C036Retail Management PDF

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It is a research project made on Retail Management of Zara...

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A Project Report on

RETAIL MANAGEMENT ON ZARA A Project Submitted to University of Mumbai for partial completion of the Degree of Master in Commerce Under the Faculty of Commerce By

MS. PRIYANKA HEMENDRA SHAH Roll no.: C036 Under the Guidance of DR. PARVEEN NAGPAL

SHRI VILE PARLE KELAVANI MANDAL’S NARSEE MONJEE COLLEGE OF COMMERCE & ECONOMICS VILE PARLE (W), MUMBAI – 400056

JUNE 2020

SEM IV

INDEX

Sr. No 1 2 3 4 5 6 7 8 9 10 11 12 13

Topic Company Profile Zara Business Model Pestle Analysis of Zara Zara Retail Store E-Retailing Omnichannel Strategy and RFID Segmentation, Targeting and Positioning Marketing Strategy Zara and CRM Logistics of Zara Zara Key Factor Towards Success Conclusion Bibliography

Page No 2 3 4 6 10 12 13 14 16 17 18 20 21

Company Profile Inditex Group is the largest fashion retailer which owns many brands such as Zara, Pull & Bear, Bershka, Oysho, Massimo Dutti and many more. Zara is the flagship chain of Inditex Group owned by Spanish billionaire Amancia Ortega. The headquarters of the group is at A Coruna, Spain, where the primary Zara store started in 1975. As of 2019, there are around 2250 Zara stores and nearly 600 Zara Home stores operating 1

worldwide. Zara started in India through a joint venture with Tata Group’s retail arm Trent Ltd. Inditex Trent Retail India, at 51:49 joint venture with Trent Ltd. running the business in India. Zara opened its first store in India in the year 2010 and since then has opened nearly 25 stores. Zara tries to market fashionable products of the highest quality. Zara has resisted the industry-wide trend towards transferring quick fashion production to low-cost countries. whereas it spent very little on ads, it spent heavily on stores. Zara pays special attention to the planning of its stores, look windows and ornamentation, and sites them within the best locations in major shopping areas. Zara is a fast fashion brand which targets an audience comprising of young adults and mid aged people. Being a fast fashion brand, the stock goes out really quick and it continuously needs to be updated with the ongoing styles in the market. The main aim of Zara is to contribute to the sustainable development of the society.

ZARA’S BUSINESS MODEL

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The business model of Zara is perfectly structured, efficiently comprising all those factors which contribute to the sustenance of this global venture. Zara styles, produces, and distributes clothing, footwear, and accessories for men, women, and kids. The business model of Zara comprises of vertical integration and logistics trade-offs. These two strategies play a vital role in the success and worldwide recognition that Zara gains. Vertical integrations help the firm to manage all of its verticals like design, manufacture, shipment, distribution and sales in its own stores. Its singular business model relies on innovation, flexibility and the way the brand understands fashion (creativity and quality styles combined with quick response to the market needs). The focus on the client permits Zara to spot the continuous changes in the fashion trends and analyse what its customers need in every moment. To have such correct info, the brands have “watchers” round the world and an IT system that permits them to gather every night the stores' information and send it on to the headquarters where it is analysed daily. Its model is characterized by perpetually changing merchandise: new clothes land in stores twice every week. The main purpose of it maintaining a position of superiority over its contemporaries is due to the importance being given to the customers and potential client relationships.

PESTLE ANALYSIS OF ZARA Zara is a big brand for a reason: it creates luxury-feeling fashion products at an affordable price. With lower labour costs ensuring a solid margin for shareholders, the company’s core business model is solid. There are concerns about Legal and Environmental issues, but Zara should be more than mature enough to handle them. 1) Political – European Trade Agreement

Zara is a Spanish brand, so it enjoys all of the advantages of operating a business out of the European Union. In a political context, one of the biggest pros of running a company in the 3

EU is the country’s extensive trade agreements. Not only does this make it incredibly easy to import raw materials and export finished products within the European Union, but it also means that Zara can send its merchandise across the world with little effort and for a low cost. Overall, the EU’s free-trade policies are massively beneficial for Zara. 2) Economic - Low Cost Labour and Affordability Spain has one of the highest unemployment rates within Europe, therefore it has a relatively low cost of labour especially in comparison to other Western European countries. Zara manufactures a good fraction of its products in Spain, so this low labour cost allows them to minimize costs and improve profitability. Therefore, the low cost of labour in Spain is a positive aspect for this brand. Zara is considered a relatively affordable brand in comparison to other European high-street fashion names. This allows the company to thrive even in poorer countries such as despite Spain’s slow economy, Zara is still one of the most popular clothing brands in the country. Indeed, Zara has some more expensive products, but it can cater to the majority of shoppers with the rest of its clothing lineup. 3) Socio-Cultural – Fashionable Brand

