Even with this higher injection of stock, Zara can sell through newness quicker. In contrast, Zara sends more targeted and directional emails by age and gender. With distinct consumer groups in mind, different products are sought after at each brand.
Tops and bottoms are the standout and delving further reveals this was fueled by strong demand for sweaters, T-shirts and sweatshirts. However, the pricing strategy at the two retailers varies dramatically. The different pricing structures are even more visible when comparing one of the most competitive categories to emerge from the pandemic wardrobe : loungewear.
With two distinct pricing categories in the market, quality and detailing will play an important role in consumer purchasing. A key differentiator between the retailers is their approach to sales. COVID has forced both retailers to rethink their strategies, especially over Cyber Month, which presented itself as an opportunity to clear through stock built-up from the pandemic. While both brands have built a fortune on affordable fast fashion, they are now working to reduce their environmental footprint with sustainable initiatives.
Last year, Zara set in place ambitious, longer-term goals. It carries about 11, distinct items per year in thousands of stores worldwide compared to competitors that carry 2, to 4, items per year in their stores. The screenshot below shows a closeup satellite view of this facility. It is the flagship business unit of a holding company called Inditex Corporation with headquarters in Arteixo, Galicia, a city in northwestern Spain near where Mr.
Ortega was born. In Zara was ranked as the 46th most valuable brand in the world by Forbes see bibliography below. Agents for the company are always scouting out new fashion trends at clubs and social gatherings. When they see inspiring examples they quickly send design sketches to the garment designers at the Cube.
New items can be designed and out to the stores in 4 — 6 weeks, and existing items can be modified in 2 weeks. They reach this market by locating their stores in town centers and places with high concentrations of women in this age range. Short production runs create scarcity of given designs and that generates a sense of urgency and reason to buy while supplies last. As a consequence, Zara does not have lots of excess inventory, nor does it need to do big mark-downs on its clothing items.
Zara has 12 inventory turns per year compared to 3 — 4 per year for competitors. Stores place orders twice a week and this drives factory scheduling. Such short term focused order cycles make forecasts very accurate, much more accurate than competitors who may order every two weeks or every month.
Clothing items are priced based on market demand, not on cost of manufacture. The short lead times for delivery of unique fashion items combined with short production runs enable Zara to offer customers more styles and choices, and yet still create a sense of urgency to buy because items often sell out quickly. And that particular item or style may not be available again after it sells out.
Zara sells 85 percent of its items at full price compared to the industry average of selling only 60 percent of items at full price. Annually there is 10 percent of inventory unsold compared to industry averages of 17 — 20 percent.
In Spain customers visit Zara stores 17 times per year on average compared to 3 times per year for competitors. Because their clothing designs change often, it is harder for people to see them clearly on the Internet and thus they are encouraged to come into the stores instead and try on the unique fashions that Zara offers screenshot below shows people at a Zara store in Madrid, Spain.
Zara spends its money on opening new stores instead of spending a lot on ad campaigns. Estimates vary on the number of Zara stores worldwide. Zara also uses a flexible business model where its stores can be owned, franchised or co-owned with partners. Zara buys large quantities of only a few types of fabric just four or five types, but they can change from year to year , and does the garment design and related cutting and dyeing in-house.
This way fabric manufacturers can make quick deliveries of bulk quantities of fabric directly to the Zara DC — the Cube. The company purchases raw fabric from suppliers in Italy, Spain, Portugal and Greece. And those suppliers deliver within 5 days of orders being placed. Inbound logistics from suppliers are mostly by truck. The Cube is , square meters 5 million square feet , and highly automated with underground monorail links to 11 Zara-owned clothing factories within a 16 km 10 mile radius of the Cube.
All raw materials pass through the Cube on their way to the clothing factories, and all finished goods also pass through on their way out to the stores. They do only 50 — 60 percent of their manufacturing in advance versus the 80 — 90 percent done by competitors. Zara does not need to place big bets on yearly fashion trends. They can make many smaller bets on short term trends that are easier to call correctly.
In February, it launched online in the US. Stradivarius was acquired by Inditex in and was originally a family-owned women's wear brand. While it made a brief foray into men's wear in , this trial was axed in Inditex says this brand is all about high-quality materials, which is why its prices are higher than Zara's. Zara's home goods store is as hot on fast fashion as its namesake brand — new styles hit stores twice a week.
You can buy anything from bed linens to home furnishings and kitchen wares. While it is certainly not a budget brand, it's considered to be a stylish alternative to more expensive brands such as Pottery Barn. For you. World globe An icon of the world globe, indicating different international options. Get the Insider App.
Further, Zara focuses on its own people with corporate initiatives on diversity, respect, equal opportunity, work-life balance and professional development. Zara fosters a highly-engaged workforce that translates into highly-engaged interactions with customers. This is a fundamentally different alignment than brands using the 4Ps approach to marketing operate. Today the customer, not the company, calls the shots. Zara involves the customer interactively in the decision-making process.
That is the Zara difference. This is a BETA experience. You may opt-out by clicking here. More From Forbes. Nov 12, , am EST. Nov 11, , pm EST. Nov 11, , am EST. Nov 10, , pm EST.
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