Chapter 1 Introduction

Zara was founded 43 years earlier in Spain. It was originally a clothing company which diversified into other retail items catering to men and women. The company now manufactures and retails clothing and accessories for women, men and children with the distinction of managing the entire operations in house there by exerting greater control over costs and quality. The company swiftly responds to changing market trends and innovates rapidly to keep their customers engaged. Unlike most retail companies, Zara does not promote their brand by employing the traditional methods of advertisement through outdoor media, advertisements in the newspapers, magazines, radio or television. The company rather focuses on the product and the place – “stores”. The philosophy is to make the products affordable to a larger section of the population and thus differentiate from others. The product pricing is one of the key ways Zara seeks to attain and sustain customer satisfaction. Keeping the manufacturing facility in-house is how the company can lower its costs and reduce wastage in the process while optimizing it for better outcomes. Zara now has presence in more than 30 countries with majority of the stores directly owned by them.

The company is part of the Inditex group. The entire design, manufacturing and distribution of Zara and other retail concepts of this group is managed through the main logistics center in Spain. The company ceaselessly manages to deliver new products to their world – wide stores twice a week.

This company is a leading entity in the retail business and have specifically chosen to target customers in the middle-income group who seek fashionable outfits but within a reasonable price range. They are globally competing with Top Shop and H & M. The company spread its global presence since 1988 in a slow organic manner capturing a market at a time and gaining traction. The company has managed to build a strong brand image and centralized their logistics hub to ensure timely order fulfilment at their stores as a continuous flow. This helps them to maintain control over their quality, pricing and costs which is otherwise difficult when manufacturing is outsourced. The higher revenues through selective choice of markets has ensured a stable financial performance. On the flip side centralization of manufacturing increases the risks of the business and increases the cost pressures too on cashflow. There is also the regional impact of online sales to contend with where multiple smaller players within a country who can achieve better efficiency. The need to update their designs regularly and liquidating unsold stocks is a continuous challenge in the garment retail business.

Technology has proved to be a boon for Zara. The option to sell online reduces much of the overhead costs while reaching out to a wider audience. It also helps Zara to gather some actionable input about their products and helps in their continuous zeal to innovate and engage their clientele. The most significant challenge for Zara in the future will be from regulatory compliance in emerging countries and the impact on earnings due to currency fluctuation in this globally unified economy. Zara has a well-planned strategy to diversify their risks by operating in more than 30 countries thereby countering any adverse conditions in one country with growth opportunities in many others. Competing in the fashion world calls for regular changes in design while tapping onto customer needs and demands. This is possible through greater control over their business which differentiates Zara from its competitors like GAP and H&M. One of Zara’s prime competitive edge has been their ability to design and launch new products in the shortest possible time thus, maintaining the customer’s interest in the company and the brand. The company is said to launch more than ten thousand new designs in a year which is more than 30 designs per day. Bulk of the promotions of Zara is through the online media and social media channels instead of spending huge amount on television and radio spots which are useful only to the point of creating awareness about the brand but focuses very little on the product range or depth of offerings.

Today, Zara is available through retail outlets in many countries around the world. Its entry into Melbourne has been a strategic move to gain foothold in the Pacific region with a burgeoning market.

Business research topic

The researchers have chosen to undertake a survey based research to evaluate Zara’s performance in Melbourne city and the issues that are impacting the sales figures and therefore the financial performance of the store.

Brand success in the retail world largely depends on the accuracy of the marketing strategy. It manifests from the precision of differentiation the market into various segments, targeting a particularly lucrative segment which has synergy with the brand and positioning in the most beneficial manner with least points of competition or a specific differentiation which helps the brand stand apart. It can be either based on cost or features or a combination of both which cannot be easily replicated by the competitors.

The next level is to design a marketing strategy to communicate with the right customers and prospects in this competitive market. The company should also create harmony among the product, price, place and promotion to voice a singular idea and promise. Research has established that the best of the products has failed due to poorly designed marketing strategy and execution of the plan especially due to inadequate primary market research to tap the pulse of the target audience.

The purpose of this research is to gather primary information about the brand and company from the customers. The research intends to highlight the key issues and suggest measures to counteract them and gain larger market share which will lead to additional revenue (Stipp, 2016).

The main reasons for a brands approval or disapproval by their customers could be one, some or all of the reasons like product range and design, price of the product depending on the quality as perceived by the buyer, the layout and décor of the stores, information about new designs, changes in return policy or the behaviour of customer service executives in the stores who are often instrumental in helping clients choose a particular outfit based on their body type, personality or colour preference in specific markets. Secondary factors which affect sales are perceived quality, packaging of the product, and the mode of distribution.

Aim of research

The aim of the research is to find the areas in the strategy that fails to meet the requirements of the customers thereby affecting the sales volumes of the company.

Objectives of research

The objectives of the research are as follows:

• To determine the factors of the marketing strategy which are falling short of customer expectations.
• To corroborate the customer views with in-store executives’ experience while handling customers.
• To recommend suitable means to overcome the issues and increase sales.

Research Methodology

This research will be a quantitative study conducted through primary survey of customers shopping in Zara, Melbourne. The survey will be in two parts – first part will focus on the customers. The second part of the survey will be conducted on few employees of Zara who are working in the stores.

The survey will be accomplished through two separate questionnaires each directed to customers or employees individually. The questions seek answers on a five point Likert scale which will be tabulated to analyse for underlying trends or linkages using mean, median and standard deviation. The comparison of findings of both the customer survey and the employee survey is expected to provide further corroboration to the findings of the research or point at significant mismatch.

Research Process

This research will be based on a detailed literature review of articles and journal views on market identification and selection. The articles on the segmentation process followed by companies while expanding into new markets will provide grounded information about the usual practices and pitfalls. Discussion of the literature on marketing strategy, customer satisfaction factors, and product positioning and branding will provide detailed insight to prepare the basic grounds for the research.

The research process will depend on the questionnaires designed for eliciting primary information from both the customers and employees. A random set of 30 customers who consent to the research will be presented with the questionnaire and the responses market on the sheet by encircling the rightful choice. Similarly, 20 employees of Zara will be approached to conduct the employee side of the investigation and data collection using a second questionnaire. The responses will be tabulated in a spreadsheet and then the compiled data will be analysed with descriptive statistics and graphs to extract actionable information.

Structure of the Report

The report will have clear sections. The abstract will provide a concise information on the approach and key findings. The introduction section will provide the background of Zara, the purpose of the research, brief literature review to indicate the direction of the study and introduction to the research process. A detailed literature review section will present critical analysis of existing views in the field and the gaps. The output of the review will be the input to the types and variety of questions that can be used in the data collection tool. The research methodology and questionnaire design will be explained in the data collection and analysis section of the report. The comparison and discussion of the findings of both the surveys will be compiled in the discussion and results section. Finally, the conclusion of the research, recommendations based on the findings, direction for future research and ethical issues if any will be explained in the final section of the report.

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