Zara's SWOT Analysis

ZARA is currently one of the most influential and leading brands in America, Africa, Asia as well as Europe markets (Zara.com.,2018). Amancio Ortega Gaona established the firm in 1975 and since its conceptualization, it has grown not only into the Galician Group Inditex most successful chain but also has become a pioneer of Fast Fashion (Zara.com., 2018). Today, the firm is recognized for its fresh designs as well as rotation of the designs thus customers always get new designs whenever they walk into one of its showrooms. Zara is one of the most powerful retailers in the world and attributes the success to its pull strategy that is founded on strategic design among other several factors.

Section A(ii): ZARA’s SWOT Analysis

Strengths

Unique Designs and Strong presence.

The company prides itself in having designers on board who understand the tastes and preferences of its clients as well as the Zara brand.  The firm’s products are not only elegant but are also of superior quality and have a finishing that is also fantastic.  Additionally, the products also are of wide range, for example, party, office, kids, men, and women as well as casual wears. Zara has continuously expanded its presence around the world. By 2015, the firm has established nearly 2100 stores around the world and continues to survive by increasing its presence.

Value of the Brand and Physical stores

 According to Forbes, Zara is ranked at number 53 and is estimated to be valued at 10.7 billion dollars.  The brand consistent quality, as well as performance over the years and staying away from controversies, has increased the positive image of the brand. The development of such a health culture has led to people loving the brand.  Zara’s also stores provide good service.  The stores have a wide and deep layout that leads to the development of open-minded feelings whenever one walks in them.

Efficient supply chain, Low costs as well as higher profits

Zara is the trendiest store as its designs are known to reach the stores in a minimum of two weeks in comparison to other competitors who take a period of six weeks.  Additionally, it is estimated that the firm’s designs over half a billion products every year which pushes consumers to visit it continuously.  Furthermore, as a result of the company enjoying design advantage as well as continuous physical stores, it rarely advertises its products.  The reason is that its already established trendy image contributes to pulling customers to it. Zara also has very low operations costs which have increased its profits margins.

Weaknesses

Generalized collection.

The firm has failed to specialize in anything which has led to shifting of consumers to competitors especially where the competitor is focused on a particular thing.

Zara’s Lack of advertising.

The weakness brought about by this is that advertising has been known to double the profits of a firm.  Therefore, the company might benefit more from the positive word of mouth brought by advertising. 

Zara has a low safety stock.

 The firm keeps low inventory as a strategy to increase the walk-ins in their stores. however, due to the rotation, the firm is unable to know the brand that was a particular hit with the consumers due to the lack of a stock buffer.  

Opportunities

Online E-commerce.

            The internet has provided various platforms and the firm can take advantage of this new trade trend thus not only making clothes available to its stores but also on the E-commerce stores.

Growing market potential and market expansion

 The brand is increasing in popularity whenever it exists.  The result of this is an increased market potential. Zara is also a status symbol and the increased earning potential of consumers needs to be capitalized on especially in the emerging markets.  The new markets will contribute to the increased business as well as profits for the firm. Therefore, the firm’s needs to increase its dominance and presence in the emerging markets.

Threats

Low advertising

The consumer base is widely increasing due to the development on the internet. The firm can increase its clients if it advertises particularly focusing on the fact that one will get the latest designs from the company. hence, there is a need for the firm to look back and strategize on advertisement policy.

Increased Competition

Zara is facing a lot of increased competition from other companies such as H&M, Mango as well as Vero moda.  The advantage that the company has is that all the other firms are a bit costly thus making Zara more affordable.  Hence, since the competition is in the semi-premium segment it might lead to saturation which might indirectly affect the margins. 

Zara’s Reach

Zara needs to increase its reach as it exclusively operates from its stores. There is a need for the firm to establish a shop in shop kind of stores, for example, in Asia.  The reason is that this is where the competition gets its volume from and Zara is missing in on this.  If Zara fails, then its competitors will get better penetration in these markets which might affect the brand equity of the company.

Section B:  Pricing Strategy 

Price refers to a product or service value which is as a result of a set of calculations, risk-taking as well as research. Therefore, the pricing strategy is defined as customers against competitors as it entails taking into account the capacity to pay, actions of the competitor, account segments, conditions of the market, input and trade margins costs (Grewal, Roggeveen, Compeau, and Levy, 2012). Zara has employed a value-based pricing strategy which is defined as setting the bare minimum to make a small profit.  The company has employed the strategy to sell high volumes of products as well as services at relatively low prices.

Grewal, Roggeveen, Compeau, and Levy, 2012 asserts that pricing is a crucial aspect of a company's market strategy. Zara employs the strategy as its aim is to be regarded as a high-end retailer while still providing products at affordable prices, thereby encouraging brand loyalty.  The advantage that the company has received from employing the above-mentioned prices is that it is able to survive during times of economic stability. The reason is that it allows them to set lower prices thus appealing to consumers.  Secondly, it has also enabled them to sell similar items at lower prices thus undercutting the firm's rivals as well as gain competitive advantage. However, the strategy also has some disadvantages as it creates the issue of loyalty not being guaranteed.  The reason is due to economy customers always looking for the best deal and are not afraid to switch suppliers to obtain it. Nevertheless, it is important that Zara understands all pricing strategies are two-edged swords (Holt, 2016). Therefore, what that attracts some customers might not appeal to another. Hence, the use of a strategy should always be dependent on the target market. 

