Zara has several advantages when it expands its operation in global markets. Firstly, Zara has always promoted its products via its stores and it had its own centralized distribution center which will translate to low advertising and logistics costs when it enters new markets. As opposed to its competitors who would invest heavily on advertising and organize a distribution system. Secondly, apparel retailing was witnessing increasing concentration which would benefit Zara when it entered new markets. Thirdly, there was more homogeneity in fashion which supported Zara’s brand of clothing since its target market is consumers receptive to fashion. Moreover Zara has an adequate system of knowing local trends and tastes which it would reflect in its designs. The strategy of opening one store for information gathering in the initial phase of entering new markets is one of its key strengths. Lastly, economies of scale were another advantage for Zara when entering a new market.
The International strategy of Zara.
After opening its first store in La Coruna in 1975, ZARA expanded within the domestic market during the 1980s. International expansion started with the opening of a store in Oporto, Portugal in 1988 (Carmen & Ying 2009). Currently, ZARA is already operating over the five continents with over 1,700 stores. International sales accounted close to 70% of its total turnover, with Europe being its largest market by far. ZARA has been identified as a trans-national retailer (Alexander & Myers 2000). On the surface, this may appear as a peculiar classification since they appear committed to a highly standardized operating formula which provides little opportunity for market responsiveness. Analysis of ZARA’s internationalization strategy would indicate otherwise (Bruce, Moore & Birtwistle 2004).
While the brand image is highly standardized, its product development and merchandising strategy are very flexible and allows for the integration of pan-national fashion trends as soon as it emerges. This is evident by its approach to trading in the British market. ZARA recognizes the appeal that their Spanish origin provided for its brand and clearly understood the distinctive positioning they had within the United Kingdom as a fashion forward retailer. The company therefore focused upon the more fashionable lines within their British stores. Pricing policy within the United Kingdom has been more upscale than their home market in order to exploit their advantages within the British market.
Best way to grow for Zara
Zara is the meaning of “instant fashion”. Instead of creating demand for new trends and using fashion shows, Zara uses another method. They study the demands of the actual customers in their stores and then deliver that design at very high speeds. They save tons of money on their delivery methods. I would say they are very much ahead of the fashion market in terms of production and sales. Zara is the number 1 most profitable out of 8 other companies in the Inditex Group. Their production cycles are much faster than H&M. In 1 year Zara launches 11,000 new items compared to 2,000-4,000 from H&M. Over the next 4 years the brand plans to double in size opening over 4,000 new shops. They plan this expansion to mostly start out in Europe before pushing anywhere else.