Analysis of Zara's Retail Strategy in the United Kingdom

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1RETAIL THEORY AND PRACTICE
Retail Theory and Practice of Zara
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Table of Contents
Formative Report Planning..............................................................................................................3
Report: Summative..........................................................................................................................5
Introduction to retail....................................................................................................................5
Introduction to the company........................................................................................................5
Key relevant changes within the UK fashion retail.....................................................................6
Relevant changes within the microenvironment..........................................................................8
Suggest and discuss strategies and tactics that could be used.....................................................9
Recommendations......................................................................................................................13
Conclusion.................................................................................................................................13
References......................................................................................................................................14

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Formative Report Planning
Retail industry is selling of goods and services to the customers in exchange of capital. Retail
industry may comprise of various types of goods for selling purposes. Fashion retail industry is a
type of retail industry, in which, retail of fashion supplies like apparels, clothing and other
fashion accessories takes place (Nickson et al. 2012). It is one of the third largest growing
sectors in the retail industry and thus has very crucial part in retail business. I will be looking
into the fashion retail business of Zara in United Kingdom. It is one of the most reputed and fast
growing fashion industries of United Kingdom and thus will be appropriate for my report. In
case, if this does not work out, another retail industry will be analysed for this purpose
(Blázquez, 2014). This will be my backup plan, which will help me in case of failure. The micro
and macro business environment of the retail industry is very crucial for fashion retail. As per
my intrinsic knowledge regarding the business world, some of the macro environmental factors
like customer factors like customer population, target, lifestyle and preferences will or may have
impact on the sales of the fashion retail industry. Along with this, legal factors like rights of
customers and employees, business acts and lawsuits for performing business will affect the
retail industry. Apart from these factors, some economic factors like economic stability, value of
currency and many such economic factors will or may affect the fashion retail industry.
In my perspective and intrinsic knowledge regarding the business world, micro factors like
employees and their behaviour in the industry will have a huge impact on the fashion retail. The
availability of skilled employees will help in delivering excellent and satisfying performance,
which will attract more customers. Another micro environmental factor is the supply chain and
distribution channels of the fashion retail. This factor is related to the cost and service provision
and thus will affect the fashion retail (Willems et al. 2012). The ongoing competition level in the
retail industry is one of the crucial micro environmental factors, which will definitely affect the
business in fashion retail industry.
For evaluating the surrounding and situation of the market of fashion retail industry, several
theories and concepts can be very helpful and result bearing. Therefore, while assessing the
details regarding different aspects of retail and fashion retail industry, I will be using and
implementing various theories like SWOT analysis theory, PESTEL analysis theory and porters

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model of five forces analysis. These theories will be helpful in assessing the different
environmental and cultural aspects of the fashion retail industry. For planning and writing the
report, I will be referring to several resources including several primary sources of data. I would
use journals, articles, magazines, books and case studies for gathering necessary data and
statistics regarding my report and I would refer to internet websites and search engines for
acquiring appropriate data for my report. In this way, I would finally be able to start my report
appropriately and effectively.

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Report: Summative
Introduction to retail
Retail industry is one of the most popular and largest industries in the market. Retail industry
deals with production of goods and commodities and then selling of those goods and
commodities to the customer in exchange of money (Hovenkamp, 2012). Retail industry has
greatly contributed in the regional, national as well as international economy. Retail industry
comprises of several businesses ranging from smallest shops run by an individual or few peoples
to large and vast organisations consisting of huge workforce and complex organisational
structure. Fashion retail industry is one of the largest sectors of retail industry and is the fastest
growing chain of retail industry. It has been most favoured sector of the retail industry and has
gained wide popularity due to emergence of globalisation (Twigg, 2012). Fashion retail industry
deals with production and retail of commodities related to fashion including clothing apparels,
various kinds of fashion accessories and many such fashion related goods.
Introduction to the company
The company selected for this report is the world famous fashion retailer Zara. At present time,
there are around 68 physical stores of Zara, actively functioning in the market of United
Kingdom. Zara also owns an online digital website for shopping, which provides the feature of
shopping online from the online stores of Zara. The entry of Zara in the UK's market has become
a threat for other competitor present in the market (Tran et al. 2011). The market share and
revenue generation in the United Kingdom has been observed to be increasing day by day, which
depicts the successful growth rate of the fast fashion retailer. Few of the biggest physical stores
of Zara in UK are situated in different regions like Guildford, Oxford Street of London,
Westfield in London, Regent Street, Belfast, Covent Garden and Birmingham. The profits earned
by the Zara in united kingdom has reportedly said to be grown to more than 58 million pound
sterling, depicting the successful launch of the company in UK’s market (Zara.com, 2019).

