Previously we looked into the SWOT Analysis of the world’s most famous sports apparel brand, Nike. This time, we will tackle the SWOT Analysis of ZARA in-depth.
ZARA is one of the largest fashion apparel companies in the world. They opened their gates during the late 1900s, in Spain, followed by a speedy global expansion. Their market focuses is on minimal and party fashion for women and men. They have created their name in the market for their non-toxic clothing.
Another aspect supporting ZARA’s successful stance is its marketing efforts. Marketing changes over the years, catering to the needs and trends of the current times and now, the majority of successful campaigns have moved on to various digital platforms. If you are interested in learning how to do successful marketing today, check out our Free MasterClass on Digital Marketing 101 by the CEO and Founder of IIDE, Karan Shah, to learn more about today’s successful marketing.
Do you want to learn about the key to ZARA’s success in the fashion apparel industry? In this case study, we will learn about the SWOT Analysis of ZARA and answer the same. Before we begin, let us learn more about ZARA, its founding, products, financial status and competitors.
Zara is a Spanish brand, based in Galicia, Spain. It is one of the leading fashion apparel merchants in the world. Since 1975, Zara has expanded globally and has maintained its supremacy in the fashion industry.
They manage to bring up to 20 clothing collections and fashion trends as of the research done in 2017. Zara is very popular for the “instant fashion” they bring to the market. These improvements were because of the new technologies and group of new-age designers.
Zara is one such reputed clothing brand that is very much loved by its consumers. Thus, they capitalize on the market expansion. Zara contributes up to 70% of Inditex’s Revenue.
|Founder||Amancio Ortega and Rosalia Mera|
|No. of Employees||75,000|
|Market Cap||$115.09 Billion|
|Annual Revenue||€18.021 Million|
|Net Profit||€14.129 Million|
Products of Zara
Zara has been successfully rising in the fashion apparel market for half a century by selling –
Competitors of Zara
They are a boatload of fashion brands in the industry. However, the top 5 major competitors are as follows –
- Forever 21
- Marks and Spencers
Now that we have tackled the areas that give us insight into the company’s core business. Let’s look into the SWOT Analysis of Zara
SWOT Analysis of Zara
SWOT Analysis of a brand is a study of its Strength, Weakness, Threat, and Opportunities. Learning SWOT Analysis of Zara will help you in upgrading your knowledge about their business and increase your own regular problem-solving skills.
Let’s get into the details:
1. Strengths of Zara
Starting off the SWOT Analysis of Zara, we have its Strengths. In this sub-section, we will learn about the organization’s unique capabilities that give it an advantage in capturing more market share, attracting more customers, and maximizing profits.
- Pioneer Advantage: The focal point of instant fashion is to design, produce and sell at a fast rate. Conventionally, this procedure is lengthy; but for Zara, it is only a matter of 3 weeks. As pioneers, Zara has the most developed, strategic practices in supply network management.
- Stores: Zara has outlets in 96 out of the 202 countries it sells in. Zara has the most fashion retail stores in the world, with 2249 locations. The number of retail stores is about double that of Nike, which has the second-highest number of retail stores.
- Supply Chain: Zara’s supply chain updates its online and retail collections twice a week. Zara’s ten logistic centres deliver within 48 hours to any region on the planet. Inditex also has an in-house software development team that is working to increase the company’s order fulfilment speed.
- Team of Designers: Zara has a design team of 700 trained designers who turn customers’ desires into designs. Each year, the design team produces 50,000 pieces of work. It also takes them only three weeks to get the designs from the drawing board to the shelves.
- Investing in Online Retail: Inditex is investing $3 billion to boost its online sales. The money will go into creating a fun online shopping experience and integrating the current physical infrastructure. By 2022, the corporation wants to generate a quarter of its income from online sales.
Zara’s success can be attributed to her mastery of the fast-fashion game. Fast fashion, however, is proving to be a double-edged sword as environmental and ethical issues mount. In our next part on Zara’s weaknesses, we’ll go over this and more.
2. Weaknesses of Zara
Zara’s commitment to revising its collection every three weeks sets it apart from other fashion houses. Zara’s dedication has earned it a spot on the top of the industry. However, the advantage comes at a cost. Here’s some more information on Zara’s weaknesses:
- Instant-fashion Trends: Surprisingly, the movement that propelled Zara to the top is also the source of its most serious flaw. Zara’s issue is to find a way of balancing sustainability with instant fashion, which is becoming more popular among buyers and policymakers.
