Retail Mix Analysis of Zara's International Expansion

Zara is a clothing retailer that has achieved success through its innovative production and supply chain strategies. The company uses cost leadership strategy, providing high-quality products at low prices, with a focus on frequent product refreshment to keep customers coming back. Zara's retail mix includes a wide range of products, effective marketing communications, elegantly designed stores, facilitating services, and customer-centric pricing strategies. However, the company faces challenges in its continued international growth, including the impact of political and financial changes in Spain and Europe, increased competition from rivals, and the complexity of entering new markets.

Introduction
Zara is a clothing retailer based in Spain providing the latest international fashion products. It is
considered as a flagship store of Inditex Group. The retail management strategies of Inditex
depend on the innovation and flexibility and has the sole purpose of mixing high quality design
and creative fashion in an amalgamation with quick reaction for the market demand have given
permission to Zara for quick international exposure and success (Isabelle, 2012). The retail mix
in Zara can easily be analyzed using the retail mix framework.
Zara has been using the strategy of cost leadership strategy which is one of the strategy outlined
by Porter.
1. Analysis of elements of retail mix of Zara in UK
Zara has been providing high quality products at low prices along with providing quality
customer experience in their stories. Zara has achieved this using innovative production and
supply chain strategies. The retail mix of Zara has been provided below:
The Merchandise Range and Assortment
Zara provides reasonable high quality of the fashion products in the broad product lines. The
merchandising product of Zara comprises of the ranges of men, women and children. Further,
these ranges are subdivided into prices, product types, fashion-ability. Further, these are
classified into the categories of lower garments, shoes, upper garments, cosmetics and
compliments. These products are sold exclusively through their stores. But a wide range of
products are offered by Zara. The Zara Basic Product line has been known to offer the cheap
fashion to the young girls and customers whereas the TRF product line is seen to cater the needs
of teenagers.
The Marketing Communications

It is powered by the horizontal communication model and highlights the marketing
communication of Zara. Zara ensures that the marketing operations are extremely streamlined
and effective and is able to identify customer preference in the market. It successfully develops
the new design based on the requirement and converts the concept into the product within 2
weeks. Zara also promotes word-of-mouth promotion.
The Design, Store Layout and Visual Merchandising
The Zara stores are elegantly designed and feature product displays, ceiling decorations, white
walls that are highly adorned with the ambient lighting and product photographs. A boutique
layout design by Zara in their stores thereby providing a more personalized experience to their
customers instead of the public shopping experience.
The Facilitating Services and Customer Services
Zara has been employing well-trained and highly knowledgeable sales and staff who are given a
special training for understanding the needs of the customers. The company instructs employees
to handle the customer service with utmost utility. The company asks the employees to develop
their personal relationship with the customers.
The Store Formats and Locations
The stores of Zara have been placed in the best locations ensuring that every store receive
highest amount of attention from their customers. The store format used by Zara are categorized
as their specialty stores focusing on selling of apparels.
The Pricing Strategy and Tactics
Zara uses principles of cost leadership and produces the product at lower cost as compared to
their competitors and selling their products at the lower price. The company does not uses
promotions and offers.

2. Sustainability of competitive advantage of Zara’s retail mix
The company has gained the competitive advantage by offering good quality products at
reasonable price along with offering the products that are frequently being refreshed. In order to
follow that Zara has been adopting the cost leadership strategy. This ensures that all the
customers are coming to store frequently. Zara spends only 0.3 percent of their revenue on
marketing. Further the elegantly designed stores helps in attracting maximum customers. Further
the company does not even indulge itself in the large scale marketing therefore high quality and
word-of-mouth is highly important to the organization’s success. This has helped in enhancing
the customer loyalty. The production processes are seen to take place in the Spain headquarter
therefore providing the time required for the outsourcing manufacturing. The company breaks
down the tasks of their employees into various steps and levels and offers fresh products with
high speed in product, short lead period, less advertising cost etc. This helps in indicating the
sustainability of competitive advantage of Zara which is seen dependent on the company’s
ability for churning out new products at short lead times.
Therefore, the customers are exposed to various products under specific product range. Further,
Zara has also been offering specific product lines catering to the needs of their customers and
their related segment. As per the retail mix of Zara where the store formats is the weakest
element of the Zara as Zara has been utilizing the various formats in the stores even when all
these stores were termed as specialty stores. But such store formats are not being standardized by
Zara and is considered to be one of the few aspects of the various retail mix which is not
standardised in Zara. The company is further seen to reduce its cost by standardizing various
format of the stores.

The production cost of Zara has been reduced by streamlining their production. The company is
seen to use effective human resource management practices for managing the workforce of the
company in an effective manner along with reducing the costs using the adopting the automation
in the supply chain of organization.
. The main highlight of pricing strategy of Zara is that they tweak the cost leadership based
pricing to gain maximum profits by increasing prices in some countries where customers are
willing to pay more. For example, the prices of Zara products in France and UK tend to be
comparatively higher than that in other European countries such Spain and Portugal, notes Zhou
et al. (2015). This indicates that Zara utilises a pricing strategy in which the prices are varied in a
target market with respect to the demand for the produc

3. Challenges faced by Zara for continued international growth
The difficulties to proceed with continued international growth that will be confronted by Zara
can be assessed utilizing PEST examination apparatus. This instrument is useful in
understanding the outside market variables influencing Zara.
Political: As an organization headquartered in Spain, Zara is influenced by the Catalan freedom
development (Catalan News Agency, 2011). On the off chance that the Catalan locale picks up
freedom from Spain this will imply that a few operations of Zara would be in te recently shaped
nation. So this would affect Zara.
Social: There has been huge increment in online retail deals in the UK (Moth, 2015. In any case,
the online operations of Zara are less developed when contrasted with that of their principle
rivals in UK, for example, ASOS, Marks and Spencer, H&M and so on.
Economical: Eurozone obligation emergency has not yet settled. As an organization that has
significant operations in Spain and Portugal Zara is impacted by this emergency (Fashion Vore,
2013).
Technical: Zara uses technology in a few regions of their store network. So the new
improvement in computerization innovation impacts Zara (Fashion Vore, 2013).
From the Pest examination it can be derived that political and financial strength in Spain and
Europe is a principle test to universal development of Zara.
Market entry method adopted by Zara is similar to the stage model of internationalization. Under
this strategy, Zara enters new markets that are geographically closer to Spain through a single
store and uses this store to test the new market. Based on the viability of the market further
expansion is carried out. However, as Zara is entering new markets that are away from Spain,

this strategy has lost its efficiency. Moreover, the business model of Zara is driven cost
leadership. The operations in distant markets increase cost as supply chain lengthens (Lopez and
Fan, 2009). This is another challenge to the international growth of Zara.
The biggest challenge that Zara has is the strong and increased level of competition in the
fashion sector as it is surrounded by large number of apparel retailers. The biggest competitor of
Zara in UK includes H&M, The Gap etc. Moreover, the competitive pricing strategies from these
rival challenges the operational tactics of Zara. The competition set up biggest challenge for Zara
when it tries to enlarge its business into new regions. There exists a growing market for Zara in
emerging countries like China, South-Korea etc, but the legal regulations and business limits in
these places make it complex to enter (Kennedy, 2014).