ZARA Sources of Competitive Advantage

Author- | Posted- | Updated: January 3, 2019 |

ZARA sources of competitive advantage

ZARA

ZARA is now a well know  fast fashion brand with an impressive presence in the international markets. It is the flagship brand of Inditex that also accounts for the largest part of the company’s revenue. ZARA’s popularity is based on several factors but mainly for its focus on quality and style along with its competitive pricing strategy. However, that is not the end of the line for ZARA. It is equally focused at customer service and providing its customers which are mainly the next-gen shoppers both male and female a unique and best in cal shopping experience. ZARA’s grown is also a result of the strategic supply chain management by Inditex. Apart from being agile, its supply chain and production system are efficient and designed to deliver results faster. Another attractive aspect of ZARA’s business model is the in-store experience. These stores are designed to offer a great in-store shopping experience and create highest satisfaction for customers. Apart from trained staff, ZARA has focused upon the use of innovative technologies for higher customer engagement and a distinctive experience that maximises satisfaction. ZARA has gained an advantage over its rivals in the fashion industry. However, this all has been achieved without making any large investment in marketing. All these factors indicate that ZARA has managed a strong edge. You will read about the several sources of its competitive advantage in detail in this discussion post.

Pricing Strategy:

The fashion industry has grown highly competitive. A very large number of brands are trying to grab the largest share of the same pie. The pie is not growing proportionate to the level of competition. while the number of players in the fashion industry is now high, most of them rely on marketing and customer targeting techniques to push sales. The largest number of customers is from the middle class. The next-gen middle class consumers are a bit price conscious. They want products that are trendy but come at affordable prices. However, not many brands have been able to find a perfect match between quality, style and prices. ZARA’s greatest strength lies here. It offers good quality products that are as stylish as those offered by the high end fashion brands but still, they are not as costly. So, ZARA is all good news for the average middle class customer who would like to buy several but cannot because of budget constraints. If high end fashion is made affordable using the right techniques and while also avoiding brand dilution or being considered cheap then it helps you gain a competitive edge. ZARA has nailed the price challenge and given its middle class consumers more to feel excited about than the other brands do. You do not have to compromise on sale and you can buy more from your existing budget. This is a distinct advantage and it has led to a larger customer base as well as higher loyalty.

Quality products :-

ZARA has managed prices of its products very well and sells them at affordable costs. This has made it very popular among the middle class consumers. However, while managing the prices, it has not lost focus on quality. It still offers good quality products. Lower prices and great styles do not mean that the brand compromises on fabric quality. The products are made from sufficiently good quality fabric. However, since the fashion trends change faster, they are meant to be worn for no more than a few seasons. Consumers do not have anything to complain about either. They are getting better value in return than what they are paying for.  The good quality is also a reason apart from the lower prices of ZARA products that helps attract and retain customers in larger numbers. It is one of the most important factors that ZARA’s popularity and sales have grown fast in overseas markets. Good quality offers a strong competitive advantage and has made ZARA a potent rival of the top selling higher end fashion brands.

International expansion:

ZARA’s extensive global presence is also a source of advantage for it. In the recent years while the number of ZARA stores has grown fast, so has its online presence. Last year, it expanded its e-commerce presence into several new markets of Asia including India and Malaysia. China is already a significant market for ZARA where the number of its stores is quite high. Together its physical and online stores have helped it manage an impressive global presence and reach a very large number of customers globally. The number of ZARA stores globally has grown to more than 2200. It is also operating e-commerce websites across 48 markets. Moreover, ZARA stores are located at prime locations all around the world where they attract higher number of footfalls. Location has a special importance in terms of strategy for the retail businesses whether fashion, food or grocery. Occupying a prime location brings a special advantage where you attract the right customers. It also helps you market your brand and products easily. Imagine being located at a place where your customers go rarely. This will not help you find the right level of exposure. Moreover, having stores in a prime location helps you remain right before the eyes of the customers at places they visit regularly. In that case, you will not have to distribute pamphlets in the streets to announce new arrivals.

