Individual Case Analysis - Success of Zara

It all started when Amancio Ortega and his wife, Rosalia Mera established a small dress making factory in A Corua, Spain back in 1963.With a workforce of just over 500 employees, Ortega decided to open the first ZARA store in A Corua, Spain in 1975. Since then, Zara has grown to become one of the most successful fashion brand around the Globe offering men, women, and kid's clothing, shoes, and accessories, as well as home accessories.Currently employing over 150,000 employees with approximately 2,300 stores operating in 96 countries, Zara generated annual sales of US$ 16.7 billion in 2020 with an estimate brand value of slightly over US$ 14.6 billion.

Zara has remained faithful to its core values of beauty, clarity, functionality, and sustainability.Zara's philosophy of giving customer fast access of good quality fashion products by high-end designers at affordable price is central to its success in the highly competitive fashion retailing industry.The secret is the ability to generate quick turnover of products in the stores. While some brands take months to get products to the store, it only takes Zara three weeks to turn customer ideas into quality products.By placing approximately 54% of its factories near the headquarters in Spain, by adopting high degree of vertical integration, and by utilizing information technology to share operating data and essential information with its suppliers, Zara is able to deliver quality products from the factories to the stores in as little as three weeks.

Another secret of Zara's success is a team of highly trained store employees and managers.Zara trains its store employees to be particularly sensitive to customer needs and wants on the shop floors.Zara empowers its sales associates and store managers to conduct customer research, to listen and note down customer comments such as ideas for fabrics, new cutting, new colors, and new styles.They are trained to constantly think about how these customer comments can potentially be converted into Zara's new collection in the next few weeks.Their ideas will then be communicated back to a team of over 700 skilled designers enabling Zara to roll out over 50,000 pieces of fashion designs annually.These new designs enter the stores in less than 15 days with online and retail collection are refreshed twice a week, and shipments to any worldwide locations are made within 48 hours, supported by a well-designed distribution networks.Furthermore, these products are made only in limited editions.Customer knows that she has to buy an item she likes when she sees it, or else she won't be able to see it again.Customers are satisfied by the large selection of relevant fashion pieces as well as the price on the tags.Consequently Zara is able to sell the products in a short period of time at full price without discount, resulting in lower marketing cost and higher profit margins.

Zara focuses on pulling customers in by enhancing customer experience.By consistently offering reasons for customers to visit the stores, such as the introduction of augmented reality for shoppers can use their mobile phones to see models wearing selected fashion pieces, and new collections every week, Zara has successfully created customer curiosity, which is the most powerful pull marketing strategy.Every human being is innately programmed to satisfy curiosity.The result is a group of loyal customer who visit its store about six times per year, when the market norm is about three times per year.

Modern customers strive for a deeper connection with the brand, and look for exchange of brand values measured by a number of factors, including quality, time, convenience, and total experience.Zara realizes the importance of exchanging with customers for brand value and not just for the product itself.Zara's fast-fashion product is available in the right quantity, format, and time, just the way customer wanted it.Zara developed a deep understanding of the entire value proposition it exchanges with the customers by consistently offering brand value of trend-right product as affordable.

Zara only spend about 0.3% of sales on advertising, because rather than push marketing, Zara draws customers in and cultivates them into brand influencers.By continuously enhancing customer experience, and offering brand values in exchange, Zara is able to cultivate a loyal customer base that evangelize the fast-fashion culture associated with the brand.Utilizing a highly sophisticated data analytics system, and engaging in two-way communication with these loyal customers through both online and offline channels, Zara can quickly identify what's selling and being said on social media, which helps to improve operation efficiency, fashion design, and service quality.These loyal customers become brand evangelists who share their excitement about Zara on their personal social networks.Zara has successfully procured 43 million followers on Instagram, 29 million on Facebook, and 1.3 million on Twitter.

Zara has built its success primarily through offline presence.It is no surprise that Zara has been hard hit by global store closure amid the COVID-19 pandemic.Zara announced to close 16% of stores worldwide in June 2020, and sales falling by 44% in Q1 of 2020.However, Zara's online store has been described as difficult to navigate due to overwhelming number of products, low readability, and poor interfacing.Approximately one third of users claimed that they get frustrated by the poor design and navigation of the online store causing them to leave without making any purchase.Zara finally woke up and decided to invest heavily to scale up its digital strategy to enhance its online shopping experience.According to Amancio Ortega, Zara plans to spend US$ 1.1 billion to enhance its online capabilities by 2022.

Evaluate the market-oriented strategy of Zara and discuss a strategic focus for Zara, justify your answer.( use ANSOFF)