Fashion Retail Industry Analysis: Key Changes and Strategies for Zara

This report analyzes the key changes in the UK fashion clothing market, focusing on the macro and micro environmental factors impacting the industry. It examines the influence of political, economic, social, technological, legal, and environmental factors on the fashion retail industry, using Zara as a case study. The report also suggests strategies and tactics that Zara can employ to respond to these changes, including sustainability initiatives, marketing strategies, and market expansion.

Retail Theory and Practice
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Table of Contents
Introduction......................................................................................................................................3
a) Identifies key relevant changes in the UK fashion clothing market and.....................................3
Stating the first concepts of the retail and the fashion retail industry.............................................3
Companies that will be looked into in terms of the fashion retail industry.....................................3
Identification of some of the macro environment factors that are or will have an impact on the
fashion retail industry......................................................................................................................5
Identification of some of the micro environmental factors that are or will have an impact on
fashion retail....................................................................................................................................8
b) Suggests and discusses strategies and tactics that could be used by the retailer to respond to
the major changes occurring in the fashion clothing market...........................................................9
Conclusion.....................................................................................................................................10
Reference list.................................................................................................................................12
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Introduction
Due to fast paced industrialization and advancement in technologies every industry is witnessing
vast changes. The fashion retain industry is one such industry that is characterized by changing
trends. This changing nature of fashion retain industry, has made it a mandatory task for the
organizations to analyze and detect the major global changes and trends and use effective
strategies to cope up with the changes. The following section would elaborate the major changes
that are thriving the market of fashion retail industry. For accomplishing this purpose, the report
would use macro and micro environment analysis along. This report would also provide some
effective suggestions for dealing with the changes.
a) Identifies key relevant changes in the UK fashion clothing market
Stating the first concepts of the retail and the fashion retail industry
The fashion retail industry is one of the fastest growing industries around the globe. The industry
comprises of the buying and selling of fashion products such as clothes, accessories, footwear,
etc. The analysis of the recent past of the fashion retail industry shows that this sector has faced
substantial growth during the past two decades. The present valuation of the global fashion retail
industry stands at 3 trillion dollars and contributes 2% to the GDP of the entire world
(Simbrunner et al., 2017). The industry provides employment to a huge number of segments. For
example, the industry employs around 24.8 million in apparel manufacturing and about 57.8
million in the clothing and textile sector (Okonkwo, 2016). The leaders of the global fashion
retail industry are Primark, ZARA, Marks & Spencer, H & M, Benton and Gap.
Companies that will be looked into in terms of the fashion retail industry
The first company that an individual might be looking into in the fashion retail industry is
ZARA. This is because ZARA is the largest retailer and fashion clothing brands across the globe.
The company serves a worldwide area with around 2266 stores in various locations around the
globe. The company stands at the first position in terms of non-toxic clothing (Zara.com, 2018).
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The second choice in the fashion retail industry is Primark. Primark is another famous retailer in
the global fashion retail industry. The company is one of the leading producers of clothing,
cosmetics and accessories with stores and operations in more than 325 locations across the globe
(Primark.com, 2018).
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Identification of some of the macro environment factors that are or will have an impact on
the fashion retail industry
The evaluation of the retail fashion industry shows that the year 2016 has been quite a tough year
for the industry (McCormick et al., 2014). This is because of the several disruptive events in
different parts of the world such as the terrorist attacks and activities in France, the Brexit in UK
and the volatility of the stock market of China. However, even after the disturbances during
2016, the retail fashion industry is still expected to be making a comeback during 2017 and 2018.
The sector has been one of the fastest growing segments around the globe (Macchion et al.,
2015). It can also be analyzed from the macro environment of the fashion retail industry that the
consumer tastes and technology has significance influence over the industry. However, the
influence of technology is higher than that of consumer taste.
The analysis of the macro environment of an industry can be conducted in an effective manner
with the application of the PESTLE analysis tool. This analysis helps in analyzing the political
factors, economic factors, social factors, technological factors, legal factors as well as the
environmental factors affecting a business (Newton, 2014). The macro environment factors of
the fashion retail industry that is having an impact and can have a further impact on the industry
are can also be evaluated through PESTLE analysis. Thus, the macro environment factors that
are or will have an impact on the fashion retail industry are as follows –
 Political factors – Political factors can be one of the biggest uncertainties for the fashion
retail industry. Various geopolitical factors such as Brexit, Terrorism, etc. have led to the
creation of uncertainties in the entire fashion retail industry of the global economy
(Rivoli, 2014). In addition to terrorism, other political factors have also affected the
global fashion retail industry. For example, government regulations and policies in
various countries around the world have affected the industry in different ways.
