Place – Success factor of ZARA

By- Hussain Bootwala

zara

Marketing is a collection to activities to transform the idea into tangible product and intangible services. Marketing mix is the crucial tool used to perform marketing activities, marketing mix refers to 4 P’s that include; product, price, place and promotion. Place is the third element of marketing mix, this refers to activities and processes used to make the product and service available to final consumer. Producer or manufacturer used different distribution channels to complete this process.

Distribution channel include different intermediaries like wholesalers, retailers, reseller, agent and franchise. Distribution options and channels are as follows:

zara 1ZARA is a well-known Spanish clothing brand famous for its quick response, which is considered as a success factor for the company and gaining competitive edge over its competitors worldwide. Fashion is all about new and trendy clothing, ZARA’s inventory management and distribution strategy are the key elements behind its quick response strategy. ZARA has outlets in 86 countries, including Europe, United States, Middle East and Asia. In 2012, Inditex the parent company of ZARA has claimed US$20.7 billion of total sales, out of which ZARA contributed 66 percent that is US$13.6 billion sales, which is a huge success.

ZARA’s outlet have new batch of clothes after every two weeks, the organization manufactures around 450 million items a year and deliver it to 1770 outlets all over the world. ZARA achieve this control and management over its placing strategy due to its strong supply chain management than many of its competitors.

zara 2ZARA has its production or manufacturing units at three distinct places. 50% of its manufacturing is done in Spain, 26% in Europe and 24% is done from Asia and even Africa. From the manufacturing units products are transported to or distributed to ZARA’s headquarter at Spain and then transferred to its outlets all around the world. ZARA’s distribution strategy is vertical integrated strategy and to follow this strategy company requires having a high amount of control from headquarter. Inditex proves to have a well-controlled management from it’s headquarter with the alignment of latest technology they make it possible to distribute its products to its outlets in minimum time frame of just 15 days. ZARA is enjoying the competitive advantage by adapting and offering the latest trend in the market with the use of Hybrid communications system which facilitates the company to produce unique and latest designs with the available material in short production time and expense.

zara 3 ZARA is following vertical integrated distribution strategy which allows ZARA to enjoy benefits like strong control, cost control, competitive advantage and differentiation. These advantages lead ZARA to be the market leader in clothing industry. ZARA is able to cut its cost and time or having cost and time control as it do not outsource its distribution, this also allows them to avoid the conflicts that usually arises because of adopting different distribution channels. Vertical integration is also serving as a point of differentiation between ZARA and its competitors, as usually retailing stores outsource its distribution and that can be the reason of delayed distribution or supply of products at retail outlets which do not happens in case of ZARA.

The company has highly competent staff which allows ZARA to produce 1200 designs per batch and make it available in stores after every two weeks, which is a big achievement and this hard work pays off ZARA in gaining reporting high sales volume. Customers visit ZARA’s outlet to check for the latest designs and trends, quick and effective distribution could be a best way to gain customer loyalty and good reputation, and these are the lessons that could be learned from the success story of ZARA. Supply chain management of ZARA can be summarized as follows:

zara 4Therefore, is can be said after analyzing ZARA’s case that it is the proof that success of any business organization depend on many factors and the most crucial is its distribution strategy or distribution channel followed by any company. Company needs to be further cautious about its distribution strategy to gain the maximum profits and maximum share in the market. On the other hand, marketing and promotion strategy is dependent on the distribution network of any company. It is very important to have a strong market analysis before adopting any strategy for the company.

zara 5zara 6

Moreover, customer is the ultimate focus of any business and all the efforts done by any business is due to its customers or selling the products for its customers. If the products do not reach to its target or potential customers then it would be useless to put so much effort on its production. Placing the right product to right people is the aim of and success of any distribution strategy. Company can get the maximum market share due to its strategy and also can lose the greater amount of market share with high quality goods at lower cost.

 

References

Dahan, G. S., & Peltekoglu, F. B. (2011). The effects of Zara to the SMEs of an emerging market. Journal of Global Fashion Marketing2(1), 1-10.

Dent, J. (2011). Distribution channels: Understanding and managing channels to market. Kogan Page Publishers.

Flylib, (2015), Supply Chain Management, accessed on 18th May 2015, available at: http://flylib.com/books/en/2.405.1.9/1/

Government of Western Australia, (2015), Marketing – Place (Distribution) Strategy, accessed on 18th May 2015, available at: http://www.smallbusiness.wa.gov.au/business-in-wa/about-sbdc/corporate-publications/business-guides/marketing-place-distribution-strategy/

Hartley, R. F., & Claycomb, C. (2013). Marketing mistakes and successes. Wiley.

