Zara, being the largest fashion brand in the world, was founded during the year 1975 and is headquartered in Spain. The brand concentrates in fast fashion and various products like shoes, accessories, swimwear, clothing, perfumes, and beauty products. Zara belongs to Inditex which is one of the largest distribution groups. Zara places customers the main priority of their exclusive business model that includes production, design, sales, and distribution through the company’s extensive retail network.
The various stores of Zara have men’s, women’s, and kid’s clothing. The various products of Zara are based on consumer trends. It has a reactive supply chain and new products are shipped to their stores twice a week. Once the products are designed, it takes about 10 to 15 days for the store to get it. All the apparel is processed using the distribution center located in Spain. New products are thoroughly inspected, tagged, sorted, and loaded to the trucks. In most of the cases, the apparel is distributed within 48 hours. Zara generates about 450 million items per year.
As of during the year 2018, Zara has its business operations across 96 markets and online markets as well. Zara as a brand is a great hit with its fast fashion business model. Zara has been successful from its creative passion for many of the company’s dress designers who are well-aware of its customers. Zara also continues to expand its global network and aside from its great fashion, it has also followed a great strategy and has taken a justifiable growth model. Zara’s business philosophy depends on the four main values of beauty, clarity, functionality, and sustainability which also reflect the inner environment of Zara’s stores.
The SWOT analysis of Zara differentiates all the main strengths, weaknesses, opportunities, and threats that would help the company to increase its growth. Read out this article, to get an understanding of where Zara stands.
The SWOT analysis of Zara specifies the strengths of the company at which it is good at and what separates it from its competitors, its weakness that stops the brand to perform well and should work more on it to improve. It lists its opportunities that the brand can use to increase its market share and brand value. It also throws light on the threat that has the potential to harm the brand.
To make sure that Zara meets the long-term competitive advantage it must address the various concerns highlighted in the SWOT analysis of Zara.
SWOT analysis of Zara.
- Fast Fashion Brand –
Inditex’s fastest and most profitable brand is Zara. The company could challenge conventional wisdom and due to this, it has become a big hit in the fashion world. The amazing fast fashion model if the brand is a big hit and is most often taken as a model for various discussions and case studies in major institutions. Zara follows a unique model and has incorporated the right balance between demand and supply to succeed in its business.
There is always new entrant in Zara’s stores, and it does not overstock products as well. Due to this, its stocks are always fresh, and the brand has an urgency sense among its customers. The product that you see on Zara’s stores shelves today might not be there the following week.
Unlike the other brands that have fewer fashion cycles, Zara brings in many fashion cycles using their well-planned and integrated supply chain along with their top fashion designers. This is the main strength for the brand.
- Strong Supply Chain Management –
Zara has established an integrated business model. Making use of IT technologies, Zara has created a system that simplifies the communication flow and data. It has created the flow in such a way that information sharing is easy.
When there are a proper connection and supply chain in place, the flow of raw materials and ideas is faster and has great flexibility. Maintaining higher flexibility is the main feature of Zara’s supply chain. While it maintains a good level of integration and communication, it comes out with new designs in less than 15 days.
There are about 1800 suppliers and by higher integration, it controls costs and has its business model effectively. Also, the retail network of the brand has increased during the recent years. As of the year 2018, the number of retail stores is about 2251 and has reached about 48 markets.
- Unique Designs –
One main advantage of the brand is its unique designs. It has many designers on board who very well understands the Zara brand and customers requirement as well. Zara’s clothes are stylish, high-quality, and have a good finishing.
It has a huge collection for men, women, and kids that includes office wear, casual wear, and party wear. All the accessories are an important part of Zara wear.
- Investment in Technology –
Zara has made a huge investment in many modern technologies that have streamlined the process of its retail network and supply chain. Aside from the RFID technology, it creates better inventory management in the stores.
Zara makes use of various IT tools for information sharing in a better way and brings in greater flexibility. It has strong support for converting ideas to products at a faster pace. Over the years, Zara has grown to a great level and this is due to its strong focus on innovation.
- Reasonable Price –
Yet another main strength of the brand is its pricing strategy that has helped the brand to get more customers. Zara’s products are available at a feasible rate. However, it does have some high-priced products to supply to the higher end of the market.
The brand’s feasible prices and its reasonable designs are mainly targeted to the youth and there are heavy conversions in the stores. Zara’s pricing strategy is, in fact, the main strength of the brand. People prefer high fashion and Zara provides them with it by producing it from cheaper fabric yet attractive designs.