Section C: Branding Strategy

 Branding is defined as the set of marketing and communication techniques that aid in distinguishing products of various companies from others thus creating a lasting impression in the consumer minds.  Majority of the firms have already developed the perception that there is little to differentiate between the various 21st-century products thus branding has become one of the main forms of product differentiation. Zara has adopted branding as a means of establishing a competitive edge (Holt, 2016). Its branding strategy employs the of brand culture. The concept leads to consumers accepting products as the conventional wisdom thus once adopted they become a norm. However, this change when people have bad product experiences or encounter stories that might contradict the conventions.

Zara’s main focus is on the consumer which can be attributed to the brand’s success. In 2015, for example, there was a story of how the firm co-creates its products with its consumers. A lady bt the name Miko had walked into one of the firm’s stores and asked to be provided with a pink scarf. However, the store did not have them. The incidence would then concur with other consumers by the name Elaine (San Francisco), Giselle (Frankfurt) as well as Michelle (Toronto). Although they each left the store without the scarfs at first within the next seven days the company had provided pink scarfs in all its stores.  The scarfs sold out within three days and the reason for the increased purchase was a result of the development of the brand culture. Today, the insights of the consumer are the core of every business and the more firms understand their consumers the better they can compete as well as innovate.  However, the main challenge that they are likely to suffer is having the right insight both at the right time as well as consistency in their access which can be mitigated by the development of a brand culture.

Section D:  Social Media Marketing Strategy

A social marketing strategy refers to the summary of everything one plans to do as well as hope to achieve on social media.  Therefore, it offers guidance to every action and lets an individual know their progress (Armstrong, Kotler, Harker, and Brennan, 2015).  Every post, like, comment as well as reply should serve an intended purpose.  Today, Zara has nearly social media profiles across all the major sites such as Twitter, Instagram, Facebook, YouTube, LinkedIn as well as Pinterest. Nevertheless, its main point of focus is on Facebook and Instagram which it uses as its primary social media platforms as a result of the importance of videos as well as pictures. The firm posts product-focused content which offers a chance to the audiences to have a peek into their latest products. Zara's fan base mostly comprises of young females.  The firm is taking advantage of the various social media platforms in the following ways; 

Zara and Facebook

The firm in 2017, added nearly a million followers making it one of the most successful brands on the platform. Zara posted nearly 500 times with over 70 percent of the posts being photos, videos accounted for 20 percent.

Figure highlighting the content that was posted in 2017 by Zara on Facebook.

 The brand promoted several posts with the majority of them being photos.  The photo contents managed to achieve a higher engagement level in comparison to other promoted posts thus the reason why the brand chose to promote videos as they managed to gather over 6 million views. Zara also participated in over 250 user conversations and managed to receive an over 81 percent positive response from the audience (Zara.com., 2018).  Therefore, it is clear that with the platform the retailer is appreciated by the customers and the brand is widely accepted. 

Twitter

Twitter is another platform that the company uses and it has currently over 1.3 million users. In 2017, it saw the addition of nearly 80, 000 users (Zara.com., 2018). Data also indicate that brand page has had an increase of over 6.5 percent fan base.  The use of this platform is centered around conversing directly with the consumers as well as responding to their concerns and queries promptly. It is estimated that Zara tweets 52 times in a day and over 98 percent of their tweets are replies.

Figure illustration of Zara use of Twitter.

According to the graph above and data, Zara responded an approximated 11,000 tweets against a total of over 110,000 mentions. The company has kept their response rate at nearly 9.6 percent as it responds between 14 -15 hours (Zara.com., 2018).  With this platform, the company has been able to answer queries of delayed deliveries, product damages as well as bad customer services in its stores (Zara.com.,2018). Through its handle @ZARA Care, the brand offers apologies or offers direction to its consumers.  The company also manages to stay relevant by joining various conversations regarding social issues which draw a lot of high retweets regarding the brand. Lastly, the firm also uses influencers to market its products and on Twitter, it receives mentions from over 13 influencers with a million followers.  With this, it has been able to create more demand for its products due to the development of influencer endorsements.

Instagram

Instagram is the most favorite of the platforms that the company uses. Instagram has provided a platform for the company’s visual brand image. Currently, the firm has nearly over 25 million followers after adding an additional 8.5 million in 2017 (Zara.com., 2018).  The significant growth has enabled the company to register the highest growth among its competitors.

Figure illustrating Zara’s activities on Instagram in 2017.

Zara in 2017 posted 469 posts on Instagram and majority of them were photos while the remainder were videos. The firm ran several campaigns that resulted in a lot of brand engagement, for example, the firm released a clothing collection through label #joinlife (Zara.com., 2018). The company was able to receive more than a million likes on the post. Zara also uses influencer marketing on this platform. A good example that shows this was the Timeless campaign that featured models of over 40 years age.  The campaign led to women discussing the effect of growing old on their style. The effort led to the company earning social media praise (Tuten, and Solomon, 2017). 

References

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Grewal, D., Roggeveen, A.L., Compeau, L.D. and Levy, M., 2012. Retail value-based pricing

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Holt, D., 2016. Branding in the age of social media. Harvard business review, 94(3), pp.40-50.

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[Accessed 17 Dec. 2018].