Similarly, the ongoing shifts of politics in UK and US have affected the state of global
retail fashion industry. On the other hand, even the largest fashion brands such as ZARA
have faced difficulties in terms of operations in the Middle East countries, posing serious
threats to the retail fashion companies in the country.
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 Economic factors – The economic factors also have a great influence over the fashion
retail industry. For example, the economic fluctuations that has taken place during past
two years worldwide, has affected the industry (Wojcik, 2018). The GDP generated by
the fashion retail industry has also decreased during the past few years due to economic
recession (Evanschitzky et al., 2015). The volatility of the Chinese market, the economic
fluctuations taken place in Russia and demonetization in India have also made it tough
for the industry and ZARA to generate profit. However, since the recession is over, the
situation for the fashion retail industry and ZARA is improving gradually and is expected
that the industry will be regaining its position soon in the near future.
 Social factors – One of the major factors affecting the fashion retail industry are the
social or socio-cultural factors. Major changes in the society and cultural factors in
different countries bring about substantial theaters for the industry. The preferences of
consumers are changing over time, thereby making it difficult for ZARA to cope up with
changing consumer needs and preferences (Cifci et al., 2016). The popularity of the
products of fashion retail industry is also influenced with demographic changes. These
social trends are actually influencing the profitability of the industry and ZARA as well.
Without focusing on consumer servicer and consumer engagement, it will become
difficult for fashion retail industry, especially ZARA to survive in future.
 Technological factors – Technology, in the present scenario, is the biggest threat for the
fashion retail industry (Joung, 2014). Information technology, globalization, increasing
use of the internet and increase in the utilization of mobile phones is leading to the
increase in the needs of the industry to undergo technological developments (Rabine,
2017). It has become necessary for every company and business operating in the fashion
retail industry to ensure that it provides its customers with e-commerce services. ZARA,
however, has taken several steps for deal with technological development.
 Legal factors – The legal frameworks and changes also proliferate in the fashion retail
industry. Compliance with legal frameworks and maintenance of business ethics has
become of the most important criterions to focus on. The labor laws and environmental
laws in different nations are making it difficult for the fashion retail industry to operate
without compliance with the laws (Percival et al., 2017). Since ZARA is a multinational
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company, the legal factors to be considered by the company differ from one country to
another, thereby increasing the difficulty of the company.
 Environmental factors – Sustainability and environment are the two most important
terms prevailing in the fashion retail industry (Khan et al., 2017). Every fashion retailer
now has to be careful about their respective carbon footprint along with the marketing of
themselves as one of the most eco-friendly brands. The fashion retail industry has to
invest remarkably in order to ensure that each brand is using eco-friendly raw materials
for selling goods, packaging and other activities. ZARA too invests in eco-friendly raw
materials largely.
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Identification of some of the micro environmental factors that are or will have an impact
on fashion retail
The microenvironment factors affecting the fashion retail industry can be evaluated through the
Porter’s five forces analysis of the entire industry and the largest retail fashion brand ZARA.
 Competition in the industry – The analysis of the fashion retail industry shows that there
prevails substantive competition between the rival companies in the industry (Kasemsap,
2018). There are various large retail fashion brands, which act as great threats for ZARA.
For example, H&M, Marks and Spencer, Benton, Gap and Primark give remarkable
competition to ZARA. Threat of new market entrants – The threat of new entrants in the retail fashion industry
is negligible (Bhatnagar et al., 2016). This is because it is quite next to impossible for any
new entrants in the marketplace to establish itself as big as ZARA and investment for
market entry is going to be quite huge. Thus, ZARA faces low threats from new market
entrants.
 Power of suppliers – The bargaining power of this industry’s suppliers is huge (Jary and
Wileman, 2016). This is because the cost of the retail brands for shifting from one
supplier to another is quite high. Thus, ZARA faces strong bargaining from its suppliers.
 Power of consumers – The power of consumers in terms of bargaining is high in the
industry (Kumar and Pansari, 2016). This is because the switching cost of buyers from
retail brand to another is almost negligible. Buyers are price sensitive and thus ZARA
faces strong threats from customers.
