Inditex is the world’s largest fashion distributor and retailer and Zara is its sub-brand. Amancio Ortega was the founder of Inditex. Along with Rosalia Mera, they both launched Zara’s first store in Spain in 1975. Zara has become a major dominant fashion brand over the years of growth and continuous expansion.
The annual revenue of Zara was 19.5 billion Euros in 2019. The fashion brand’s contribution to the annual revenue of Inditex was approximately more than 70%. Currently, Zara is operating its fashion business in more than 96 countries with 2240 retail fashion stores across the world.
It won’t be wrong to say Zara is the crown jewel of Inditex. Why Zara has become such a famous and popular brand in the fashion industry over the years. The study of the swot analysis of Zara would help you to answer the following question.
We’ll study the internal strengths/weaknesses behind the growth and progress of Zara. The external opportunities and threats became the rise and fall of Zara. The swot analysis increases your problem-solving skill and your IQ level.
Here’s the swot analysis of Zara;
Table of Contents
Strengths of ZARA
Following are the strengths of ZARA
Speedy Supply Chain
According to a report, Zara has approximately 10 logistics and distribution points in different countries across the world. They can deliver the product in two days at the required location. Most importantly, the brand has a history of updating its online and retail fashion collection every two weeks. Inditex has customized software and application; along with its distribution team, they both can deliver the product on time.
Retail Fashion Stores
Zara is running its retail fashion business in approximately more than 202 different markets worldwide. Out of the 202 markets, the brand has fashion stores in 96 of them. The total numbers of retail stores of Zara are 2270 across the world. The company has the largest network of retail fashion stores in the fashion market. Even the retail network of Nike is a bit smaller than the brand.
Fashion Industry Pioneer
Zara has been in the showbiz and fashion industry for the past 45 years. It’s a lot of time and the brand has seen and experienced different modern eras. The company has got a plethora of experience in designing, producing, distributing, and retailing fashion products.
The whole process of launching a new fashion product into the market is very lengthy. Companies spend months on it, and Zara takes only three weeks to design, produce, distribute, and put it for retail in stores. It’s because of the efficient management strategy and the supply chain system of the company.
Online Store & E-Commerce
Although Zara entered into the online retailing and e-commerce field much later than its competitors, the brand took the initiative at the right time. According to a study, approximately 3 billion dollars of investment Inditex (parent brand of Zara) in the e-commerce sector to boost up the company’s sales.
Zara wanted to achieve two main goals for such a huge investment. First, the company wanted to integrate the new online platform with the old physical stores. It could increase the sale by boosting customers’ engagement on the platform. Now the company plans to increase the sale.
Better Customer Experience
The design and decoration of the store, easier setting of stock, efficient use of tech tools, and amiable staff are an important part of better customer experience at Zara’s stores. The company has a reputation for having the most professional PR staff at its retail fashion store. They increase customer engagement and develop a relationship with them. The fashion customers visit the stores repetitively to check out the latest trends.
Affordable Prices
Zara offers fashionable products at an affordable price range. It’s one of the key strengths of the company. The brand also got a product portfolio of high priced luxury items for the elite class.
Zara has established a database of loyal customers by offering luxury fashion products at an affordable price range. It has allowed them to look good and enjoy fashion by not spending a lot of money.
Weaknesses of ZARA
Find out weaknesses of ZARA
Poorly Treating Employees/Ethical Concern
There are more than 7108 production and manufacturing factories running under the umbrella of Inditex. The brand has partnerships with approximately 1520 worldwide suppliers.
Zara has established a comprehensive set of policies, codes of conduct, rules, and regulation for employees. But the ground reality tells a different story. Many critics and NGOs have accused the brand of the poor treatment of employees in some of its factories in Asia.
Less Presence in Asia & the US Market
The US is one of the world’s largest retail fashion market. The market share of Zara in the US is only 4.4% by having 44 retail fashion stores. The market share in the Asia-Pacific region is only 38%. The unequal and imbalanced distribution of the market share in different parts of the world show brands’ mismanagement of resources.
Pandemic & Physical Stores
Zara has the highest number of retail fashion stores in the fashion industry and the company has always dependent on its stores. The pandemic of covid-19 has shifted the world from physical retail shopping to online shopping. The company’s management took a quick and smart decision of shifting its business and it helped Zara to move along with the circumstance. It has reduced the company’s sales by approximately 11% in 2020 compared to sales in 2019.
Fashion Industry
The trends in the fashion industry are always changing. The brand has difficulty maintaining the balance of keeping up with the updating trends. It’s Zara’s major weaknesses, but the inconsistency has also helped the brand to survive in different eras.
Forecast of AI
Inditex has been dealing with different AI and big data companies to estimate the behavior of customers. When it would predict the results, the management won’t be happy to see a lot of unsatisfied customers.
Opportunities for ZARA
Below are the worth mentioning opportunities for ZARA
Resale Market
The annual net worth of the resale market is 28 billion dollars worldwide. According to an estimate, it would increase to 64 billion dollars by the end of 2025. It’s a huge growth opportunity for Zara in the resale market.
Environmentally Sustainable Products
50% of the population comprises of young millennials. They check out the sustainable tags when they go out shopping. It shows the growing trend of environmentally sustainable products. The management of Zara should keep in mind the interest of customers and offer them the same product.
Personalized Marketing
Hundreds of thousands of customers visit the website and online store Zara. The company has a huge amount of customers’ data. If Zara invests its resources in the analytic tools, it would help the company to find out customers’ trends and buying patterns. When you know the patterns, then you can serve them better.
Fast Delivery
According to a study, a customer visits Zara’s store roundabout 17 to 18 times annually. They’re repetitive because the brand updates its product portfolio consistently. As we have discussed earlier that the company takes 3 weeks to launch the product. Zara can increase the customers’ visiting time if it could speed up the production time.
Influence Marketing
According to a report by Unbox Social that influence marketing is an effective strategy for boosting your fashion and lifestyle business. For instance, Zara introduced a marketing campaign of #DearSouthAfrica, it brought 60 micro-influential people and they attracted an audience of 8 million people.
Threats to ZARA
Following are the greatest threats of ZARA
Competitive Fashion Industry
Shein is the world’s largest Chinese fashion e-commerce and it has a huge following on its platform. Approximately 10.3 million people are using the mobile app of Shein and only 2 million people are using Zara’s mobile application. It makes Shein the biggest competitor of Zara in e-commerce.
Price Competition
Fast-Fashion offers the latest trending fashion products at a lower price than Zara. Many manufacturers use the logo of Zara and sell it in disguise. Counterfeit products and lower prices are a major threat to the brand.
Government Regulations
The Spanish government issued an executive order to close down all the factories in the early month pandemic. Zara has permission to open only 3 factories out of 13. The wave of lockdown has shut down businesses and factories across the world. The longer lockdown and shutdown stays, the more it would destroy businesses. The production, retailing, unemployment, and purchasing power are all connected.
Covid-19 Pandemic
The pandemic of covid-19 has shut people into their houses. The lockdown and social distancing shut down all the stores, shopping malls, and local businesses. Since Zara has invested its capital at its stores and relies on it for the majority of its sales. The lockdown decreased the sale roundabout 11% in 2020.
Environmental Issues
The fashion industry follows the trend of disposable products. They create an astronomical amount of waste when you calculate it at a mass-scale. The young generations of millennials care about the environment. They want sustainable products that create less waste and don’t pollute the environment.
