The Success of Inditex: A Case Study of the Marketing Mix

This article examines the success of Inditex, the parent company of Zara, through a case study of the marketing mix. It explores how the 4 P's (Product, Price, Place, and Promotion) have contributed to its dominance in the international fashion industry. The article highlights Inditex's focus on offering quality designs at low prices, its flexibility in adapting to fashion trends, and its strategic use of physical stores and online sales. It also discusses the company's investment in real estate and its emphasis on location as a form of promotion. Overall, the article showcases Inditex's innovative approach to marketing and its ability to quickly respond to consumer needs.

GBE End of module assignment
According to Wall, Minocha and Stan (2015: chapter 9) the four main components of the
marketing mix in an international business initiative are the 4 P’s. One of the most archetypal
examples of internationalization success is the clothing giant Inditex, a look to these four p’s
is required to understand its success and dominance.
Intro
In 1963 Amancio Ortega founded Confecciones GOA in the Spanish city of La Coruña.
Initially, the company functioned as a garment workshop, specializing in the manufacture of
women's clothing for sale to third parties. In 1975, Ortega opened the first store called
"Zara", on Torreiro street in La Coruña. The Zara firm from the beginning was marked by a
business model based on offering quality designs at low prices. The integrated model
systematically produced, distributed and sold its own products, which allowed it to reduce
costs for intermediaries and suppliers, and gave the brand a huge competitive advantage.
Product
Zara represents evolution and convenience, because the clients pay a lower price for
clothing. But also represents flexibility and adaptability to the fashion trends and the wishes
and desires of the consumer.
The available literature on consumer behaviour leads to the conclusion that consumers
prefer a wider range of options and collections along a single season, rather than just one
collection (Azevedo et al., 2008; Valaei and Nikhashemi, 2017). Price is also an important
factor, that makes Zara competitive. Disposable income in modern days is related to
disposable clothing.
Regarding the Product, there are two factors that differentiate Amancio Ortega's group, and
that have pushed them to the top of the industry.
Diversificación
On the one hand, the international/diversification of the brands and all the group's stores.
The fashion offered at Zara Regent Street in London are different from those offered in the
centre of Paris.
Mixing traditional and online stores is key. Inditex growth responds to the integration of the
traditional model of physical stores and online sales. The group's online stores grew by 41%
in 2017 and more than 100% in 2018 (Inditex, 2018). And in the year 2020 it managed to
maintain a presence on five continents.
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Flexibility
On the other hand, Zara keeps open communication channels with consumers to detect
changes in trends, in this way it can bring these changes to the production and distribution
chain faster and more efficiently than its competitors.
Inditex incorporates analytics of the data derived from its sales, both in traditional physical
stores and in digital channels. Through the constant analysis of data, the company can
monitor which fashion items are the best sellers, which garments are not sold, which colours
are being purchased by consumers, which fabrics are gaining strength, whether some
products are passing of fashion and if other products are growing in sales, and many other
different variables. Thanks to Big Data analysis, Inditex designs, produces, distributes and
puts new products on sale in an average launch time of three weeks (Nathan, 2017).
Price
In the clothing industry, fashion brands tend to adopt high-price strategies, because they are
really aimed at consumers with high purchasing power. To price high is a strategy
traditionally aligned with luxury brands. But there is a sector of consumers that does not
have the purchasing power of the upper classes and that nevertheless wants access to a
type of fashion that has better design, and more quality than cheap clothes, but not an
exorbitant price. In this niche is where Zara’s market relays. Young consumers want fashion
but don't have the purchasing power to buy the big brands.
In addition to this, the affordable price allows consumers to change clothes more often. And
this is where the key to Inditex's strategy lies: sales over price. If the price is low, consumers
will be more likely buy more clothes. Prioritizing sales over price causes more product to
circulate, and in the long run the business sells more (De Maeyer, 2012). The purchase
decision is also easier for the consumer because the cost of the product is low. It seems as
though the product becomes disposable, because it did not represent a high expenditure.
The discarding of the clothes can happen very quick, since fashion trends may render a
jacket obsolete in a mater of weeks, and next season that jacket is going to be out of
fashion.
Thus, high circulation of product is paramount for Inditex, and the way to achieve this is by a
low price strategy, completely opposed to the approach of the big brands.
The real state side of Inditex
One of the unknown facets of the Inditex group is its activity in the real estate sector. In the
same way that in the past McDonald's used to buy land to build its fast food restaurants and
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keep hold of the ownership of the real state side of the business (Ferreira, 2010), the Inditex
group invests part of its profits in establishments, not only stores but in in some cases entire
buildings, whose space is partly leased to its own competition. In this way Inditex favours its
own activity and at the same time feeds on the activity of its competitors. Or to put it another
way, Inditex's competitors are paying Inditex to be able to compete against Inditex.
Promotion
At Inditex, the line that separates Promotion and Place is very thin, sometimes inexistent.
One of the classic components of Inditex's marketing is the location of its stores. Instead of
spending a large sum of money on marketing, Inditex believes in locating its stores on the
High Street and in the most significant places in the city. Once the store is established in the
centre of the city, the design of the window and the front of the store steals all the eyes of
passers-by (Hume, 2011).
None of the Inditex brands is in the habit of investing heavily in direct marketing, only 0.3% is
invested in advertising (de Jorge Moreno & Carrasco, 2016) . However, all Inditex brands
attract and retain customers and some of them become ambassadors.
