Zara is a Spanish apparel retail company that specializes in fast fashion and is involved in the sales of clothing, shoes, accessories, perfumes, and other such products. It was founded in 1975 by Amancio Ortega and Rosalia Mera. It currently has its headquarters in Arteixo, Spain. It was first named Zorba, after the classic film, but later changed to Zara. Lets us discuss Zara’s competitive advantages.
Zara’s competitive advantages include its proficient supply chain and management system, the large number of retail stores that it owns across the world, its unique customer service, economical prices of its products, and its high investment in technology and in hiring professional designers. Its competitive disadvantages include its struggle to keep up with the changing trends in the industry, its heavy dependence on retail stores (changed its strategy and moved to e-commerce as well), unequal geographic distribution, less focus on marketing, and the availability of only a general collection to the customers. Read on to find a detailed analysis of the same.
Competitive advantages of Zara
- Proficient supply chain and management system: Zara has employed the best practices in the running of a supply chain as it can launch a product within three weeks, which includes designing, producing, retailing, and distributing. Other companies in this industry take months to achieve the same.
- A large number of retail stores: Zara has the highest number of retail stores in the world, closely followed by Nike. It has more than two thousand retail stores spread all over the world. This helps Zara widen its customer base quite easily.
- Unique customer service: Zara employs trained employees who understand the importance of good relations with customers, which helps in customer retention and also to attract new customers. Also, Zara uses decoration in the stores and focuses on the aesthetics of the store in order to provide a good experience to the customer.
- Economical prices for most of its products: Zara provides unique products with the latest designs at economical prices, due to which it could attract a large number of loyal customers.
- High investment in technology: Zara has increased the proficiency of its supply chain and distribution system by using radio frequency identification (RFID) technology for managing its inventory and logistics. This has enabled Zara to save precious time while launching and delivering products in a short period.
- Hiring professional designers: It is estimated that the company employs a team of designers that generates around fifty thousand creative designs in a year. Investing in human resources has also served as an advantage for Zara.
Competitive disadvantages of Zara
- Struggle to keep up with the changing trends: As the trends in the fashion industry tend to change continuously, Zara has struggled to keep up, largely due to its inconsistent temperament.
- Heavy dependence on retail stores: Having been largely dependent on physical retail stores, Zara had suffered losses due to the outbreak of the coronavirus pandemic. But it quickly realigned its strategy and launched an e-commerce platform.
- Unequal geographic distribution: Most of its market share comes from the Asia-Pacific region and its presence in the United States, which is the largest market in the fashion industry, is very less. If it can improve its presence in the United States, that will be an advantage to the brand.
- Less focus on marketing: Zara focuses more on increasing customer engagement and building good relations with the customers. But it has not involved itself in advertising or marketing its products. This can be a drawback given that the fashion industry is getting competitive.
- Availability of only a general collection of products: Zara does not focus on a specific category of products and this might lead to the loss of many prospective customers.
What can Zara do to improve its position in the competitive fashion industry?
Zara already has a robust supply chain and logistics network which it can put to good use and try to minimize the delivery time. It gets even easier to implement as it has launched its own e-commerce platform in the wake of the covid-19 pandemic. It can make further use of technology to collect data from customers regarding their tastes and preferences and maintain a database so that it would be possible to provide a personalized experience to the customers. Customers these days also look for environmentally sustainable products; it would be good for Zara to focus on this aspect to attract more customers. Although Zara has a large number of retail stores across the world, the brand has not become much popular in developing markets like Malaysia, Singapore, India, and Thailand among others.
Zara is one of the most popular brands in the fashion industry and has many opportunities to grow further. Its robust supply chain management system is the greatest advantage it has in the competitive fashion industry.