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Key relevant changes within the UK fashion retail
The key relevant changes that occur in the fashion retail industry of UK market can be accessed
through evaluating the macro-environmental factors of the business environment of Zara in UK
(Crofton and Dopico, 2012). These macro environmental factors of fashion retail of UK can be
determined with the help of PESTEL analysis method.
Figure.1- Pestel analysis
(Source: Pslides.com, 2019)
Analysing these macro environmental factors will help Zara in examining the changes occurring
in their business environment. Through identifying these changes, Zara will be able to bring
necessary amendments in its business strategies and activities (Byun and Sternquist, 2011). The
macro environmental factors of the business environment of Zara in United Kingdom can be
determined from the following table-
Macro environmental
factors
Brief description
Political factors  Impact of Brexit
 Trade agreement with European
 Interference of UK’s government
Economic factors  Devaluation of currency

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 Increased inflation in UK’s market
 Less spending capacity of customers
Social factors  Population of united kingdom
 Diverse culture
Technological factors  Online shopping platforms (Joy et al. 2012)
 Inclusion of advanced technology
Legal factors  Copyright laws and regulations
 Employees and customers rights
Environmental factors  Sustainable policies
 Use of organic material
 Recycling of textile waste
Table.1- PESTEL analysis
(Source: learner)
Political factors- The retail business of Zara in United Kingdom has been impacted from Brexit
movement. It has resulted in devaluation of the currency of United Kingdom i.e. pound sterling.
However, the agreement of Zara with Europe has helped the company in distribution of the
products of Zara across the European border without any border tariff (Caro and Martínez-de-
Albéniz, 2015). The interference of the government of United Kingdom in the business activity
of Zara may also affect the business performance of Zara.
Economic factors- The devaluation of pound sterling has created negative impact in the
business of Zara in UK. Along with this, the less spending capacity of customer due to inflation
of United Kingdom’s economy has lowered down the sales rate of Zara in UK (Piotrowicz and
Cuthbertson, 2014).
Social factors- UK have the population of 64 million people, which gives the opportunity of
reaching to more customers by Zara. The people belonging to diverse culture, who live in United

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Kingdom, are very fond of the products of Zara, giving Zara a competitive advantage in the
market (Zara.com, 2019).
Technological factors- Zara uses advanced technology for carrying out fast production and
packaging activities. It also has a developed online shopping platform, giving it more reach to
the diverse customer population (Kant Hvass, 2014).
Legal factors- Zara is required to strengthen their copyright laws as their products can be copied
and sold in the market illegally. The customer and employees acts and rights are compiled in
business according to the regulations of UK.
Environmental factors- Zara is very concerned towards the environmental safety and therefore,
it comprises of developed sustainability policies, which are practiced in its business operations.
The majority of cloths in Zara are made from organic fabric (Goworek et al. 2012). Zara has set
up fashion bins around its stores in UK, in which, all the textile related waste is dumped and they
are recycled by Zara. This reduces the negative impacts of garbage dumping and landfills.
Apart from these factors of the microenvironment, there are several other macro environmental
factors, which affect the retail business. These factors include the demographic division of the
customer population in United Kingdom. The products and services of Zara are to be developed
and distributed according to the different demographic segments (McColl and Moore, 2011). The
taste or preferences of the customers of United Kingdom are also very crucial for the retail
business of Zara, as the products are distributed and stocked accordingly.
These were the macro environmental factors of the business environment of fashion retail in
United Kingdom.
Relevant changes within the microenvironment
The microenvironment of Zara comprises of equally reputed competitors in the fashion retail
industry of United Kingdom. Some of the strong competitors of Zara in the fashion retail
industry of United Kingdom are H&M, Mango, and GAP and United colours of Benetton
(Hovenkamp, 2012). H&M has a very strong hold in the market of United Kingdom and it has
very stable business set up in the market of UK. This rival of Zara performs based on highly
developed cost cutting strategies, which helps them in increasing their profitability rates and

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ratios. Another competitor of Zara is Mango, which is very similar in case of business operations
and approach as compare to Zara. Mango is one of the leading companies in the field of supply
chain management and business structure (Halik, 2012). The productions as well as pricing
strategies of both Zara and Mango are very similar, making their products of similar level. The
only major difference between them is regarding their business venture and strategy. Zara is
much famous and popular among the customers of UK as compared to Mango.
Another rival i.e. GAP is also a highly reputed and popular brand among UK’s customers.
However, the products offered by GAP are very expensive as compared to the products of Zara,
giving Zara a big competitive advantage in the retail market of UK. Benetton is also in the list of
popular and famous competitors of Zara, in the retail market of United Kingdom (Déri, 2013).
The company is originally named as united colours of Benetton. This rival of Zara is famous for
investing in development of its production areas and strategies. All these rivals of Zara are very
reputed and have a very strong base in the market of United Kingdom. In such case, new entry of
Zara in the market has been a little concern for the business and growth in the retail industry of
United Kingdom (Zara.com, 2019).
Despite of presence of these many rivals in the market, Zara has effectively managed to generate
sufficient amount of revenue to demonstrate its successful entry and control over the market
(Kolios and Read, 2013). Apart from these rivals, there are many such other names in the list of
market competitors of Zara, which include brands like TK Maxx, Topshop, Next and many such
other famous clothing and fast fashion retailers. Zara has to bring changes in its marketing plans
and strategies according to the changing strategies of these competitors present in its
microenvironment. This affects the retail business of the company in the fashion market of
United Kingdom.
Suggest and discuss strategies and tactics that could be used
The most influencing factors of the macro environment of the retail business of Zara are its
political factors, legal factors and economic factors. The political factors of the macro
environment of the retail business of Zara include several impacting factors like the Brexit
movement (Goworek et al. 2012). Brexit movement is nothing but the withdrawal of Britain
from European Union. This has drastically affected the retail business and customer’s behaviour

