In this article, we’ll walk you through a SWOT analysis for Zara. Inditex, the world’s biggest fashion retailer owns the brand Zara. In 1975, Amancio Ortega, Inditex’s founder, opened the first Zara store in Spain. Since 1975, Zara has grown to be a dominant presence in the fashion industry.
Today, with 2,240 stores across 96 countries, Zara brought home €19.5 billion in 2019. Contributing 70% of Inditex’s revenue in 2019, Zara is Inditex’s crown jewel.
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Pioneer Advantage: Fast-fashion focuses on designing, producing, and selling clothes as soon as they identify a trend. In traditional fashion, the process takes months; Zara does this in 3 weeks. As pioneers, Zara has the most evolved strategy and management practices in running the supply chain.
Stores: Zara is selling in 202 markets and has stores in 96 of them. Totaling 2249 stores, Zara has the most number of fashion retail stores in the world. The number is almost twice the number of retail stores than Nike has, which has the second-highest number of retail stores.
Supply Chain: Zara refreshes its online and retail collection two times a week. Zara’s 10 logistic centers deliver to any location in the world within 48 hours. Inditex also has an in-house team who design software to double the speed at which the company dispatches orders.
Design Team: Inditex has a team of 700 trained designers who transform the customer’s desires to designs. The team of designers outputs 50,000 creatives a year. And, it takes them just 3 weeks to get the designs from the drawing board to the stores.
Switch to Online: Inditex is investing $3 billion in bolstering its online sales. The investment focuses on developing an engaging online buying experience and integrating existing physical infrastructure. The company aims to generate a quarter of its revenue through online sales by 2022.
The reason Zara is so successful is that Zara has mastered the game of fast-fashion. But due to growing concerns about the environment and ethics, fast-fashion turns out to be a double-edged sword. We’ll cover this and more in our next section on Zara’s weaknesses.
What are some of Zara’s weaknesses?
What makes Zara unique in the world of fashion is its commitment to revise its collection every two weeks. This commitment gives Zara a place at the top of the industry. But the edge comes at a price. Here’s more:
Fast-Fashion: Interestingly, the trend that helped propel Zara to the top is the cause of its most pressing weakness. With the focus on sustainability increasing among customers and policymakers Zara’s weakness is balancing sustainability with fast-fashion.
Reliance on Physical Stores: The pandemic accelerated Zara’s plans to limit the number of physical stores. Online sales helped Zara climb out of a massive drop in sales because of COVID-19-related causes. However, even with online sales picking up, the sales are only at 89% of what it was in 2019.
Expansion to US and Asia-Pacific: Zara has 99 stores in the US. This accounts for only 4.4% of Zara’s 2249 stores. However, the US is the biggest apparel market in the world. And the Asia-Pacific accounts for 38% of the apparel market share. Zara’s presence in both geographies is weak.
Ethical Work Practices: Inditex works with 1520 suppliers across 7108 factories. Although Inditex deserves credit for creating a rigorous code of conduct, a large gap exists in enforcing the code. An issue, as reported by Buzzfeed, regarding the treatment of workers in Myanmar points to this gap.
AI-Enabled Prediction: Currently, Inditex is working with AI and Big Data companies to create an AI-enabled system that predicts consumer behavior. However, the current system is still in its testing stage. When such a system goes online, Zara will have the unrivaled capability in predicting and fulfilling customer’s needs.
What are some opportunities for Zara?
One of the biggest advantages Zara has is its experience in capitalizing on fashion trends quickly. This advantage puts Zara in the right place to leverage opportunities on the horizon. Some of these opportunities are:
Rapid Delivery Cycle: Customers visit Zara’s shops on an average of 17 times a year. This is because Zara responds to trends as soon as they emerge. Right now, Zara delivers a trend from start to finish in just 2 to 3 weeks. However, in the future, Zara could shorten the cycles even more.
Personalization: Collecting data and segmenting the customer base after analyzing the data is becoming easier than ever before thanks to AI. This allows for providing personalized suggestions to customers. Zara should capitalize on this technology.
Eco-Friendliness: According to the Sourcing General, more than 1/3rd of Millennials and Gen Z look for “sustainable” and “environment friendly” labels on clothes. Together, the two groups account for 50% of the population. So, Zara must listen and respond to this growing need.
Resale: The re-sale market, currently valued at $28 billion today, is predicted to grow to $64 billion in 5 years. Integrating a re-sale strategy to their current platform would allow customers to purchase more with less wastage. This encourages consumerism while supporting sustainability.
Influencer Marketing: Unbox Social says influencer marketing is the most effective strategy for promoting lifestyle brands. Zara’s success with the #DearSouthAfrica campaign involving 60 micro-influencers engaged 8 million people. This should be a model for the future.
What is the biggest threat to Zara?