Fast Fashion model:

The fast fashion model adopted by ZARA is also a strong source of competitive advantage. Fashion cycles change after at ZARA. Styles are updated frequently and faster inside ZARA stores. The fast fashion model enables ZARA to replenish its stores frequently. This has several benefits and it all keeps customers engaged and bringing them more frequently to the ZARA stores. Trends change fast and customers are always looking for the freshest styles in the market. Moreover, ZARA does not overstock its stores and the demand for its products remains high because a style available today will not be there a few weeks later. This works to keep the demand for ZARA products high. Inditex has synchronised its supply chain with its production process very well.  A well managed supply chain helps support the production process and a large group of creative designers keeps bringing new ideas to the ZARA stores.

Customer service:

Customer service is also an important focus area for ZARA and helps retain customers in larger numbers. While most brands invest a lot in marketing and retention, in case of ZARA most of its marketing happens through its stores and websites. Those stores are not just designed beautifully to provide a superior experience but the company staff are also trained well to provide the best customer service to the customers who flock to ZARA stores. Apart from that the brand is investing in  emerging technologies to make shopping at Zara a distinctly great experience. These stores are designed to reflect the modern trends in fashion, fun, music and technology. Making customer service a central focus was important for another reason too for ZARA. It does knot invest in marketing and instead all the marketing happens though the physical and online stores as well as publicity. So, by focusing on customer service it has been able to strengthen the relationship between the brand and the customers.

Brand image:

Brand equity is an important strengths in this era. It is because the companies or bands the have maintained a great brand image are more secure in terms of customer base and net sales. Such brands enjoy higher loyalty as well as higher sales. It is because customers trust and like to shop only from the brands that have created a string and responsible image. ZARA is a customer oriented brand which apart from prices and quality places hear focus on customer experience. This has helped it manage a good image as well as retain its popularity among its followers.

HR management:

In the field of HR too, Inditex and its flagship brand ZARA are doing very well. The company employs a large number of designers. The gender ration also looks great where the percentage of female employees is much higher than the male employees. Moreover, apart from good salaries and financial incentives, the brand cares for the work environment and motivation of its employees. It takes special care of its personnel and has implemented special training program to help them grow their skills and continue their education. In this way, ZARA and the entire Inditex company have managed their human capital very well. Apart from taking special care in terms of hiring the best talent, it has also established a strong culture that keeps its employees motivated and engaged. HR can be a source of strong competitive advantage since there is high level competition in the industry. Only skilled people can help you manage competitive pressures and productivity very well. 

Customer loyalty:

Customer loyalty is a string advantage and to achieve customer loyalty, you have to focus on several things. Most amazing thing about ZARA is that it does not invest heavily in marketing and advertising like many other brands do to create demand.  Instead it invests in creating trust and loyalty  by managing prices, quality and customer service better. While it brings attractive products at affordable prices, it has connected with its customers better by focusing on the in-store customer experience and designing it to suit the visitors’ preferences. High level customer loyalty is a distinct advantage which translates into higher sales and revenue. ZARA  generates the highest revenue of all the brands owned by Inditex.

Conclusion:

ZARA has grown into a  world famous fast fashion brand and its international presence has seen an impressive rise in the recent years. its network of physical stores has reached more than 2200. Apart from that the brand is also operating e-commerce websites across 48 markets. Overall, ZARA is in a strong position to achieve faster growth in near future. Some other key strengths that have helped it achieve an edge over its rivals include its pricing strategy, focus on quality and customer service and the excellent in-store experience it has designed for visitors. ZAR has achieved all this without investing any thing in marketing. Instead it relied upon a well synchronized supply chain. Moreover, its focus on HR has also helped bring great results. In this way, ZARA has obtained several sources of competitive advantage. A large customer base and high level customer loyalty are helping it grow faster.

Sources:

Inditex Annual Report 2017

Abhijeet Pratap

Abhijeet has been blogging on educational topics and business research since 2016. He graduated with a Hons. in English literature from BRABU and an MBA from the Asia-Pacific Institute of Management, New Delhi. He likes to blog and share his knowledge and research in business management, marketing, literature and other areas with his readers.