10RETAIL THEORY AND PRACTICE
in the retail market of United Kingdom. However, the trade agreement of Zara with Europe has
been a great relief for running the business without any major consequences. The economic
inflation and devaluation of the currency of United Kingdom i.e. pounds sterling, has also posed
negative influence on the market of United Kingdom. The less spending ability of the customers
ah brought considerable downfall in the sales rate of Zara in UK (Blázquez, 2014). The company
has been somehow managing with these factors, and this has made it very difficult for Zara to
properly align its business activities and operations with the legal requirement of business as per
the legislative framework or lawsuits of United Kingdom.
These factors of the macro environment of retail business of Zara are the most impacting factors
for it. However, there are some significant influencing factors, present in the microenvironment
of the retail business of Zara (Twigg, 2012). These micro environmental factors can be assessed
with the help of several analysis strategies and methods like SWOT analysis strategy and Porters
five forces model.
Micro environmental factors of Zara can be anything and can have various impacts on the
business of Zara. These factors comprises of the weaknesses and threat of the company along
with the opportunities available for the growth and expansion of the company. It also shows the
storing areas of the retail business of Zara, which can be used for sustaining the business growth
and prosperity in the retail industry of united kingdom. The following table depicts the micro
environmental factors of the retail business of Zara in United Kingdom (Zara.com, 2019).
Strengths Weaknesses
 Zara has string research and development
department, which helps the company in
bringing innovative products in its product
range (Nenni et al. 2013).
 Due to strong brand name and reputation
in the global market, Zara has gained
considerable success in the retail market
of UK.
 Zara offers trending fashions and style
 Zara keep on experimenting in its styling
and production strategies, which can cause
heavy losses due to failure and can be very
risky for the business of the company.
 As the company is active in retail of fast
fashion clothing and fashion accessories, it
can be replaced by any other brand present
in the market.
 Zara has very less or very poor reach in

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wears to its customers.
 The products of Zara are affordable and
are of better quality.
the areas of digital marketing.
 Zara does not advertise or promotes it
brand in an effective manner, as compared
to its rivals.
Opportunities Threats
 The fast fashion company has the
opportunity of expanding its business on
online platforms.
 The company can enhance its business
profitability through e marketing.
 Zara can set up more stores in different
regions of UK.
 It can focus on investing in the emerging
market segments of the retail market of
United Kingdom (Miller and Mills 2012).
 There are a huge number of rivals of Zara,
present in the retail business of UK
(Amatulli and Guido, 2011).
 The purchasing power of the customer is
very less in Zara.
 The increasing inflation rates in the
economy of United Kingdom have lowered
the confidence of the customer, which can
bring major decline in the sales rate of Zara
in UK.
 The company has less compliance with the
laws and ethical business practices.
Table.2- Swot analysis
(Source: learner)
Porters five forces analysis technique can be used for determining the micro environmental
factors of the business of Zara in United Kingdom.

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Figure.2- Porters five forces model
(Source: Slidesalad.com, 2019)
The five fore present in the business of Zara are as follows:
Power of buyer- The products offered by Zara re innovative and are of good quality. Customers
get a huge variety of clothing and products at a very reasonable price, which makes the customer
attract toward it. However, there are numerous options for the customer in UK’s market.
Therefore, buying power of the customers is medium.
Power of suppliers-Losing a client like Zara will be a great disadvantage for the supplier of Zara,
which makes the power of supplier less.
Competitive rivalry- There are many rivals of Zara in the retail market of United Kingdom,
which as med the competition rivalry for Zara very high (Tran et al. 2011).
Threat of entrants- Zara he been a leading brand in the market and has more than sufficient funds
for investing in business development. This has lowered down the threat of substitution for Zara.
Threat of substitutes- There are many brands in UKs market, which can be a substitute of Zara’s
products, making the threat of substitutes high for Zara (Zara.com, 2019).