Inquiry Based Learning Project: Zara Retail Industry Analysis

This report provides an in-depth analysis of Zara's position within the dynamic retail industry. It begins by outlining current trends, including fast fashion, sustainable practices, and the integration of artificial intelligence and machine learning. The report then applies Porter's Five Forces framework to assess Zara's competitive environment, evaluating factors such as competitive rivalry, supplier power, buyer power, threat of substitution, and the threat of new entrants. Based on this analysis, the report offers several strategic recommendations for Zara, including reducing shrinkage, increasing sales opportunities through enhanced social media presence, improving customer service, expanding product lines, providing employee training, upgrading technology, and introducing additional sales channels. The report aims to provide valuable insights into how Zara can maintain its competitive edge and adapt to the evolving demands of the retail market. This assignment, contributed by a student, is available on Desklib, a platform offering AI-powered study tools.

Inquiry Based Learning Project
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Table of Contents
INTRODUCTION...........................................................................................................................3
Trends in retail industry..............................................................................................................3
Analysis of the organisation (Zara).............................................................................................4
Recommendations.......................................................................................................................6
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9
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INTRODUCTION
Retail industry is going through a change that is with the advancement in technology and
changing needs and demand of customers, the company belonging to retail sector are changing
their ways and methods (Jin and Shin, 2020). This report is based on current trends in retail
industry and the organisation taken is Zara.
Trends in retail industry
Customer behaviour is changing and their expectations are higher, hence it is important
for retailers to understand its customer in order to achieve success in the business. Zara is one of
the most preferred brand and has established its brand name in marketplace. There are frequent
changes in the trends and Zara is taking measures for meeting day to day demands of its potential
customers. The three current retail trends on which Zara is focusing are fast fashion, sustainable
fashion and use of artificial intelligence and machine learning (Verma, Malhotra and Singh,
2020).
 Fast fashion- Fast fashion are term as quick fashion where cloths are design by the
designers and they quickly move to the stores to meet new trends. Fast fashion allow the
customers to buy trendy cloths at reasonable price and satisfied their current needs. As
with the increase in the increase in the competition the organisations belonging to retail
industry are coming up with new innovation and additions in their existing range.
Youngster are highly preferring fast fashion as they are affordable and they would have
large variety of fashionable cloths. Earlier people spend less amount in purchasing cloths
but in late 1990s purchasing cloths has become form of entertainment and the demand for
cloths has increased in the marketplace. The fast fashion has become possible with the
improvement and innovation in the supply chain management (SCM). It has become
important and providing great profits to the companies belonging to retail industry
through establishing mutual beneficial relationship. Fast fashion is at boom for retail
industry as due to constant introduction of new products and designs the customers are
visiting physical stores frequently which is leading to increase in the sales and profit
margins (Raza and Kilbourn, 2017).
 Sustainable fashion- Sustainable fashion is define as clothing, shoes and accessories that
arr manufactured by the companies belonging to retail industry and according marketed
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by them in most possible sustainable manner by considering the environmental and socio
economic factors. As due to increase in demand and increaser in level of competition the
various steps are taken by the companies in retail industry which has impact on the
environment and measures need to take place in order to protect the environment. The
focus of the retail industry is to improve all the levels of products life cycle that is from
acquiring raw materials to production of products for reducing the impact on
environment. The primary aim of the retail industry is to minimise the use of undesirable
products which has major effect on the environment. With the frequent change in the
trends the focus of the fashion companies is to make changes in its production,
distribution and marketing process along with formulating strategies with the focus on to
take step towards greater sustainability (Balaji and Roy, 2017). The focus is to use the
renewable and recyclable methods in their business operations and activities.
 Artificial intelligence and machine learning (use of big data)- Artificial intelligence is
reshaping and reinventing the retail industry that is with the use of advance technology
and computers the work process has become simple and fast. The artificial intelligence
use by companies help them in establishing direct connection with the potential
customers. Digital transformation in the retail industry has helped the company in many
ways that it become easy to identify the current trends and the changing behaviour of the
customers. With online presence the companies able to collect the large data of its
customers and able to effectively analyse what customers are searching, buying, what is
in their wish list and carts. The CRM (customer relationship management) software
developed with the use of AI has provide great support to the business in communicating
with the potential customers and understanding them (Pantano and Gandini, 2018).
Analysis of the organisation (Zara)
Zara is premium clothing brand that has made its place in the market during the rich
history of its existence. But the ever-changing market requires equally evolving strategies and
plans. For which market and competitive awareness is a must. Porter's Five Forces, analyses the
market for competitive rivalry , supply power, buyer power, threat of substitution, and threat of
new entry. Furtherance is detailed information on the discussed sectors. One of the most
effective and simple of market analysis is Porter's Fife Forces (Strydom, Petzer and De Meyer,
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2015). This method of research and analysis is specifically dedicated to find out the effects of
competitiveness in the market.