- Physical Store Dependence: Zara’s efforts to reduce the number of physical stores were pushed by the pandemic. Zara was able to recover from a large reduction in sales due to COVID-19-related issues thanks to online sales. Even with the increase in online sales, sales are still only 89% of what they were in 2019.
- Expansion to the US and Asia-Pacific: Zara has a total of 99 stores in the United States, out of the total 2249 outlets, US stores only account for barely 4.4% of the total. However, the United States is the world’s largest apparel market. In addition, Asia-Pacific accounts for 38% of the global apparel market. Zara has a little presence in both geographies.
- Ethical Workplace Standards: Inditex works with 1520 different suppliers across 7108 different plants. Although Inditex deserves respect for developing a strict code of conduct, there is a significant gap in its enforcement. This gap is highlighted by an article in Buzzfeed about the treatment of employees in Myanmar.
- Prediction Aided by AI Systems: Zara is actively working with AI and Big Data companies to develop an AI-enabled market trend prediction system. On the other hand, the current system is still being tested. Once such a system is in place, Zara will have an unrivalled ability in forecasting and satisfy client wants.
3. Opportunities For Zara:
Zara’s ability to quickly capitalize on fashion trends is one of its most significant assets. Zara is in a good position to take advantage of upcoming changes because of this edge. These are some of the opportunities:
- Rapid Cycle: Customers visit Zara’s stores an average of 17 times each year, indicating a rapid delivery cycle. This is due to the company’s proclivity for reacting to trends as soon as they emerge. Zara currently creates a trend from start to finish in about two to three weeks. The brand should be able to continue these cycles even further in the future.
- Customization: Thanks to AI, collecting data and segmenting the client base after evaluating it is easier than ever before. This enables clients to receive customized recommendations. Zara should use this technology to its advantage.
- Sustainability: More than a third of Millennials and Gen Z look for “sustainable” and “environmentally friendly” labels on clothing, according to the Sourcing General. The two groups together account for half of the population. As a result, Zara must pay attention to and respond to this expanding need.
- Reselling: The resale market, which is currently worth $28 billion, is expected to expand to $64 billion in the next five years. Customers would be able to buy more with less waste if they included a resale plan into their present platform. This promotes consumerism while promoting environmental sustainability.
- Influential Marketing: Influential marketing is the most effective technique for promoting lifestyle companies, according to Unbox Social. Zara’s #DearSouthAfrica campaign, which involved 60 micro-influencers, reached an audience of 8 million people. This should serve as a blueprint for the future.
4. Threats For Zara
In the last segment of SWOT Analysis of Zara, we will delve into the problems the brand might face. In the traditional sense, Zara’s largest competitor is H&M, on the other hand, the brand is now also facing a slew of internet-based competitors. But these rivalries are only part of Zara’s problems.
- Competition: Shein, the world’s largest apparel shop with an entirely online presence, is China’s fast-fashion behemoth. The Shein app received 10.3 million downloads in September while Zara got only 2 million downloads in the same period, spelling danger for the brand’s future.
- War of Prices: Zara’s core niche is fast-fashion, which offers the latest runway trends to clients swiftly and at a low cost. Imitators are conducting pricing wars to drain off Zara’s line, but the sector is vulnerable.
- COVID-19 Pandemic: Inditex reported a 44% reduction in revenues in the first quarter of 2020. According to Inditex’s report, the closure of 88% of its outlets due to the Coronavirus was the primary cause of the reduction in sales.
- Regulations And Restrictions: In Spain, Inditex has 13 factories. Only three of the 13 factories were operational in the early months of the epidemic due to the Spanish government’s lockdown efforts. The company can expect similar restrictions as Europe and India prepare for a Third wave.
With this, we come to the end of the SWOT Analysis of Zara. Let’s conclude this case study in the section below.
Zara’s current focus is on recovering from the COVID-19 situation and strengthening its web presence. Inditex’s financials are improving, and the company’s management is hopeful about increasing online sales. For the time being, we can say Zara has everything under control. But what about outside influences?
Zara uses multiple channels of digital marketing such as SEO, Emailing and Content Marketing, and uses it to promote and educate its clients about newer products. Zara benefits from Digital Marketing because it is cost-effective and helps it connect to its target audience of young adults (18-30 years)
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