Hemantha, Y. (2012). Indian Consumer’s Perception of Spanish Fashion Brand Zara. Advances In Management.

Royo-Vela, M., & Casamassima, P. (2011). The influence of belonging to virtual brand communities on consumers’ affective commitment, satisfaction and word-of-mouth advertising: The ZARA case. Online Information Review,35(4), 517-542.

Shi, H., Liu, Y., & Petruzzi, N. C. (2013). Consumer heterogeneity, product quality, and distribution channels. Management Science59(5), 1162-1176.

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32 thoughts on “Place – Success factor of ZARA

  1. Thanks for the blog. Though I am not a big Zara fan, good to know that Zara has a solid distribution network. Because of the excellent distribution network, Zara is avoiding building up of unpopular or unsold stocks, which could be a “death” to the business. The inventory optimization model could assist Zara a lot especially in the quick season changings.

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  2. Your Blog gives the wide idea on how Zara brand is distributed and how it capitalize the brands and had clear understanding of practical example of perfect distribution of the brands. I think market research is one of the major factor influence the brand distribution. Your blog gives us the idea how they are retaining the market by time management and so on.. I am now more interested on how they really targeted the segments which they have now. Your blog helps to think on more perceptive around the distribution channel.

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  3. By distributing new designs every two weeks, Zara keeps consumers engaged and checking out stores regularly. Although not a Zara customer myself, I shop at Temt that stocks every couple of weeks as well and stock always sells out fast because of the affordable pricing and quality merchandise, therefore customers visit the stores regularly and they have managed to retain a regular customer base.

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  4. Thanks for the blog. I’m not a fan of Zara, so I have no idea of its distribution channel until now. I believe that vertical integrated distribution strategy is one of the important reasons for Zara to succeed. By producing its own designs, Zara attracts a large group of customers who likes clothing with unique designs and this creates Zara a regular customer base, because customers won’t be able to find the same design anywhere else. And I think Zara is smart in this way.

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  5. Thank you for the good blog entry. When I have a look into my wardrobe I think 60 % of my clothes is from Zara 🙂 so I’m very interested in your topic. How amazing is the fact that Zara distributes new designs every two week? That shows that Zara always has its eyes on new trends. Ans this is also one reason why I love Zara. Because its clothers are always trendy and modern and it procues its own designs. Further I would agree that vertical integrated distribution strategy is one of the most important reasons why the brand is so successful.

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  6. thanks for the blog. I think ZARA given the transportation choices (e.g. shipping all to Spain and then all from Spain, and using air to ship across the ocean), I would imagine that transportation costs would be very high, especially when sending many small shipments. Perhaps Zara makes up for this with low inventory costs and spot-on demand satisfaction.

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  7. I hadn’t realized that Zara had such an integrated approach to the product development and sales. Seems they have hit upon a great model that suits the fashion industry which has short product life cycles and helps them maximize turn over and also minimize superseded stock. I expect we wont see many Zara stores as the Discount Factory Outlet centers we seen on the edge of many of our cities in Australia.

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  8. Thanks for this blog, I think that Zara’s business model is fascinating. Especially when you consider that the head of Zara is one of the richest men in the world.

    I think it is worth turning our minds the use of sweatshop workers in the developing world when discussing the ‘success’ of Zara’s distribution channels. Zara has repeatedly been in the press for their use of low paid workers and poor conditions of factories overseas. It’s interesting that this negative press doesn’t seem to have damaged their brand very much.

    From a marketing perspective – how have they achieved this? Their ability to provide up-to-the-minute, cheap, disposable fashion would not be possible without someone along the distribution chain paying a very real and human price. Is it successful marketing that allows us to forget this and buy anyway?

    From a human perspective – Even if it’s legal, cost effective, successful for the business – do marketers have any obligation to think about the wider implications of their advice and actions? Or is profit our only consideration?

    Thanks for a great blog on a very interesting topic.