Competitive Rivalry
This segment of the Porter's analysis emphasises on the extent of competition that exists
in the market and how it affects the business of a company. Intense rivalry in the market can lead
to changes by the company in order to gain competitive advantage which in turn could reduce the
profit margin of the company. But all these changes are inevitable as one cannot escape the
competition find a way through it and hence more and more measures to increase the sales
should be looked out for (Loureiro, Miguéis and da Silva, 2018).
Suppliers bargaining power
This provides information about the power suppliers of a particular company holds to
bargain. In case of Zara as has very old and strong relationships in market. The bargaining power
is low, also because of the available number of suppliers is more and Zara like brands are less, so
the brand enjoys upper hand in the supplier-brand deals and relationship (Lewrick and et.al.,
2015).
Buyer bargain power
|This segment of analysis informs about the bargaining power customer enjoy over the
brand, upon which the brands has to make adjustment and required changes. Zara as a clothing
brand is known for its image, luxury and brand value it posses with numerous stores around the
world, and that too in premium malls; Zara's customer don't really look out for bargain as it is a
symbol of modern-classic fashion and customer buy the brand for the display of status (Nayak,
Akbari and Far, 2019).
Threat of substitution
This part of the analysis tells the Brand whether the competition in the market replace the
brand as a preference. As Zara deals in a sector of close to premium customers it's competitors
are Gucci, Christian Dior, Prada and other luxury brand . But the brand Zara is recognized as a
brand with classic design and quality, its customers do not really look for the brands substitute
due to USP of Zara i.e modern classic fashion clothes. So the threat of Substitute of Zara is quite
low (Yoon and Suh, 2021).
Threat of new entry.
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The content of this part keeps an eye at the new comers of the market and the threats they
could bring because of either low prices which are kept to gain market share quickly or because
of offering trendy product. But as it is well established in the market that Zara enjoys the loyalty
of the customer and is very classy as a brand and so are its customers. Over the ears in the
market Zara hasn't really seen a difficulty due to the upcoming regularly upcoming trends
because of the classic product the brans offers and throughout the sale soft Zara stayed unmoved.
So it will not be an exaggeration to state that Zara is a brand that enjoys its position and brand
image when it comes to competing with the new entry in the market hence the threats related to
them is quite low (Ayodeji, O.G. and Kumar, V., 2019).
Through the above stated Porter's Five Forces analyses of Zara it can be concluded that
the brand is quite comfortable when it comes to dealing with the competition of the market
because of its style of clothing and customers targetted. The brand also enjoys an astonishingly
great loyalty from its customers and the number of it because of the brand image of Zara and
status it represents. Apart front this the analysis also points out at the key factors the brand has to
keep a closer look at that is a change in trend, which can be countered by a light change in the
product line while maintain the classic appearance (Serral, Vander Stede and Hasić, 2020).
Recommendations
From the above study and analyse of the new an changing trend in the retail industry,
here are few suggestions for Zara in order to increasing it profitably according to the current
trends.
 Reduce shrinkage- Zara is providing high quality products but some cloths or
accessories provide by the are at high cost which customers are not finding worth it to
spend that must. Moreover, in marketplace there are large number of substitutes of Zara
such as H&M, Marks & Spencer, etc hence, it is important for them to focus on its
pricing strategies as simple mistake may cost business quite a bit. They should spend
more time in understanding the pricing strategy of its competitors and should make
changes to attract and engage its potential customers (Krisnadewi and Soewarno, 2019).
 Increase sales opportunities- Zara is facing high competition in marketplace and its
competitors are using various digital ways to attract large number of its potential
customers. Its competitors are using social media marketing highly to attract and engage
customers. Zara is lacking in this phase as they are not focusing and spending much on
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promotional activities. They should take measures and focus on making its social
presence stronger (Seo and Buchanan-Oliver, 2015).
 Customer service- The management of Zara need to focus on improving its customer
service. In its physical stores it has been identified that the services provide to customers
are not up to expectations. The staff members are not present to serve the customers and
they should open up more cash counters in order to provide fast services to customers.
The customers have to wait for too long in lines for trail rooms which is time consuming
and exhausting factors. Hence Zara management need to take measures to improve it and
should focus on providing fast services to its potential customers (Rossi-Hansberg, Sarte
and Trachter, 2018).
 Add new products or product lines- As in order to hold its position in the marketplace
it is important for Zara to come up with new desires on weekly bases in order to attract
more customers. As they are dealing in clothing only hence should focus on expanding its
business such as can enter in home decor, etc (Venkatesh, Rathi and Patwa, 2015).
 Training to employees- Zara should focus on providing effective training to its staff so
that they would able to handle the its customers in better manner. It is one of the
attracting factor as if customers get good treatment from the management, it lead to
satisfaction and help in covering them into loyal customers. The employees with the help
of effective training would able to provide better quality services to its customers and this
help in enhancing the brad image of the company (Wiese, Zielke and Toporowski, 2015).