Zara’s biggest competition in the traditional sense . However, in the online space, Zara faces competition from multiple businesses. But competition is just one of the threats to Zara.
Competition: China’s fast-fashion giant, Shein, is the world’s biggest fashion retailer with a purely online presence. During September, the Shein app saw 10.3 million downloads. Zara, with only 2 million downloads in the same period, must watch out for its rivals in the digital arena.
Price War: Fast-fashion, Zara’s primary niche, brings the latest trends from the ramp to the customers quickly and at low costs. However, the industry is vulnerable to imitators waging price wars to leech off from Zara’s line.
COVID-19: In the first quarter of 2020, Inditex reported a 44% drop in sales. Inditex’s report states the closure of 88% of its stores because of the Coronavirus lead as the central reason for the drop in sales.
Government Regulations: Inditex has 13 factories in Spain. Due to the Spanish government’s lockdown measures, only 3 of the 13 factories operated in the early months of the pandemic. With Europe heading towards a second wave, the company can expect similar measures.
Sustainability: The use-and-throw attitude people had towards fashion is changing. People are conscious of the impact of fashion on the environment and people. Thus, Zara would have to push towards making fast-fashion a sustainable business – economically and ecologically.
Zara SWOT Analysis: Conclusion
Recovering from the COVID-19 crisis and strengthening online presence is Zara’s current priority. Inditex’s financials show signs of recovery and the management is optimistic about boosting online sales. So, we could say Zara has things under control for now. But what about external factors?
Well, the pandemic has accelerated the growth of online shopping. In the immediate future, Zara must consolidate its footing in the digital and physical space. Zara has got many things right in its rise to the top of fashion retail. The question is – can Zara do the same online?
From this SWOT analysis for Zara, we hope you have seen how creativity and commitment to customers strengthen a brand in adversities. Here’s the takeaway – get in touch with your audience, build a strong relationship with them, and give them what they want.
SWOT analysis is the best way to learn from the successes of the business world. We’ve put together many of them. Look at our SWOT analysis library for more. In case you would like to learn what is a SWOT analysis, read our guide on how to do a SWOT analysis. You can also use SWOT analysis examples and our SWOT analysis template to get the hang of it.
Weaknesses in the SWOT Analysis of Zara – Zara SWOT Analysis
Advertisem*nts: Zara is spending very little on its advertisem*nt. If Zara follows an aggressive advertising strategy it can double its profits and revenue. Designs: Zara is selling unique designs and does not follow a standard design concept.
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.
SWOT analysis might help the executive to understand the opportunities and threats in the environment with the strengths and weakness of Inditex; thus help the executive to evaluate existing strategies and formulate the new master strategies (growth strategy, stability strategy and retrenchment strategy).
What are some of Zara's weaknesses? Fast-Fashion: Interestingly, the trend that helped propel Zara to the top is the cause of its most pressing weakness. With the focus on sustainability increasing among customers and policymakers Zara's weakness is balancing sustainability with fast-fashion.
A SWOT Analysis is a straightforward way for everyone in your organization to evaluate the current status of the enterprise, to appraise a product or a service or to set a future goal. In other words, a SWOT analysis assesses whatever you find most necessary for your business to achieve a certain objective.
Zara sets market-based pricing strategy which sets the target price consumer is willing to pay. The budget for production according to the target price. This in turn fixes the profit margin they earn on every item.
The brand could expand its customer base and encourage more shopping by investing more time to market themselves on digital platforms and improve its e-commerce sector's functionality. The biggest threat Zara is facing is the intense number and level of competition in the industry.
However, the brand has recently faced three main challenges: e-commerce, competition and sustainability. To sustain its global expansion, the brand made a step toward digital expansion even before the pandemic hit, and it paid off. So far in 2020, Zara reports a 74% jump in online sales alone.
Zara discounts only about 18% of its making, approximately half the levels of competitors. Instead of additional quantities per style, Zara produces extra styles, roughly 12,000 a year. So, that style sells out more fast and there are more new styles which are already waiting to come out.
The greatest risk for Zara is that the products that it creates more quickly than other retailers do not find a market; that they do not fit in with shoppers' current tastes.
Its boxes, bags, hangers and alarms are reused and recycled at the end of their useful life. Bags given to customers are already made from 100 percent recycled paper, and by 2023 they will eliminate all single-use plastics given to customers.
The competitive advantage Zara is pursuing is lower prices than his competitors with better speed and flexibility in getting the product to market. This is an advantage over gained over competitors by offering consumers greater value, by means of lower prices and cutting age fashion.
Zara has cultivated unique advantages with its 4Es approach to marketing by focusing on experience, exchange, evangelism and every place strategies for the customer, rather than the old product, price, promotion and place concept focused on the brand.
