Zara: Premium Fashion


May 16, 2011

Pallavi Srivastava

New Delhi , May 2011

If one has to look for a classic case of excellent branding without spending a penny on advertising, Spanish fashion brand Zara will surely fit the bill.

Inditex (Zara’s parent company) has formed a 51:49 joint venture with the Tata Group’s retail business, Trent and opened the first Zara store in India in May 2010. The brand made a big bang entry in the Indian fashion battleground. More than 500 women visited the first store (in Select Citywalk mall in New Delhi) within the first few hours of its launch. Going by reports, the store clocked sales of Rs 90 lakh on the first day and around Rs 1.25 crore on the opening weekend. At present, estimations suggest that the Zara stores in Selec tCityWalk (New Delhi) and in Palladium Mall (Mumbai) have monthly sales of approximately Rs 4-6 crore.

However, when we quizzed Inditex about its sales, the company didn’t disclose the information citing it confidential. According to Technopak Advisors, Zara was also instrumental in generating 30-40 per cent more footfalls in malls where it opened. So much so that, few stores near Zara in the Select Citywalk mall have noted 20 per cent higher footfalls, since Zara’s opening.

Affordable fashion?

Zara’s core target group globally is the mid-market. In India, the brand is looking at a share of the upper middle class’ wallet.

If we go into the background, Zara, the Spanish fashion brand has been a huge success because of its fast affordable fashion model which translates into latest fashion clothing at a reasonable price for its core target consumers, worldwide. This model is hugely led by the two Ps – Product and Place and strongly complemented by competitive pricing. However, promotion is one P where Zara doesn’t puts a lot of energy.

Zara’s model is simple: It takes two weeks for a design (mostly runway knock-offs) to move from designbook to the store. It also has 11,000 styles in one year and changes the inventory in store even twice a week. In sharp contrast, it takes four to eight months for any other fashion brand to produce a fresh design and place them in stores and usually there are 4,000 new styles every year.

This model has helped Zara offer its customers widest range of choices across the globe. The brand is adopting a similar approach in India too. Zara’s offering worldwide is focused on luring consumers through combination of latest trends, good design, high quality and affordable prices in a constantly renewed collection. Monica Laliwala, Managing Director, Xsis Promotions says, "Zara works on the impulsiveness of youth and that is why the fast fashion model and this strategy has worked really well for the brand across the globe."

So if you walk into a Zara store on a monthly basis, chances are low that you will find the same designs you saw last time. The company spokesperson comments, "Zara is applying to Indian market the same way of understanding fashion business that has supported its expansion to 78 countries until now. With our first stores opened in India, we are learning about Indian customers tastes." The brand takes into consideration the opinions, preferences and concerns of the Indian customers through sales figures, orders of the stores and daily dialogue with store managers. "Our store staff is specially trained and motivated to be able to catch’ this information, being always open to listen to the customer and to transmit his/her comments to the designers. Of course the information we receive from our Indian customers is being taken in mind by our designers," adds the spokesperson.

Zara follows a central distribution model where all its merchandise is shipped to different parts of the world from its distribution centre in Spain. The same model is applied in India too. This ensures that the quality of product remains the same as in any other global market, however, it puts some pressure on the costs because of high import duties. That’s the reason why Zara’s pricing turns out to be premium in India as against its ‘affordable fashion’ pricing globally. In contrast, most of the international brands operating in India now are relying on local sourcing. So far, the premium pricing has not hurt the brand in the country but some experts are of the view that Zara may need to keep an eye on that front to build successful and sustainable business here.

However, Devangshu Dutta, CEO, Third Eyesight, a research firm, feels that in terms of pricing, it is meaningless to directly compare the mid-market segment in India with what is mid-market in Europe, when the income and spending standards are so different. A brand has two choices: either to be consistent in its pricing, or to change its merchandise and shift pricing downwards to fit into the very different Indian mid-market. "If pricing is kept consistent with European markets, then direct translation of European pricing into Indian rupees immediately places all mid-market brands into the premium segment. On top of that, high import duties ensure that there is less margin to manoeuvre on the retail price," he adds.

Best placement

According to Peshwa Acharya, marketing & retail expert (currently Marketing Head Reliance Communication), location has played a key role in the success of Zara in the country. "It has clearly chosen the locations where its core TG, that is the upper middle class, is surely present. That’s the difference between Zara and Mango (both are Spanish brands). Zara has chosen only premium locations for its store while Mango has opted for a mix of both," he says.

Zero advertising

Another noticeable thing about Zara that has left many marketing suits surprised is that the brand doesn’t advertise at all. When quizzed, the company responded, "We do not advertise, as we believe that our product and our stores must speak themselves and satisfy customers’ expectations. We don’t envisage any kind of promotion and Zara doesn’t work with celebrities in any country." So much so that the brand hasn’t got even a specific marketing budget for Indian market.

The brand is still testing the waters in the country with a handful of stores and the response so far has been overwhelming. So far, it is present in Delhi and Mumbai and plans to open stores in Mumbai, Pune and Bengaluru in 2011.

The success path – Segmentation, Targeting and Positioning

Result- What the brand achieved

(This article appeared in the May 2011 edition of Pitch magazine.)