Their pricing strategy has driven a huge loyal customer base. With Zara, people can purchase new fashions regularly without having to spend a huge amount on it. Zara has been able to develop a win-win strategy for the brand and customers.
- Increase in Sales –
Zara has seen a fast growth ever since its formation. It has an exceptionally integrated online and offline retail channel. Over the years, Zara has expanded on its sales to a great extent.
Zara has attained global fame due to its pricing and customer service, having an attractive design for its products. This has eventually led to more sales thereby increase in its revenue. This is the main strength of the brand.
- Customer Service and Experience –
Zara is indeed popular for its customer service and its value proposition has been increased through its customer service focus and convenience. It has tactically opened its retail stores in those areas that have attracted more customer flow. Zara’s stores are beautifully designed and are also furnished with technology to make the shopping easier.
Zara’s employees are well-trained to handle customers and provide them with better service. It has indeed created a brand by itself for customer relationship and is valuable. Through its customer service, it has generated many valuable customers and retained them as well.
Zara makes use of RFID technology in its stores to track the garment location. It produces products that its customers look for and ensure that it is available to them.
- Low Presence in few Markets – In many fast-growing markets like India and Malaysia, the Zara stores are less. There are fewer stores in New Zealand and Thailand as well. The stores are less as compared to the stores in the UK, USA, Russia, China, Spain, etc. Zara should place more stores in many other markets, and this is a weak point for the brand.
- Less Marketing – Zara has been into less marketing and promotion of its brand. Instead of advertising and promoting its products to push more sales, it is trying to bring customers basis their requirements and likes. Using this method, Zara has not advertised much and created a strong presence. While there is a lot of competition, the brand would face a lot of challenges without having a marketing strategy in place. Hence, the brand might should invest a lot in marketing to get more sales and increase its customer base.
- Generalized Collection – Zara does not focus more on anything specific but instead has everything for all. This is a big weakness for the brand because customers might shift focus to competitors whose focus is on one thing. It could be pants, shirts, party wear, dresses, etc. Zara lacks in such immediate focus.
- Using AI for better Customer Experience – Zara has always focused on customer experience and to provide great customer service, it can consider improving its customer service more by investing in virtual reality, AI, and many other similar technologies. While the brand is more customer-oriented, it is highly useful to convert shopping to better experience using these latest technologies.
- Marketing – Even though Zara has a good customer base, it can increase its customer base thereby resulting in more sales on venturing out in marketing and promotions. As of now, it invests less in marketing, but investing more amount in marketing and having a proper marketing strategy in place it could be good for the brand. This would help them to have more customers and increase their sales.
- Developing its Retail Channels – Zara has a huge retail channel set up in many parts of the world. It is still not prominent in a few places like India, Singapore, Malaysia, Thailand, and New Zealand. India is indeed a highly profitable marketplace for such top brands. The company should venture into more markets to expand its growth.
- Online Commerce – Zara would see a huge opportunity in setting up e-commerce to buy products. It should take advantage that the online buying patterns have and produce clothes for online commerce as well. This would see a huge growth for the brand.
- Strong Competitors – Zara sees a huge competition from the other top brands in the fashion industry. This creates a lot of pressure on its sales and marketing. While Zara has a great brand value and has got a well-defined supply chain, it does see intense competition from many other fashion brands.
- Regulation – Various political and legal regulations of the business industry are on the rise. All over the world, the legal and government agencies are regulating businesses that include the fashion industry as well. Fashion industry sees many rules of regulations in place. Right from labor to quality and in many areas, the industry must be compliant with laws. The laws vary from market to market and from country to country. When there are more regulations it is a threat to the brand as there is always a chance to slip one or two.
- Increase in Raw Material Cost – The cost of raw materials is always on the rise and it is a huge threat to the brand. Zara has a proper and integrated supply chain in place and is dependent on the raw material to the fullest. But when there is an increase in the raw materials and labor cost, it would increase its operational cost as well. This would have a negative impact on its profits which is a threat to it.
The SWOT analysis of Zara mentioned in this article has highlighted the main strengths of the brand that comes up from it being a fast fashion brand, having a strong supply chain, unique designs, investment in technology, products being priced reasonably, increase in its sales, and better customer service and experience.
Zara’s main weaknesses are from showing low presence in other markets, less focus on marketing, and having a generalized collection. The brand sees its opportunity on investing in the latest technologies for customer experience, increase its marketing, and venturing into online commerce.
Zara sees a threat from its competitors, various regulations, and a rise in raw materials.