 Up-gradation in the technology- As with the advancement in the technology the
company and the innovation taking place in the marketplace it has become important for
the management of Zara to keep its hardware and software up to date and should focus on
its effective utilisation the business operations.
 Introduce additional sales channels- The competitors are using different sales channels
along with its own website and mobile application they are using different online selling
platform by establishing contact with them. The other online selling platform are
Amazon, Ebay, Alibaba, etc. Zara is providing online selling option to its potential
customers through its website and Zara application. They should focus on establishing
contact with other popular online selling platforms such as Amazon, etc to attract more
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potential customers and to increase its sales volume (Granata, Moretta Tartaglione and
Tsiakis, 2019).
 Seasonal peaks- The company can make changes in its in its seasonal peaks by
understanding the business environment and accordingly building strategies to increase
its sales volume. The peak seasons in case of Zara are summer sales, Black Friday, etc so
by understanding the behaviour of customers they can make changes in its system for
attracting more audience such as by providing shopping vouchers, etc.
CONCLUSION
From the above report it has been concluded that the changes are taking place in the
business environment quickly. The companies need to identify these changes and the current
trends in the marketplace so that they would able to formulate and implement effective
techniques to attract and engage its target audience.
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REFERENCES
Books & Journals
Jin, B.E. and Shin, D.C., 2020. Changing the game to compete: Innovations in the fashion retail
industry from the disruptive business model. Business Horizons. 63(3). pp.301-311.
Verma, N., Malhotra, D. and Singh, J., 2020. Big data analytics for retail industry using
MapReduce-Apriori framework. Journal of Management Analytics. 7(3). pp.424-442.
Balaji, M.S. and Roy, S.K., 2017. Value co-creation with Internet of things technology in the
retail industry. Journal of Marketing Management. 33(1-2). pp.7-31.
Pantano, E. and Gandini, A., 2018. Shopping as a “networked experience”: an emerging
framework in the retail industry. International Journal of Retail & Distribution
Management.
Ayodeji, O.G. and Kumar, V., 2019. Social media analytics: a tool for the success of online retail
industry. International Journal of Services Operations and Informatics. 10(1). pp.79-95.
Granata, G., Moretta Tartaglione, A. and Tsiakis, T. eds., 2019. Predicting trends and building
strategies for consumer engagement in retail environments. IGI Global.
Lewrick, M. and et.al., 2015. Radical and incremental innovation effectiveness in relation to
market orientation in the retail industry: triggers, drivers, and supporters. In Successful
technological integration for competitive advantage in retail settings (pp. 239-268). IGI
Global.
Nayak, R., Akbari, M. and Far, S.M., 2019. Recent sustainable trends in Vietnam's fashion
supply chain. Journal of Cleaner Production, 225, pp.291-303.
Raza, D.N. and Kilbourn, P.J., 2017. The impact of point-of-sale data in demand planning in the
South African clothing retail industry. Journal of Transport and Supply Chain
Management, 11, p.8.
Strydom, E., Petzer, D.J. and De Meyer, C.F., 2015. A multidimensional customer value model
for the high fashion retail industry.
Loureiro, A.L., Miguéis, V.L. and da Silva, L.F., 2018. Exploring the use of deep neural
networks for sales forecasting in fashion retail. Decision Support Systems, 114, pp.81-
93.
Yoon, J. and Suh, M.G., 2021. The key elements of strategic leadership capabilities to the
latecomer firm: the case of RT Mart’s success in the Chinese retail industry. Asia Pacific
Business Review. 27(1). pp.29-52.
Serral, E., Vander Stede, C. and Hasić, F., 2020, June. Leveraging IoT in Retail Industry: A
Maturity Model. In 2020 IEEE 22nd Conference on Business Informatics (CBI) (Vol. 1,
pp. 114-123). IEEE.
Krisnadewi, K.A. and Soewarno, N., 2019. Competitiveness and cost behaviour: evidence from
the retail industry. Journal of Applied Accounting Research.
Seo, Y. and Buchanan-Oliver, M., 2015. Luxury branding: the industry, trends, and future
conceptualisations. Asia Pacific Journal of Marketing and Logistics.
Rossi-Hansberg, E., Sarte, P.D. and Trachter, N., 2018. Diverging trends in national and local
concentration (No. w25066). National Bureau of Economic Research.
Venkatesh, V.G., Rathi, S. and Patwa, S., 2015. Analysis on supply chain risks in Indian apparel
retail chains and proposal of risk prioritization model using Interpretive structural
modeling. Journal of Retailing and Consumer Services, 26, pp.153-167.
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Wiese, A., Zielke, S. and Toporowski, W., 2015. Sustainability in retailing–research streams and
emerging trends. International Journal of Retail & Distribution Management.
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