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  9. Zara is one of my favourite clothes brand and I have never realised they have 2 weeks turnover of their products. That’s very quick considering fashion has a short product cycle. Their distribution channel must be well executed. It will be interesting to find out whether they are distributing the same type of new styles to each country or not. I went to Zara stores in different countries besides Australia and they have different type of styles. Is it because every country have different styles or it’s just different timing when they will get the new styles? I bought a jacket from Zara store in Indonesia early this year and I just found the same jacket in Australia recently, so there is about 5 months difference. Could it be the styles in Australia is older than other countries because we are located further away than other Asian countries? I’m very interested to see how they manage the distribution of their new styles. Besides that, every country will have different weather season thus they have to manage different styles are sent to different countries. For example, around this time, we have autumn season in Australia so Zara will sell autumn clothes (e.g. long sleeves, jackets, etc) and in Singapore is hot and humid weather all year long so we will expect to see summer/ spring clothes (e.g. shorts, t-shirts, etc) – how do they manage this distribution? How do Zara team manage to come up with new styles every time?

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  10. Good post~

    Place is the third element of marketing mix, Place (channels) is often referred to as distribution portfolio, which includes distribution channels, storage facilities, transport facilities, inventory control

    ZARA has a huge sales network, she has more than 2,000 sales stores in more than 50 countries worldwide, including more than 760 ZARA stores. but more importantly, after years of investment and construction, ZARA established distributor of high-tech system, which is the world’s only company able to produce within 15 days of good clothing distribution to more than 850 stores worldwide fashion company. ZARA stick to their own principles and operational network of almost all of the stores, at the same time invested heavily in building their own factories (currently 22 owned factories) and logistics system, she has the own team of designers, all products of their own design, with its own factories, to quickly implement production as needed.

    ZARA’s distribution facilities are very advanced, the number employees needed are very little when running. In order to ensure that every order arrive at its destination on time, ZARA did not take a waste of time method of artificial sorting but borrowed the optical reading tool that can be picked per hour and more than 60,000 sorting clothes. ZARA use a “five fingers tightly control the production and sale ” a huge sales network and efficient distribution system, its “fast, agile, multi-category, small-scale, competitive strategy of big terminal” has been the best execution speed to get on the top spot in the fashion apparel industry,

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  11. I was new to Zara and very good write up though. Yes Vertical distribution has benefited them because of which they are market leaders in clothing sector. Their distribution model can be a framework for new entrants or start-ups in different sectors. As u said after products are manufactured in different places it is transported to headquarters at Spain which means Zara has high supply chain costs that in-turn more pricing for products from customers. By overcoming this and transporting directly to outlets from manufacturing places will make them to reduce price of products and more customers can purchase Zara, which eventually benefits increase in more sales for Zara .

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  12. Thanks for the blog to give me a further understanding of how ZARA ran its business. For a international clothing companies, i think ZARA has made a scuessful strategy on thevertical distrbution. The well-planed distribution system makes ZARA transport its products all over the world. Unlike other companies, Zara transferred it prodcuts back to the headquarter first and the seperated them out to its outlets which means Zara could monitor the quality of the products and ensure send the goods to the right locations. In addition, the high efficient R&D team also makes Zara give out a large diversity of its products in the market so that the customers could find different new-designed clothes in different seasons. Well-orgnized distribution system helps zara save the time cost of deliverying its products which might reduce the potential risk of supply diffculties.

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  13. Thanks for the post.
    The ‘place’ element of the marketing mix refers to where products are made available to consumers.
    This is also called distribution. in this case, Zara brand which is one of huge clothes brands in the world that conducts their business in Europe, Asia, Australia and so on. With headquarters located in Spain, ,Zara ship more often and in smaller batches. Zara manage an control their quality and quantity products to be delivered on the right destinations as well.New styles can hit stores twice per week. What i notice is they conducts very good distribution to make them succeed. But, the key of Zara’s corporate strategy is, it has very good Supply chain management. so that, reducing price of products can be done, as they are transporting directly to outlets from manufacturing places, then the sales of products will make more profit. In Australia instead, Zara also presents their products, although Australia may be substantially smaller than other parts of the world, it is viewed as a valuable market of fashion-savvy consumers with an eye for the latest fashion and international brands. Zara joins other international brands such as Gap and Victoria’s Secret which already have a presence in the Australian market, paving a gateway for other major brands.

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  14. Good article !
    This is another success story that highlights the importance of a solid logistics & distribution management system well coordinated from production to the consumption.

