and United Colours of Benetton are the main competitors of Zara. (Barnes & Lea-Greenwood 2006; Joy, et al 2012). However, Zara is a very successful fast-fashion brand, whose success is based as much on its marketing strategy as on its approaches to operations management.
Zara’s Marketing Strategy
Zara stores have 7 main lines of production of men’s and women’s clothing. According to 2013, each line of products consists of 5 subsections. Subsections are divided into underwear, outerwear, shoes, cosmetics, and accessories. The Zara catalogs also include a fashion line for children. Zara makes only 50 – 60% of the whole production at the beginning of a season, and the rest – during it. The percent of discount sales of the company makes about 15 – 20%. Zara offers much more production to its clients than any other company in the industry. In comparison with 2 000 – 4 000 items produced by its competitors, Zara make more than 11 000 various items a year. The company needs only 4 – 5 weeks to design, produce and present a new model in a store, and only 2 weeks for making little changes in the design of the already produced goods. The acceleration of the production process allows the company to respond to the requests of clients quicker and easier. There are no models, staying more than 4 weeks in stores; therefore, clients try to visit Zara’s stores more often. (Loeb 2013).
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Zara is a vertically integrated network of retail trade. The company designs products and sales of its goods. Unlike similar distributors of clothes, Zara controls the most part of a production chain. Almost 50% of production is made in Spain, 26% – in other parts of Europe and 24 – in Asia, Africa, and other countries. While competitors take out production to the countries of Asia, Zara manufactures its most fashionable models at own factories in Spain and Portugal. The marketing strategy of Zara is feedback. According to the concept “Just in time”, things are made on demand. The design of a collection depends on the information, which comes from shops (by phone or e-mail). “Report and sell” is the main function of the company’s staff.
The marketing strategy of Zara assumes its certain purposeful actions or existence of the definite principles of behavior. They are urged to provide the continuity of decisions and measures for the formation of the company’s assortment and its management; maintenance of competitiveness of goods at the demanded level; optimal commodity niches (segments); development and implementation of a strategy of packing, marking, service of goods. (Blythe 2009).
A well-thought marketing strategy of Zara not only allows the top management of the company to optimize the process of the assortment updating but also serves as a kind of a reference point of the general orientation of actions allowing to correct the current situations. The brand applies the so-called “principle of a fast design”, taking the minimum quantity of time (about 15 days) for the production of a new collection. The creative team of the company, consisting more than 200 experts for the creation of new collections uses the tendencies from the world podiums. The conceptual policy of a brand is the combination of the classical and youth stylistics in its models. The production of Zara is carried out by small parties with the use of industrial and home production. At present, the Zara brand collaborates with 30 producers of materials and accessories. The fast deliveries of the new models, characteristic for a brand, provided the appearance of the new term “Z-day”, when a new collection comes to stores, in the market of clothes. (Blythe 2009; Kotler & Armstrong 2011).
However, Zara’s fast fashion has its disadvantages, namely, its clothes are not intended for a long lifetime. The focus on the latest trends means that even the qualitative things made out of the qualitative materials, well cut out and sewed, are not designed for more than a season. The relevance and financial availability lead to an increase in consumption. The fast fashion means not only prompt transition from a podium to shops. Also, this approach involves the reduction of time of wearing an increase in the requirement to get rid of the clothes quickly. (Barnes & Lea-Greenwood 2006; Joy et al. 2012).
Zara carries out a constant improvement of its assortment. It results in the satisfaction of various needs of consumers and reception of profit – implementation of Zara’s marketing strategy. The assortment of Zara’s production is the reflection of the preferences and desires of consumers. Expanding its assortment, the company is guided by a full-fledged or increasing demand an appropriate level of the income of potential consumers. The assortment of Zara’s goods is characterized by the uniqueness of the ideas realized in the widest range of models, excellent quality and a democratic price. At present, the brand offers such directions as ZARA Woman, ZARA Basic, ZARA TRF, ZARA Man, ZARA Kids. The company expands its assortment, putting new fashion lines into production. The target audience of Zara includes people from 16 to 65.
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Moreover, a well-developed system of Supply Chain Operations (SCO) is applied in Zara. It includes three main aspects: maximization of the used resources and minimization of inventory and time. These aspects directly affect pricing, sales, customer satisfaction, and overall business values. The supply chain of Zara consists of four main stages.