Zara is one of the most well known brands in the world and is also one of the largest international fashion companies. They are the third largest brand in the garment industry and are a unit of Inditex.
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. Strengths and weaknesses are internal to your company—things that you have some control over and can change. Examples include who is on your team, your patents and intellectual property, and your location.
Opportunities are openings or chances for something positive to happen, but you'll need to claim them for yourself! They usually arise from situations outside your organization, and require an eye to what might happen in the future. They might arise as developments in the market you serve, or in the technology you use.
Zara's overarching strategy is achieving growth through diversification with vertical integrations. It adapts couture designs, manufactures, distributes, and retails clothes within two weeks of the original design first appearing on catwalks.
Zara's brand identity refers to the identity of the brand Zara created from Inditex group. Zara´s identity represents how Inditex group wants Zara to be seen, Zara´s differentiation from competitors and what the brand promises.
The ad, which has been seen in stores in England and Spain, features the slogan "Love Your Curves." While it's seemingly a well-intentioned message about body-positivity, there's a problem: The two models featured alongside the phrase are straight-size, and thus, the curves that Zara is asking customers to love aren't ...
Zara's strategy is to offer a higher number of available products than its competitors. While most clothing retailers manufacture and offer to the public for sale 2,000 to 4,000 different articles of clothing, Zara's production has been markedly higher, at over 10,000 pieces produced per year.
Zara's eCommerce strategy uses an automated marketing platform for sending relevant and timely emails notification to shoppers regarding everything from order status updates to back in stock notifications, and so on.
Hence, overall, the fast responsive and powerful designer team is a core competency for Zara. Secondly, VIRO suggests that the unique model of in-store inventory is valuable, rare, organized, and costly to imitate, and is a key core competency for Zara.
Overall, ZARA is in a strong position to achieve faster growth in near future. Some other key strengths that have helped it achieve an edge over its rivals include its pricing strategy, focus on quality and customer service and the excellent in-store experience it has designed for visitors.
Since, among other things, Zara's supply chain is so short and efficient, Zara is able to respond to any changes in trends much quicker than its competitors. As well, Zara is able to produce small batches of clothes without fear of not meeting demand, because it can quickly respond to surges in demand.
It is said that he was an autocratic leader first where the concentration of power was focused on him. But once his business ascended, and his reputation became superior, his leadership style transformed to a democratic way of leadership.
Zara discounts only about 18% of its making, approximately half the levels of competitors. Instead of additional quantities per style, Zara produces extra styles, roughly 12,000 a year. So, that style sells out more fast and there are more new styles which are already waiting to come out.
The greatest risk for Zara is that the products that it creates more quickly than other retailers do not find a market; that they do not fit in with shoppers' current tastes.
However, the brand has recently faced three main challenges: e-commerce, competition and sustainability. To sustain its global expansion, the brand made a step toward digital expansion even before the pandemic hit, and it paid off. So far in 2020, Zara reports a 74% jump in online sales alone.
The H&M brand has established over 4000 stores in several countries globally; A number that's way bigger than that of Zara. This brand has gotten an edge over its competitors as they've been more productive in the US market.
Its core values are found in four simple terms: beauty, clarity, functionality and sustainability. The secret to Zara's success has largely being driven by its ability to keep up with rapidly changing fashion trends and showcase it in its collections with very little delay.
Overall, ZARA is in a strong position to achieve faster growth in near future. Some other key strengths that have helped it achieve an edge over its rivals include its pricing strategy, focus on quality and customer service and the excellent in-store experience it has designed for visitors.
The brand could expand its customer base and encourage more shopping by investing more time to market themselves on digital platforms and improve its e-commerce sector's functionality. The biggest threat Zara is facing is the intense number and level of competition in the industry.
Its boxes, bags, hangers and alarms are reused and recycled at the end of their useful life. Bags given to customers are already made from 100 percent recycled paper, and by 2023 they will eliminate all single-use plastics given to customers.
Zara's overarching strategy is achieving growth through diversification with vertical integrations. It adapts couture designs, manufactures, distributes, and retails clothes within two weeks of the original design first appearing on catwalks.
Hence, overall, the fast responsive and powerful designer team is a core competency for Zara. Secondly, VIRO suggests that the unique model of in-store inventory is valuable, rare, organized, and costly to imitate, and is a key core competency for Zara.
Zara is recouping its losses as apparel sales rebound. After taking a hit during 2020 due to the coronavirus, the fast-fashion retailer's revenue has returned to pre-pandemic levels, parent company Inditex reported during its earnings this week.
ZARA (Spanish: [ˈθaɾa]), is a Spanish apparel retailer based in Arteixo, A Coruña, Galicia, Spain. The company specialises in fast fashion, and their products include clothing, accessories, shoes, swimwear, beauty, and perfumes.
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