On the other hand, the Inditex group is strong in social media. The Zara brand alone has
more than 49 million followers on Instagram, 30 million on Facebook and 1.3 million on
Twitter. Social networks are used to connect with consumers and are also used to analyse
and predict changes in fashion trends.
The pink scarf
According to several sources (Fashion & Law Journal 2021; Roll, 2015; Russel, 2019), in
2015 a lady called Miko entered in a Zara store in Tokyo, Japan. She asked for a pink scarf,
but unfortunately the store wasn't selling any product like that at the moment. Exactly the
same happened in Toronto, San Francisco and Frankfurt. Seven days later, the brand was
able to distribute over half a million pink scarves to two thousand stores around the world.
They were sold out in three days.
This anecdote is just a little sample of the quick reaction capacity that the group has to
satisfy consumer needs. One could argue that Inditex has replaced a high investment in
marketing campaigns with a high investment in customer attention, care and satisfaction.
Place is promotion; promotion is place
Inditex was formally created in 1985 to house all the brands that businessman Ortega had in
mind to develop. Another of the keys of the group is the diversification of brands according to
the demographic group with which it is related.
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As the group began to grow and spread out, they began to practice an overlapping strategy
in the same physical area of the city. For example, a Zara store in the same area as a Pull &
Bear, Bershka and Massimo Dutti store. This overlapping of areas of influence allows the
business to have control of the majority of existing demographic groups.
Massimo Dutti focuses on a line of elegant clothing for men. Pull & Bear is focused on more
urban fashion. Both Bershka and Stradivarius focus on young fashion, but Stradivarius is
more feminine and Bershka is more 'cutting edge'. On the contrary, Oysho specializes in
knitwear, swimwear, pajamas and lingerie. Uterqüe was used as the accessories brand of
the Inditex group. Due to the pandemic, the stores were closed and the brand merged with
Massimo Dutti (Dewalska-Opitek & Bilińska-Reformat, 2021). The luxury accessory facet
does reinforce the premium profile of the Massimo Dutti brand, so that Uterqüe still plays an
important role.
It is very common to find all the group's stores in the same area of the city where the mother
store is located, which would be Zara. In this way the group tries to gain total control of the
fashion market wherever it settles.
Place
As said before, place is promotion and promotion is place. Amancio Ortega’s vision was
from the beginning to segment and diversify through different brands. Already in 1988 Inditex
begins to expand, and the first city it takes is the capital of Portugal. In 1995 the Inditex
group completely bought Massimo Dutti and in 1999 Stradivarius. With these two
acquisitions, the group jumped into the world of fashion on a global scale. In the first stages
of internationalization, Inditex managed to have a presence in 40 countries, with an
investment of 270 million euros (Diaz, 2020) . United States, Japan, Saudi Arabia and
Turkey among others, in addition to Latin America and stores throughout Europe. In record
time, in the year 2000, the Inditex business group had 600 stores around the world and was
capable of producing more than 260 million euros in net profit.
With the intention of financing the internationalization process and maintaining its presence
abroad, Inditex decided to become a publicly owned company. The group placed 26% of its
capital in the Stock Market. Four years later, Inditex already had 2,700 stores around the
world.
Inditex is not far behind in the digital field. The group's stores already had complete virtual
shop by 2010 and were already operating at full capacity in this digital aspect. In November
2018, Inditex opened 106 online stores at the same time. By that time the group already had
stores in 96 countries but only 46 of them had an online store. For the Inditex group, online
‘place’ is also important, and this is proven by the opening of online stores in countries
where there is no physical store, such as Ivory Coast, Ghana or Senegal. The group uses
stores in nearby countries as logistics hubs to feed product traffic to those countries that only
have a digital store. This combined digital operation made Inditex revalue 4% in the stock
market.
Conclusion
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Inditex is one of those rare cases of disruptive agents that change the way of doing
business. The clothing produced by traditional high end brands is manufactured with high
quality fabrics and modern designs, and adapted to the needs of consumers. Inditex's
revolutionary approach is to use lower quality materials but in a design that is already of
good quality, thus producing what scholars call disposable clothing or fast fashion Zhang et
al., 2021).
Inditex is a company that focuses on a high number of sales, in exchange for a low product
price. In this way, it manages to achieve a very high number of sales and a large volume of
cash flow. The Inditex product does not use the same fabrics as haute couture fashion.
However, it uses very similar designs, making clothing more attractive to consumers through
the price.
The very high volume of sales is what is behind the great growth of the company, in an
unprecedented success in the world of fashion. Inditex placed a lot of emphasis from the
beginning on online stores. This practice, together with other practices such as locating all
the group's stores in the same geographical area, gives Inditex enormous control over
fashion wherever it is established. Location is so important that even countries that do not
have a physical store do have an online store, and these stores are supplied by the logistics
centres of stores in nearby countries.
Finally, Inditex is one of those rare companies that does not invest much in promotion.
However, this is something that cannot last long because Inditex already has several
competitors, particularly in the United Kingdom, where it is more difficult for it to penetrate
the market. Until now, Inditex has been promoted thanks to its price, its location and its
product. One could argue that the other three P's are the ones that have influenced the
promotion, in the case of Inditex.
However, sooner or later, Inditex is going to have to invest large sums of money in
marketing, because it is becoming one of those large conglomerates that, in the end, cannot
compete with the new agents that enter the same market, at least not through prices alone.
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