Unlike the fast fashion supply chain, used by Zara, the typical convention fashion supply chain is rather complicated and includes a lot of stages and participants.
The analysts of the fashionable industry note a tendency of a stronger mixture of two leading directions in fashion: a mass character and prestige, which received the marketing name “massluxe” or “masstige”. The strategic alliance between the producer of clothes H&M (Hennes&Mauritz) and the designer of the fashion house Chanel Karl Lagerfeld is the best prove to it. Unlike Zara, which is aimed at designs and price, the management of H&M singles out three main factors of success: original design, a perfect ratio of price and quality and effective logistics.
The justification of the cooperation of Karl Lagerfeld with H&M consists in the interest shown by a mass consumer in relation to prestigious, luxurious goods and, even, the readiness of consumers to save up money for the acquisition of expensive design things. The specialists of H&M seek to reconstruct the concepts of production of clothes, managed by the company according to the requirements imposed by the consumers of an era of a mass exclusiveness. The company’s priority is a commitment to the needs of customers. It has economic production and constant attention to market tendencies. The marketing strategy of the company changes together with the changes in the tastes of customers. The fashion in H&M is the reflection of the moods of society. Thus, the cooperation with the leading fashion designers became a unique component of the marketing strategy of H&M, aimed at the satisfaction of the customers’ needs for self-expression. (Lopez & Fan 2009).
The success of Benetton is based on the development and the correct use of the business strategy, which adheres a competitive advantage to its products through the own system of a chain of values, and, as a result, the product of the highest value is offered to the end user. Besides, the company provides a competitive advantage to its retail dealers. If to estimate the activity of the company from the point of view of the creation of own chain of values, Benetton derives the strength from the simultaneous realization of two opposite tasks in practice – it uses a scale effect to the full scale and ensures the flexibility of production through the application of the balanced strategy. Thus, the purchases of raw materials are carried out centrally; it allows to receive economy at the expense of a scale effect. It makes Benetton the world’s largest purchaser of wool. Besides, the company independently develops the advanced methods of obtaining new colors and creates new models of clothes by means of computer designs. (Lopez & Fan 2009).
When these directions of a rod competence of Benetton are fostered in it, flexibility is provided by the attraction of subcontracts for the production of clothes partially belonging to the company suppliers, the number of which exceeds 700. Therefore, the company can quickly react to the slightest changes in fashion. At the same time, the image of the action of Benetton for providing similar subcontractors with orders in a full volume and to support prices for raw materials allows minimizing the expenses for marketing and operations, and, respectively, to keep the prices of the finished goods at a guaranteed low level.
Like Zara, the Benetton clothes allows its customers to self-express and create own identity, corresponding to the modern needs of buyers for special attention to a personal image. For retail trade, the clothes of the Benetton brand is also very desirable goods as considerable expenses of the company on the means of communication and use of various technologies of distribution lead to the creation of a bright identity and appeal of the company and generated irresistible aspiration to join a hospitable family of Benetton. Moreover, the company’s marketing strategy is also aimed at fast fashion – 15 days for designing, modeling, production, and distribution of the ready production in Benetton stores.
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The operational management of Zara is aimed at the balance of business processes and customers’ needs and preferences. Thus, the main direction of the price policy of Zara is the stabilization of the prices in the conditions of a full-fledged demand. The marketing actions are characterized by moderate information support by a shop assistant, application of various organizational measures for the protection of the market segment against its competitors. Besides, Zara adheres to the discounts policy during seasonal sales. The price is established by the management of Zara in such a way to meet the needs of buyers, on the one hand, and to promote the achievement of the objects set by the company, consisting in ensuring the receipt of sufficient financial resources, on the other hand. (Caro et al 2010; Kimiagar 2008).
The management and planning of the distribution system in Zara proceed from the common strategic decisions of the company, correspond to the chosen strategy of segmentation and positioning and are coordinated with all basic elements of “a marketing complex”. Thus, the company pays great attention to the phases of its goods life cycle. At the stage of the introduction of the product to the market the checked trade partners, providing information on the reaction of customers on new products, are usually used. At a stage of the market growth, the expansion of the distribution system, the formation of sufficient stocks in all links of a commodity distribution network is of particular importance. At a stage of the mature market, a special emphasis is placed on the ensuring additional appeal of a product to all participants of a marketing network and the organization of counteraction to competitors trying to use the adjusted sales channels. At the same time, there is a continuous process of optimization of the structure in Zara. The official website of Zara www.zara.com, which offers all models, presented in Zara stores, is another distribution channel of the company’s identity. It also gives information about the new collections of a season and fashionable tendencies, which help the customers to have the ready idea of the goods, sold in a store. However, there is no online store. (Caro et al 2010).