Zara is a fashionable name for most shoppers where you can only praise the company for its hard work. Zara delivers a good-quality product for relatively cheaper price and because of the brand’s clever marketing efforts, it feels rather exclusive for buyers. Zara pays close attention to the performance of its online store, since consumer’s preferred channels are definitely changing. 4) Technological – Large Amount of Data Technology has a big role to play in the success of Zara. The brand has both brick-and-mortar and online stores, which makes it easy for them to collect and collate immense amounts of customer data and information. Using proper analytics, Zara can unearth a better understanding of customer preferences. Further, the use to automation and AI can help

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streamline the manufacturing, logistics and delivery processes, thereby improving operations across the entire supply chain. 5) Legal- Copyright

Zara has to operate within the bounds of the law. For all fashion brands, copyright law is one of the scariest legal branches out there. Since Zara loves capturing hot clothing trends and making them more affordable, it is bound to run into some issues with copyright. In fact, the major retailer already has. It’s been accused of stealing designs and clothing concepts from the likes of Adidas and Balenciaga. In past cases, Zara has largely been able to weave itself out of uncomfortable legal situations like these.

6) Environmental- Fast Fashion and Sustainability

Environmentally Sustainability Business practices are influencing businesses like Zara all the world over. Zara’s parent organization Inditex has already pledged numerous sustainable goals that it intends to fulfill. Zara stores are being made more energy efficient and the manufacturing process is being streamlined to reduce wastefulness. The fast fashion industry is considered one of the biggest promoters of wasteful clothing purchases. Therefore, Zara should maintain an eco-friendly business practice to stay in the market

ZARA RETAIL STORE Every Zara store has an identical aesthetic and an almost identical store layout. There is a team of architects and visual merchandising experts whose main job is to design and curate each aspect of the store which includes the sleek door and light bulb colours to the music being played and exact position of the clothes. These teams work on a 3D canvas on which they examine their visions in the form of many mock stores across its different categories like women’s, men’s, TRF and home.

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VISUAL MERCHADISING

STORE LAYOUT

STORE DESIGN AND ATMOSPHERE

STORE LAYOUT 

Usually the store has a grid layout which makes it easier for customers to navigate through and find clothes.

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There are different clusters for men’s, women’s and kids section.

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The merchandise in the various sections are grouped together such as the kids section, formal wear, casual wear, and others.

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The space is used efficiently and the made wide passages between the shelves, racks and clusters so that the customers can walk through the clothes easily and have a look at the products.

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The payment counters are placed in such a way that the customers in the queue can face all the angles of the store at some point and glance over the products.

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There is no replenishment done during the working hours of the shop as they do not like to disrupt customer’s experience while shopping.

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Usually best selling merchandise is placed at the right of the entrance as few researchers believe that customers turn right after entering the store.

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Discount merchandise are usually displayed at the back of the store as the customers would end up looking at their fresh garments first.

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Accessories are spaced throughout the store and not clustered them together to beautify and to make it unique.

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There are no seating areas around the whole store.

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The changing rooms are always kept at the end of the store, so it becomes easier for customers to go through the whole store, pick up their garments and then go change all of

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them together at the end of the store. 

Usually mannequins are placed in such a way that as soon as you enter the store, they are visible to all the customers to showcase their new collection and attract customers

STORE DESIGN AND ATMOSPHERE 

The walls of the stores are plain and of only two colours, black or white to not divert customer’s attention from the garments.

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The shelves and fixtures are also monochrome in colour to give a classic look.

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Zara strategically places its lights aiming at the walls and is a combination of ambient and track lighting. The lights have yellow hues. Bright lighting is used as to highlight all the vivid designs and fabrics used by the customers.

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It is consistent with its merchandise and displays the new collections at the same spot. For

example: The new collection of formal wear will be replaced with the old collection at the same spot. 

The store design and atmosphere reflects customers ethics.

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The round track fixtures are used to showcase their basic collection.

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The temperature of the store interior is always cool and welcoming for their customers to feel comfortable.

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Relaxed music plays in the background usually preferred and enjoyed by the customers to make them enjoy shopping and give them a nice experience.

VISUAL MERCHANDISING 

Specialized garment racks and display cases are used for merchandising display as to not spoil the garments and easy access to the customers.

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The latest trends and new collection are usually displayed at the most visible area of the store

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There are many mannequins put around the store, especially at the entrance of a new section, they display new collections and latest trends and this is one of the important aspect of merchandising.

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Usually the best selling garments and new collections are portrayed on the right of side of the entrance.

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One of the interesting concepts of Zara is that they place their merchandise according to their colour scheme so that the garments complement each other.

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Only black and wooden hangers are used by Zara to hang their clothes at various hacks.

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Their shoe collection is always displayed beneath the garments, so that customer get tempted to by them if it matches the outfit picked.

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Every section has a different payment counter to avoid crowding and make the customers wait.

