Zara analysis

8 August 2016

Introduction ZARA is one of the trendy garment retailers as an important brand in portfolio of Inditex. With development of technology and extension of market, ZARA has expanded to over 1,500 stores in 44 countries, since founded at a Spanish town called La Coruna in 1975. In internationalization process, Zara employed various retailer formats, especially online shops, to complement weakness in traditional in-store purchase. Moreover, current development status of e-tailling is attractive for Zara to entry when facing increasingly fierce competition.

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Apparently, this “clicks-and-bricks” approach makes sense to some degree. This article demonstrates rationale why ZARA launched online store by combining academic theories with situational audits. Furthermore, it proposes several recommendations to optimize current online retailing. Obviously, it is meaningful to research Zara which is a leader in textile retailer. As one of biggest garment retailer, its behaviour sets an example for other rivals, even brings a new model for this industry in further development. Owing to stimulus from success of Zara, resource allocation or even industrial structure might be recombined.

On the other hand, it proposes a new purchase belief or lifestyle, which should be suitable to several time-pressured consumers. Therefore, rationale why wither choose this articles is apparent based on contextual statements. 2. Zara has been landing in online retailing After success of online retailing store in Spain, trendy fashion retailer Zara planed to install web store in France, Italy, Portugal and the UK, in 2010 September. Until to 2011, Zara boasted it had extended its online presence to customers in more than sixteen European countries, Japan and US.

Rationale for e-tailing uses in European countries Zara has expanded European market via building online channel. In following essay, it would analyse what and how variables entice Zara’s practice by integrating academic knowledge and situational analysis.  Superiority of internet retailing With popularization of computer science in society, net accessed by personal computer has being accepted as a professional and interactive mainstream intermediary. For several social departments, searching information through internet has been regarded as a habit in daily life.

Virtual shop owes its inherent advantages compared to other retailing classes in following aspects (Rosemary& Mohammed, 2004): The most prominent characteristic of e-tailing retailer is selling via network instead of entity store, which is beneficial to decrease dependence on specific location. As a manner to approach sophisticated retailer that may be geographically distant to customer, net helps virtual retailers to communicate with consumers and cover wider target market by providing home shopping service. Unlike store-based retailers, it is unnecessary for sellers to possess physical space for inventory or exhibition.

Internet is adopted as a display platform and transaction mechanism, namely delivery commodity directly after completed transaction. It reduces operating costs to a great extent if deducting rental fees, operational expenditure and relatively higher labour salaries. As previous empirical research showed, average transaction cost is around $15 per transaction in traditional retailing compared to approximately $0. 3 in virtual resale (Philipps et al., 1997). This huge difference between costs induces retailer join in virtual retailing markets extremely. In comparison to catalogue retailer, internet dealer also holds own advantages.

On the one hand, expense in producing and distributing catalogue is much higher and information cannot be updated promptly on catalogue. On the other hand, online shop display merchandise without upper restriction on size of catalogue or quantity of product represented. .Considering its social influence, e-tailing impels a new home-shopping device, capacitating time-pressured and less flexible consumers to purchase regardless of limitation on shop business hours. Moreover, it also implies that clients can eliminate time spending in visiting shops or waiting in queue, which is the most boring part in shopping.

Besides enlarging target market, it also proposes a fashionable shopping belief which is popular among young people.  Situational audits Zara undertake online retailing in European countries according to comparative environment and own marketing strategy except for advantages of e-tailing. The following part reveals how Inditex draft development device according to specific situation. Firstly, recent years witnessed a rapid rise in online retailing sales; namely, the significance of web store use is displayed among retail sector gradually.

As facts demonstrated by U. S. Census Bureau, online quarterly sales increased stably at 28% from 2000 to 2007. In the duration, the average growth rate of total retail sales only made up 4. 5% (U. S. Census Bureau, 2007). With popularization of internet use, a growing number of net users create niche market in retailing industry, who becomes potential consumer. Concededly, it holds enormous growth potential although online transactions only generate a small portion of total retail sales. Therefore, Zara intend to seize the opportunity to reach expanded target market.