The secret of the attractiveness of the Zara brand for consumers is the fact that despite rather low prices for brand goods, its consumers do not have the feeling of fast consumption of goods. It is caused by a high quality of decoration of show-windows, and their location, as a rule, in the downtowns. Among the functional benefits, attracting consumers, there is a high quality of clothes and style of Zara. The phenomenal operational flexibility of Zara designers, the abilities to use the latest tendencies, just shown on the world podiums instantly, immediately coming to its stores, embodying the seen in the models. The designer dresses start being sold in Zara shops in several months after they were shown during high fashion weeks all over the world. It irritates fashion designers but pleases consumers who are not able to afford original design things or simply do not see the sense of it, in the presence of a cheaper alternative. (Loeb 2013).
Zara’s competitor – Benetton – has a similar system of the highly automated warehouses, which store, pack and assemble orders for definite retail networks. Unlike Zara, Benetton uses innovative RFID tags for tracking its goods. Moreover, the company all the time reshapes its retail operations management. The small stores of Benetton are substituted with mega-stores, able to display the whole assortment of Benetton goods and inspire its customers. Unlike Zara and Benetton, the operations management of H&M is handled internally, the distribution channels are subcontracted. The goods are transferred to retail stores all over the world through the company’s terminal in Hamburg. The stores are much bigger than those of Zara and are fully owned by H&M. Production works only at day shifts, the party is produced during one shift; only 10 % go to warehouses, while the warehouse stocks of Benetton, H&M, and Gap compose 14-15%. (Slack, Johnson & Brandon-Jones 2011).
Zara does not advertise its goods on the international podiums. The clothes go directly to stores and become available for each buyer. An exclusive significance is given to the speed of delivery. New collections arrive at Zara stores twice a week. Owing to such an approach, the Zara networks do not need big warehouse space. They simply sell everything that arrives from the central factories, reducing, thus, the pre-sale cost of goods. The things in shops are sorted not by a style, but by a color scale. It facilitates the choice of goods by customers. Shop assistants are interested not in selling certain goods, but in the general expansion of sales. (Kimiagar 2008).
Not only the delivery of goods to Zara stores but also the exchange of information between the intermediate links of a chain “designer – seller” compose the key priority of the company. Due to the perfectly run operation management, the information hits its target, the range is replenished and extends. It results in satisfied clients, huge profit and a lack of sales with the stale goods. These factors greatly increase the reputation of Zara. The immediate receipt of information allows updating the store assortment twice a month. The emergence of new goods attracts clients, thus saving funds on advertisements. The Zara Company spends annually about 0.3% of its profit on advertising, while its competitors – 3-4. (Caro et al 2010).
To sum up, Zara’s success is based as much on its marketing activity as on its approaches to operations management. The key factor of success includes the existence of fashionable collections in Zara stores; the price is also important, but it is on the second place. The marketing strategy, applied by Ortega, is based on the control over all three parts of production – modeling, tailoring, and sale of clothes – is managed by one center in Sabon-Artesia, near the production center Corunna. Owing to this fact, Zara reacts to new trends in clothes design quicker than its competitors. Strictly adhering to the uniform rhythm, the Spanish company Zara has a well-developed operations management. Unlike its competitors, Zara is engaged in the whole supply chain – starting from design to sales to customers, giving small parts of the chain to its contractors.
One of the methods, which Zara always applies to offer the latest models to the customers really deserves attention as a sample of the successful solution of a big problem by small means. The company’s designers copy models from all major fashion shows at Paris, New York or Milan, send them by fax to the central factory in Corunna, where designers immediately begin to produce new models. Several days later Zara strikes buyers with the new models, presented only by the leading fashion designers of the world.
The secret of Zara’s success is a correctly developed strategy, followed by all employees in the company, starting from ordinary tailors up to top management of the company. The emphasis is placed on the qualitative goods for a mass consumer from it not always by the high family budget, but the irresistible aspiration to look fashionable and to wear comfortable dresses of a well-known design brand.