    Some organizations will push for high volumes with less frequent shipments to keep the distribution & handling costs low, but they could end up resulting large volumes of unsold stocks at the retailers end and eventually causing drop in profits, but some firms such as Zara are looking at frequent distributions of low volumes so that the retailers maintain smaller quantities, which reduces the burden on the retailers and eventually result in good customer experience as the new designs keep coming and keep changing, which will keep the customer motivated to come back very often to check new designs or repeat purchases.

    Building a reliable logistics & distribution management system requires lot of commitment and effort at the beginning and not everyone will be up for it straightaway as it involves forward & backward integration to keep a good control over certain aspects of the process so that you minimize channel conflicts, a reliable MIS system, establishing a distribution network, winning the trust of downstream retailers and upstream vendors are some of the key aspects to success.

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  15. I am a fan of Zara and I am happy to see that it has such a good distribution strategy. Having vertical integration could help the company to cut costs because they do not outsource any channel. Also, time is faster, more effective and efficient, and conflicts as well as misunderstanding from different channels are avoided. Zara manufactures and distributes products in small batches. Instead of relying on outside partners, the company manages all design, warehousing, distribution, and logistics functions itself. By owing its in-house production, Zara is able to be flexible in the variety, amount, and frequency of the new fashion styles they produce. Within just two weeks distribution cycle, Zara’s rapid product turnover contributes to its huge success in the fashion industry.
    I think Zara having a single distribution centre may be an advantage as it has centralized control, avoided conflicts, focused on one rather than managing several different time schedules. However, because Zara manages distributions on its own, designing and production process may not be at its optimal level. Maybe making more distribution centres would be a better option. These centres would enable Zara to be more effective and efficient in distributing its products to the retailers.

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  16. I like Zara, it is one of the popular brands when it comes to clothing. But honestly I never thought that its success factor would be a great distribution strategy. New clothing in every 2 weeks is simply Awesome. Because especially when it comes to clothing, people want new stock each and every time. Generally, people visit a clothing outlet once a month and if they change their stocks in 15 days then that is the best thing possible.
    I strongly believe that if a company wants a success in such a competitive world then it should have a good distribution channel.

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  17. Good post
    Also,Zara is a vertically integrated retailer. Unlike similar apparel retailers, Zara controls most of the steps on the supply-chain, designing, manufacturing, and distributing its products. Zara set up its own factory in La Coruña (a city known for its textile industry) in 1980, and upgraded to reverse milk-run-type production and distribution facilities in 1990. This approach, designed by Toyota Motor Corp., was called the just-in-time (JIT) system. It enabled the company to establish a business model that allows self-containment throughout the stages of materials, manufacture, product completion and distribution to stores worldwide within just a few days

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  18. I’m fans of Zara. i have just known that Zara’s supply chain is so efficient which only use 30 days to finish the whole process of selling from design. Husks for sharing.
    I love Zara’s design, cutting and the affordable price. The most important is the timing of designing is taking one day only! It really a fast Fashion business which made me going to the shop weekly and always surprise me that always has New stuff!

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  19. Zara is a popular Spanish clothing brand; their reputation is quite high in the market. Zara have many stores in different countries; Zara used the similar strategy with Coca-Cola and McDonald; Zara will change their clothing style to suit the preferences of the local. For example, the preferences of Asian and Western are quite different; Asian prefers to have more cute or special pattern; Western prefer for simple design. The competition of clothing market is very intensely; Zara focus on vertical integration; they have the advantages of good cost control and differentiation; Zara do not prefer to use outsources strategy.
    Zara have well job allocation for the staff to case this effective distribution to be positive; thank you for providing the mind map to explain their management of supply chain.
    They distribute new design every two weeks is very attractive for customers to find out what are their new clothing design; this can maintain regular customers and attract new customers.
    Thank you for your sharing.

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  20. It is amazing that Zara can distribute their new design in a short period time. I guess as people who likes Zara tend to pay more attention on fashion, the quick distribution of new design enables Zara to attract more customers and maintain their current customers.

    Liked by 1 person

  21. This is an interesting article and provides great insight into the company’s distribution. Zara’s ability to be a bit more reactionary to customer demand and trends, allows them avoid excess inventory and in turn hire more employees and invest in technology in the manufacturing plants. From a supply chain perspective, it is a great model and one that clearly has been proven to work.

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  22. Thank you for this interesting blog. I know more about Zara cloths. I remember Zara has resisted the industry-wide trend towards transferring fast fashion production to low-cost countries. Perhaps its most unusual strategy was its policy of zero advertising; the company preferred to invest a percentage of revenues in opening new stores instead. This has increased the idea of Zara as a “fashion imitator” company and low cost products. Also, Zara is a vertically integrated retailer, there are over 2000 Zara stores located across 88 countries.

