Swot analysis of Zara fashion brand. Zara is the Spanish world’s leading fashion company. Retail apparel, perfumes, fashion products, beauty items, accessories, swimwear, and shoes are some of the main expertise of the brand. Inditex is a parent distribution company and Zara is its subsidiary company.
Rosalia Mera and Amancio Ortega laid the foundation of Zara in 1975 in Spain. The headquarter of the company is in Arteixo, Spain. Zara has approximately more than 2270 retail stores across the world. Amancio Ortega is the chairman of the company. The brand uses the retail network business model for the design, production, sale, and distribution of its products.
According to an estimate by Owler, the annual revenue of Zara was approximately 21.9 billion US dollars. There are roundabout more than 152,854 people are working in the company. According to Forbes, the brand value of Zara is 14.7 billion US dollars in 2020. Approximately more than 70% of Inditex’s revenue comes from Zara.
Today, we’ll study the swot analysis of Zara. Here we’ll discuss the internal factors of the company and how they impact the fashion industry. If you want to learn about the external factors of the brand, check out the pestle analysis of Zara. Here’s the swot analysis of Zara as follows;
Strengths of Zara
Pioneer Fashion Brand
Zara is a pioneer in the fashion industry for many young brands. Whether it’s production, designing, retailing, and distribution, the company has achieved proficiency in all of the processes. Traditionally speaking, fashion companies used to take months to launch something new.
On the other hand, Zara completes the whole process only in three weeks. Only a pioneer brand with the most proficient supply chain and management strategy could do it.
Highest Retail Stores
According to an estimate, Zara is operating its business in 202 markets across the world. Out of them, the company has got retail stores in 96 of them. The brand has roundabout more than 2270 retail stores worldwide. Zara has got the highest numbers of retail stores in the fashion market. Nike is in the 2nd position of having the most retail stores.
Fast Supply Chain System
Zara updates its fashion retail and online collection twice a week regularly. According to an estimate, the company has got roundabout 10 logistic units worldwide that deliver the product to any location in 2 days. The distribution team and the customized software of Inditex speed up the process and deliver the orders quickly.
Switched to E-commerce
According to an estimate, Zara’s parent brand, Inditex, has spent approximately more than 3 billion US dollars to boot up brand sales. The purpose of such a huge investment is to perform two main functions. It’s to combine the physical retail stores with the online system and increase customer engagement and to promote online shopping. Now Zara plans to achieve a quarter of its annual revenue from its online sales by the end of 2022.
Unique Customer Service Experience
Zara is famous for providing a unique customer experience. The company does it with a convenient layout of products, decoration of the store, and the efficient use of technology. The employees of the brand are trained professionals and they know the value of customer relationships. All of these things attract the attention of customers and bring them to the store.
Ever since the establishment of Zara, the sales and profitability of the company have been increasing. One of the most important current updates of the company is to combine its online and offline store. There are two main reasons for the growth of the company, economical pricing, and customer experience.
Economical price range is a very important strength of Zara and it attracts a lot of customers at its stores. The company also offers high priced products in certain luxury markets. People want new and unique things, and Zara provides them latest designs with an economical price range. That’s how the company has created a database of loyal customers. They can buy fashionable products without spending a plethora of money on them.
Investment in Tech
Zara has spent a lot of capital on technology in recent years. The company uses the advanced tech system to speed up the supply chain and distribution system. The brand also uses RFID technology for inventory and logistics management. It’s because of the investment in innovative technology, the brand has been able to quickly convert ideas into actual products.
The parent brand of Zara, Inditex, has got a team of approximately more than 700 professional designers that convert customers’ needs and wishes into designs. According to an estimate, the designers’ team generates roundabout 50000 creative ideas annually. The company only takes 3 weeks to make the sketch-designs into reality and deliver them into stores.
Weaknesses of Zara
Keeping up with Fashion
As you’re familiar that the fashion industry is always growing and changing. Zara has always struggled with maintaining sustainability in the fashion industry. It’s because of having an inconsistent temperament; the company has achieved success.
Depending on Physical Stores
Zara has always heavily relied on the growth and sale of its retail store. The pandemic of covid-19 has pushed the businesses against the wall by shutting down all the physical-economic activities. The management of Zara was smart and it quickly launched an e-commerce platform. The brand has achieved only 89% of the sales in 2020 compared to 2019.