E-RETAILING The brand is always the very first at offering the latest trends and high quality products at a affordable price. Therefore, the company decided to start selling online via its website and the mobile application. This was a part of the company’s expansion policy of the integrated online-offline store model globally. Zara.com, its website and the Zara mobile application offered all its products that they had in the store and at the same price. In India, Zara delivers products at home in 2 to 4 days in the metropolitan region and almost a week for other regions. Zara also made provisions of 9

collection their online orders at the store between a particular time to avoid delivery charges and can shop by sitting at home. Though, in few regions of the world, Zara offers same day delivery and can shop hassle free at their convenience. Zara’s marketing strategy to sell online is a combination of omnichannel retailing and integrated stock management system. Zara’s ecommerce strategy uses an automated marketing platform for sending relevant emails notifications regarding their order status updates to back in stock. However, the brand keeps its messaging on target and personal according to the shopping needs and web behavior of the customer. Apart from having a Zara eCommerce website that provides a load of product images, great sizing tips, and knowledge and is super easy to navigate, Zara’s mobile app is as well user-friendly and fast and easy to use. Zara did not leave any stone unturned even while creating their online presence. However, in the current scenario due to an ongoing pandemic, Zara has thought of closing brick and mortar stores, as the sales via the website and the mobile have increased. Even during a global crisis, loyal customers of Zara are shopping online, and Zara has not failed to bring new trends to the market.

ZARA WEBSITE

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Zara automated mails and notification

OMNICHANNEL STRATEGY AND RFID

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To deal with the increasing influence of technology within the retail and wholesale market, business owners need to constantly come up with new and innovative ideas to draw in potential customers. Omni-channel retailing is a technique that lets customers use multiple sales channels to form one transaction. The apparel store of Zara perfectly showcases the extent to which a business can develop its omnichannel strategy. While some wholesale and retail businesses are going completely online, Zara stands out by encouraging its customers to buy from both its online and brick-and-mortar stores. They offer few in-house sales channels in an attempt to bring the functions of the online store into the physical store, such as: 

Sales assistants roam around carrying iPads that customers can use to place their orders for product that was unavailable in the physical store. The customers are notified by the stores at the time when their order arrives so that they can pick it up at their convenience.

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Self-service checkout counters allow customers to pay for their purchases without the need of a cashier.

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For customers who would want to skip paying delivery charges, Zara allows them to order online and collect their purchases from the store.

Radio Frequency Identification (RFID) is a software designed by the company to keep a check on the garment and help the customers. RFID helps the store to know where all of their garments are at all times. From the moment they codify the garment alarms, they can use this system to individually recognize each item from their logistics centers to the sales area itself. Using this, they can quickly locate a garment at the request of a customer and let them know at which particular store or online if it is available, as it is unavailable at the store the customer is shopping. With RFID, stock management can be done 80% faster, which allows the company to give more time to the customer for a better service.

SEGMENTATION, TARGETING & POSITIONING 12

SEGMENTATION STRATEGY The segmentation strategy adopted by Zara in India is centred upon the demographics of its customers like gender, age and psychographics. The customers are further segmented on the basis of their fashion sense and style for instance in India Zara offers contemporary, trendy, classic, grunge and Latino style of clothing. The segmentation strategy of Zara involves a blend of ethnicity in its products with a combination of varied settings and tastes for the Indian customers along with introducing new products every two weeks.

TARGETING STRATEGY The target audience of Zara comprises of the customers that are interested in purchasing trendy apparel and high-end fashion products but are unable to make purchases from the already existing high-end boutiques and couture. With the increasing disposable income in the country, there will be fashionable and quality apparel. The target audience of Zara in the country is women above 17 years to early ’40s particularly residing in the mid-income category segment and who are conscious of fashion and prefer trendy clothing.

POSITIONING STRATEGY The positioning strategy of brand Zara aims at democratizing fashion. The main objective of the company in India is to provide its customers with high fashion and trendy products at lower prices to accommodate their needs. The stores and outlets of Zara are particularly located at high-end locations to make its products accessible to a large consumer base that prefer trendy, highly fashionable, and quality products at reasonable prices.

MARKETING STRATEGY 13

Zara has a marketing strategy which replaces the 4P’s to 4E’s those are Experience replaces product, Exchange is new Price, Evangelism is now Promotion, and Ever Place is new Place that puts customers at the center around which the company and the brand revolves. The strategies followed by Zara are:

1) Fast Fashion Many retailers use the strategy of trying to be fashion innovators, to be trendsetters, and to capture early adopters. But instead of spending the cash on R&D to be first to plug, Zara takes a totally different approach: fast fashion. Rather than setting fashion trends, Zara rides the wave of what’s currently hot and established to supply affordable copycat versions of high-end brands. And to appease its teen and 20something demographic, the store prides itself on getting new designs in stores within 2 weeks.

2) Customers’ Feedback Asking for customer feedback is quite hypocrisy at Zara. When a customer says she loves (or hates) an article, this gets reported back to headquarters, and communicated to in-house designers, who apply the feedback to future work. And its store managers are far from minimum-wage employees. They’re experts in fashion and observation and are taught how to pay attention to what customers are saying and doing to reflect what moves the brand needs to make next. Try doing that with armloads of statistical data generated on a computer. By including customers within the design and improvement process, Zara builds massive brand loyalty.

3) Anti-Marketing Approach

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Zara spends only about 0.3% of sales on advertising and doesn’t have much marketing to speak of. Consider that the ind...