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  23. great blog. most of my cloths are from zara so i was really excited to read this blog.i had no idea and i was amazed to know that zara brings new design every 2 weeks.this shows that zara is alway in trend Yes Vertical appropriation has profited them in light of which they are business sector pioneers in apparel segment. Their dispersion model can be a structure for new contestants or new businesses in diverse segments. As u said after items are made in better places it is transported to central station at Spain which implies Zara has high inventory network costs that thus additionally estimating for items from clients.

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  24. Excellent blog! Zara is said to be pioneer in Agile Supply chain and company success is related to the efficient Agile Supply chain. Agile companies are said to be more customer focused. Zara is a classic example of that. Zara has developed an efficient and effective supply chain model to react to rapid change in customer demand and they have successful meeting in customers demands.

    http://www.researchgate.net/publictopics.PublicPostFileLoader.html?id

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  25. Great blog. Although i am not a fan of Zara, but certainly i was amazed by their efficiency of its supply chain systems, logistics and especially the speed to respond…Zara locate various business function in close proximity of the headquarters, and tight control, allows the various functions to coordinate and take joint-decision very quickly. Control also refers to early investment in raw material, and direct or indirect “ownership” of processing and production capacities. These provide the capability to respond very quickly to the market research-influenced decisions. Similar to H&M, Zara has its distinguish vertical integration which lead them cutting cost, cutting time, be more effective and more efficient in manufacture and distribution function.

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  26. Nice Article. !!
    Zara can be an example who uses a great distribution strategy. Zara is able to achieve this is because it hasn’t outsourced any activity. Thus from designing to distributing every activity is being done my Zara. I believe this gives them a competitive advantage from other companies.

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  27. Very well written article !
    Zara has carved out a niche for itself in fashion to an extent that it , can be used for “fast-fashion” synonymously. One would agree with it that, its quite a daunting task to translate a concept to a product in store in just 15 days. Definitely lot of effort goes into matching up to the standards of the fast changing fashion trend world .
    Probably one of the unusual strategies to have a vertical integration strategy in such scenarios, but by not outsourcing any of their activities, they chose to convert a probable drawback into their biggest advantage over their competitors right now. The basic advantage of their in-house production is that it allows them to be flexible with the wide variety of the products to be launched , or may be the frequency.
    It is interesting to know that they make sure a significant 85% of their factories’ capacity is reserved for the in season adjustments. By funneling back the constant feedback data from the customers as to what they want, or prefer, with the designers at hand to quickly sketch out new designs just proves how much they are into customer satisfaction in a way increasing the net influx of customers .

    They have been in the news for their indifferent wages to their employees working in day in and day out. Wages of the European workers are higher than those of their developing world counter parts (owing to their headquarters in Spain) but turn around time is just a wow !

    They definitely know where to channelise their investments !

    This definitely is one of those interesting topics for those who are at the crossroads which path of risk to choose ! Thank you for the good share.

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  28. Zara has emerged as a brand which furnishes its customers with new fashion much faster than its competitors. One realises after reading the blog that the fashion retailer has developed a breakthrough supply chain to differentiate itself from the competitors, hence giving no space to competitors to imitate Zara and providing the fashion retailer a pre-emptive differentiation and positioning. A brilliant blog which touches the nuances of Zara’s distribution strategy.

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  29. Great post!

    Zara is a very well known brand globally! it only has penetrated the market in Australia a few years back.
    In my opinion the main attributes of the brand , Zara make trendy affordable clothes. This particular attribute has made Zara position its brand conveniently for wide range of people around the world. Due to the growth of the company the logistics process could become challenging. Having said that Zara doesn’t use only one type of distribution. As described in the original post Zara uses intermediaries to distribute and service the entire market. Distribution channel include different intermediaries like wholesalers, retailers, reseller, agent and franchise.

    Zara follows a vertical integrated distribution strategy which allows the company to enjoy benefits like strong control, cost control, competitive advantage and differentiation.

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  30. This is a interested article. Zara this brand’s success story shows the strength of its operations. Its cross-functional operations strategy, coupled with its vertically integrated supply chain, enables mass production under push control, leading to well-managed inventories, lower markdowns, higher profitability, and value creation for shareholders in the short and long term.

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