 Threat from substitute products – The threats of substitute products in the industry is
moderate (Li et al., 2015). This is because other retail brands can produce similar
products but there is going to be a difference in the quality of the products. ZARA faces
strong competition in case of substitute products from H&M only since no other retail
brand will be able to provide similar quality products as ZARA provides.
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b) Suggests and discusses strategies and tactics that could be used by the retailer to respond
to the major changes occurring in the fashion clothing market
Ideas and strategies that could be useful for responding to the changes
Some of the major trends that are witnessed in the previous section are the increasing
competition among the companies, the changing nature of consumer behaviour which is
characterised by high bargaining power, the increasing importance of sustainability and
sustainable practices and so on. Zara can adapt several strategies in order to cope up with this
fast changing scenario of the retail industry and respond effectively to the changes that are taking
place in the retail industry.
The strategies that can be adapted by the organisation for responding to the changes are as
follows:
The most evident change that is entering into the scenario of fashion retail industry is the concern
regarding sustainability. Before forming strategies for sustainability, it is essential to understand
the major three pillars on which sustainability depends. The three major aspects that form the
base of sustainability are environment, society and economy (Fani et al., 2015). In order to
ensure sustainability, Zara therefore has to focus on all of these aspects. Customers are also
becoming more and more concerned regarding a company’s initiative for contributing to
environment, economy and social benefit. The company has already undertaken several
community initiatives for benefiting needy and poor people. It must continue such programs and
further invest in such programs that aim at benefiting needy people. However, sometimes such
initiatives remain limited in mere initiatives and advertisements. Zara must look after the fact
that their investments are bringing fertile results. For this it may take consult with the local
people and assess the effectiveness of the initiatives.
Consumer behaviour is changing significantly making it more difficult for the organisations to
manage product and pricing strategies (Macchion et al., 2015). Zara must consider the high
bargaining power of customers as a strong external force ad forms strategies to cope up with this
strategy. It must improve its marketing strategies and make marketing activities more appealing.
The adaption of social media marketing and emotional marketing would be beneficial for this
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purpose. It should also amend its pricing strategies as most of the customers compares pricing of
product among companies, before taking a final decision of purchasing. Therefore, such
strategies would be beneficial for attracting customers and retaining them from buying from
other rival companies.
The increasing competition is a chief characteristic of the fashion and retail industry.
Organisations are developing more and more creative ideas for luring customers and the
consumer expectations are also increasing significantly. Zara must take effective steps for
gaining competitive edge over other organisations. Again the marketing strategies are most
effective tools for achieving this purpose. It would help Zara to magnetise its customers and
influence them to become potential loyal customers of the company. Market expansion is another
major strategy that can help the company ensures more competitive advantage with the
additional benefit of profitability and growth. The emerging markets are found to be most
profitable markets for business expansion. With a large young population, the markets of such
nations are becoming more and more potential for the fashion retail industry (Rabine, 2017).
Zara must strengthen its activities in the emerging markets where it already exist and further
enter into such market where it does not. The two most important markets that Zara must utilise
for its profitability and competitive benefit are India and China. The cultural variety of theses
nations comes as major benefits for the profit of the company. The brand name of Zara should
also be utilised for gaining attention of the customers and for creating more influential image
than the rival companies. Its past long history has to be utilised for the purpose.
The company can use some other major strategies for improving overall performance. One of the
most effective strategies is using effective technologies for boosting up performance of both core
and non core functions. For example, it can use decision making tools that are able to form
effective solutions based on data inputs. Such applications can generate effective solutions from
scattered data and information. Thus the company can improve its performance and be
responsive to the changes that its industry is facing.
Conclusion
The above discussion provides a clear understanding of the fashion retail industry with the help
of the example of Zara which is a renowned global brand. With the help of external environment
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analysis and analysis of micro environmental factors, the report provides an elaborated
understating of the major changes that are taking place in the scenario of fashion retail industry.
The external environment analysis is conducted with the help of PESTLE frame work, while the
micro environmental analysis is done with the help of Porter’s Five Forces. The major changes
that are making significant influence on the market are the concern with sustainability, increasing
bargaining power of the customers and the increasing competitive environment. The project
provides effective solutions for dealing with such changes. The recommendations shows that
Zara must adapt the changes and utilise them rather than shunning such changes.
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