Expanding in Asia & the US
The US is the biggest market in the fashion industry. Zara has got only 4.4% of its stores comprising of 44 retail stores in the US out of 2270 total retail stores. The market share of the brand is only 38% in the Asia-Pacific region. Unequal geographic distribution is the major weakness of the company.
Poor Treatment with Employees
Zara’s parent brand, Inditex,l have got approximately 7108 factories worldwide. The company works with more than 1520 suppliers across the world. The brand has established a very strict code of conduct and policies, but the company has difficulty applying it. There are reports that the conditions of workers in Asian factories like Myanmar are very low.
Inditex is working with big data and AI companies and they would help the brand to forecast the behavior of customers. When it goes online, the company would be surprised to find out the unfulfilled needs and wants of customers.
Zara offers a general collection to everyone. It doesn’t focus on only one category of products. A generalized collection may turn away many customers. They visit the competitors’ stores that offer the only category like pants, shirts, shoes, accessories, etc.
Less Focus on Marketing
Zara hasn’t been promoting and marketing its products to increase sales. The focus of the company is to increase the customers’ engagement and likes. The way the fashion industry is becoming very competitive, the company would face great challenges without advertising and marketing its products.
Opportunities available to Zara
Quick Delivery Service
According to an estimate, the customers of Zara pay a visit company’s retail store approximately 17th and 18th times in a single year. It’s because the brand is very active in introducing and launching new trends. The company brings a sketch board idea into a real product in 3 weeks. The brand should minimize production and delivery time.
Technology has made it possible to collect and analyze the customers’ data from visiting your online retail store. Zara should use analytics and offer personalized suggestions to customers. That’s how the company should provide a personalized experience to the customers.
The young demographic comprises 50% of the total population. When they go out shopping, they look for eco-friendly and sustainable tags while shopping. Zara should follow these customers and adapt to environmental changes. If the company offers environmental-friendly products, it would be able to attract a young audience.
The market value of the resale market is approximately 28 billion US dollars. Financial analysts suggest that it would expand to 64 billion dollars in the next 5 years. If Zara combines its current platform with the resale market strategy, it would serve two purposes. First, it would promote consumerism and offer sustainability at the same time.
According to a study by Unbox Social that promoting your lifestyle businesses through influence marketing is the most effective strategy. Zara launched a campaign by the hashtag #DearSouthAfrica, 60 micro-influencers participated in it and they brought an audience of 8 million people. It’s a new potential online business model.
Flourishing Retail Channels
Zara has got more than 2270 retail stores across the world. But there are developing markets like Malaysia, Singapore, India, Thailand, and New Zealand, where the brand hasn’t gone there. If the company wants to grow, then it would establish more stores in the developing economies.
Usage of AI Technology
The focus of Zara has always been on providing a better customer to its visitors. If the company invests in AI and virtual reality technology and launch it at its stores, it would increase customer satisfaction. When customers are better satisfied, they would refer to your brand. More referrals would increase the sale.
Threats Zara has to face
Shein is the Chinese world’s top fashion brand with a huge online and e-commerce presence. According to an estimate, approximately more than 10.3 million people have downloaded Shein’s mobile applications. Approximately only 2 million people have downloaded Zara’s mobile application. The company should keep in mind the growth of its rival brand.
Competition over Price
Fast-Fashion is also a main competitor of Zara in the same category and it offers the latest fashion trending products at a low price. Counterfeit and imitating products make Zara vulnerable to external threats.
Pandemic of Covid-19
The pandemic of covid-19 has shut down almost all the retail stores of Zara. The drop in sales in 2020 is mostly due to the pandemic and lockdown of businesses. If the company hasn’t launched retail e-commerce, it would have faced huge losses.
At the beginning of the pandemic, the Spanish government ordered Zara to shutdown all of its factories. Only 3 of the factories were open out of the 13, other countries ordered the same. Such government policies and regulations are killing businesses.
The trend of disposable products (use and throw) is ending. Now people care about the environment and they want to make less waste. Therefore, Zara has to move towards the production of sustainable products.
The cost of raw material is increasing and it’s a great threat to Zara. It would cause to raise the production cost that would increase the retail price. Consequently, the more retail price would decrease the sale.
After the study of the swot analysis of Zara, we have realized that the pandemic of covid-19 has brought Zara into an e-commerce world. The brand managed to control its losses. If the company keeps on investing in technology and the latest trends of fashion, it would keep on growing.
Ahsan Ali Shaw is an accomplished Business Writer, Analyst, and Public Speaker. Other than that, he’s a fun loving person.