Secondly, biggest rivals have launched and succeeded in virtual store in succession. On the one hands, as Jeremy demonstrates, brand that has not referred to online presence suffers a huge threat from competitors’ dramatic increase in online turnover. Obviously, rivals’ aggressive expansion in online market creates a threat to Zara’s sales. In order to maintain even enlarge market share, Zara participates in online retailing competition under compulsion. On the other hand, competitor’s success strengthens Zara’s confidence in web retailing. Meanwhile, it also offers a model used on guide strategy implement on internet.

Facing increasingly fierce competition, hence Zara plan to occupy virtual market via installing online shops as soon as possible. Thirdly, online retailing complements in-store selling profitably. Online stores will comfortably supplement its extensive store estate by means of providing extra service to consumer, especially dispelling restriction on time and space. Moreover, Zara’s entry to the online retail has opened access to an enormous source of data that can be collected and analyzed to improve corporate business strategy and marketing device in further development.

The gathered massages can be used for designing and executing Zara’s own marketing initiatives, such as direct mailing (n. a. , 2012). Finally, characteristics of e-tailing correspond with its marketing strategy. Zara has adopted pattern that manufacture and replenish constant new products in invasive price to develop curiosity and make it indispensable for a regular visit simultaneously. E-tailing can lessen expenditure on store operation efficiently and thereby decrease costs which is closely linked with price. Meanwhile, virtual shops renew catalogue in time that satisfy needs of fast fashion industry.

Furthermore, most internet shoppers are in 20 to 30 years old, which is coincidence with target market of Zara. Considering realistic significance of virtual retailing, it is reasonable for Zara’s entry. 2. 2 Recommendation for virtual retailing in further development Until now, Zara’s website has been built, which installed online interactions between seller and buyer ranging from the point customers visit in retailer’s web to the point retailers fulfill consumer order (Field et al. , 2004 and Smith et al, 2007). During whole process, Zara has formulated a series of management measures to control performance in e-tailing.

In the first place, it matches online price to those in physical store across each country. In term of payment approach, this transactional website accepts lump-sum payment by credit cards or debit card. Secondly, there is no charge for shoppers to delivery merchandise when they purchase at Zara online store. Furthermore, consumer also can require delivery channel by express courier or regular post according to their situation. Thirdly, e-store is constantly renewed by updated items when entity shops exhibit new arrivals. Finally, this web offers same exchanges and returns policy as in physical store.

That superior after-sales service lifts customers’ worries to some degree (Susan, 2011). However, besides previous efforts, Zara is required to make a progress in following areas for the sake of perfecting online retailing (Alba et al. , 1997). Recommending related merchandise Unlike traditional in-store retailing, electronic sellers facilitate one-stop shopping and enhance service quality via offering various complementary products. Relying on personalization technologies, retailers provide customized features online, namely complex catalog navigation and tailoring of the purchase process

For example, customer is provided with recommendations of products that the customer might be interested in, based on the product searched for or those previously bought by the customer. Given this popular marketing approach, Zara web can suggest best-seller in season or complementary product accord with items based on current or previous buying. Moreover, it also should advise several garments in similar style in accordance with purchase history. It allows Zara to deliver trust built from one merchandise area to another consequently maximizing possibility of cross-buying and rising sales.

Improving distribution system As one of main variables to restrain internet retailing development, order fulfillment is considered as an obstacle to expand electronic market. Additionally, distribution expenses and efficiency are regarded as factors which influence shopping decision. Actually, Zara indeed has set few policies in this area before. Besides those previous measures, Zara can recruit specialist and build logistics system to supervise online order, inventory management, and goods distribution. During the process, staff should check every order and deliver merchandise as soon as possible.

This efficient distribution system not only helps Zara to satisfy current consumer, but also strengthen own competitiveness compared to other online rivals. Offering good consumer service The quality of online buying process affects consumer purchase decision, satisfaction and loyalty (Zeitham et. al. , 2002 and Wolfinbarger & Gilly, 2003). Like other retailing approaches, transaction disputes happen inevitably across online shopping process, which mainly contains unpunctual order arrival, unqualified products and payment problem.

To be competitive, sellers are not only required to supply high-class merchandise, but also offer a pleasant shopping experience via superior service to ensure whole process is responsive and convenient for consumers (Lqbal, et. al. , 2003). Therefore, it is necessary to improve relationship between buyers and sellers by improving consumer service. For this purpose, Zara should arrange personnel to answer questions before purchase, help consumer to complete complex transaction during purchase, and optimize after-sales service, especially respond or deal with consumer complains.

For example, the website retailer can retrieve personal account information which is then automatically store in personal account of consumer for the sake of facilitating consumer to review past searching or purchase and track order in shipment. Favorable shopping experience should increase repeat purchase behaviour to some degree. Managing customer relationship In the highly competitive virtual marketplace where cost of retaining a customer is lower than recruiting a new one, relationship marketing take on an added importance. Zara can communicate with existing customers to advertise online, show updated products, and inform new promotions.

For example, the website supplies the alternative of receiving reminder of special events or message about new arrivals. If complete payments, consumer will receive homologues voucher which can be used in next transaction automatically. Apparently, this act is available to increase repeat purchase, build customer loyalty and at least retain current market share. 3. Conclusion This article mainly discusses retailing marketing concepts which is contained in news as appendix. On the on hand, the essay explains the rationale why Zara launched online retailing store, which contains inherent superiority of online store and appropriate environment.

On the other hand, writer proposes several recommendations, including merchandise assortment supply, distribution efficiency rise, consumer service improvement and customer relationship management. As predicted, with improvement in web retailing and economic resurgence, Zara’s virtual retailing will boom; and hence Zara will adjust current economic growth pattern to flourishing online marketplace. Furthermore, thanks to stimulate from success of several giants in virtual market, fast fashion industry will recombine resource allocation at a certain extent.

The group already sells a home range online, but its revamped website will offer fashion lines which have only been available in its stores until now. The push into cyberspace is seen as a defensive move that comes amid fears of a decline in High Street spending. H&M will follow in the next fortnight; Gap began online sales for the first time outside the US last month. Consumer confidence is waning and many fear a further economic slowdown. Online fashion sales, meanwhile, are proving resilient. At rival Next, for instance, first-half sales in stores fell 1. 5%, while its home shopping business saw sales rise 7. 8%.

Further strength in internet trading has been reported by Asos, the online market leader, which said sales rose 54% during the January-to-March quarter when compared with the same period a year earlier. Online growth Online retail sales have boomed as more people get high-speed internet connections and time-pressed shoppers take advantage of shopping from home or work, according to industry observers. Shopping on the net is expected to see sales grow to ? 94bn ($144 bn) in Western Europe by 2014, from ? 56bn in 2009, according to consultants Forrester. But online sales still only make up a small proportion of total sales.

In the UK, only 8% of total sales in July were made online, according to the Office for National Statistics. “Shops that don’t have an online presence have noticed rival stores enjoying a dramatic increase in online sales, while their sales in shops have been pretty flat,” according to Jeremy Baker, professor of marketing at the ESCP business school. Complement to existing stores Zara’s online shop will soon be followed by H&M’s online shop, which will go live on 16 September. Gap and Banana Republic are already there, having opened their online operations outside the US for the first time, on 26 August.

Online stores add to rather than cannibalize physical stores, hence they tend to bring in additional sales, according to industry observers. “There is clearly demand for Zara product online,” said Simon Chinn, retail consultant at Verdict Research. “It will comfortably complement its extensive store estate, adding an extra level of service for its customers. ” Rapid growth Online retail sales are set to double in next three years Zara is “liked” by more than 4. 5 million people who have signed up as fans on Facebook. The key now is to convert those fans into customers.

Inditex, Zara’s parent company, has overtaken Gap as the world’s biggest clothing retailer by sales. Inditex chief executive, Pablo Isla, said: “Customers should expect the launching of online selling for the group’s other brands in coming years. ” The success of retailers such as the dedicated online fashion site Asos hints at how rapid the migration of sales from traditional stores to the internet is, especially among the 18-34 age group. Zara made a small profit in the year to the end of January 2010, after recording a sharp loss during the previous year. It is hoping to see a 10% rise in revenue linked to its online store.

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