Analysis of Retail Management at Zara in Klaipeda, Lithuania
Zara is a fashion retailer that is part of the Spanish parent company Inditex, one of the largest distribution groups of the world. The company is unique in the fashion retail industry because it is the most highly vertically integrated company in the fashion industry. It owns every stage in the value chain instead of outsourcing manufacturing to low wage countries in Asia. The first Zara store was opened in the city of Coruna in Spain in 1975. The company expanded rapidly because of the philosophy of integrating high quality, trendy fashion and affordable prices. Today, the company has stores in more than 400 cities of the world (Inditex 2012).
Merchandise Range and Assortment
Zara is a retailer in the fashion industry. Its stores are usually present in the shopping centers and malls of the city district. Zara has a unique position in the fashion retailing industry. It offers fast fashion to the customers and this is the most distinguishing factor that makes Zara distinct from its competitors. The brand relies on providing new trends to the customers. However, these trends are momentary and soon the old trends are replaced by new ones. This helps to increase the number of visits of customers to the stores. I observed this in the store at Lithuania because customers there were revisiting the store even after one week or ten days of making the last purchase from there.
To maintain such a high traffic of customers and repeat visits by them, Zara needs to offer merchandise that sells fast and has a high fashion appeal. The merchandise range has to be appealing so that it sells fast and the new merchandise has to be trendier than the old one so that customers continue to flock to the stores. The merchandise available has to meet the merchandise expectations of the customers (Radder 1996). This helps the company to achieve its strategy of fast fashion that increases merchandise turnover rapidly.
Another aspect of the strategy of Zara is that the merchandise has to be affordable compared with other high street brands like Gap and Benetton. For this reason the merchandise range and assortment has to be manufactured and sourced in a way that the lowest costs are achieved and transferred to the customers in the form of lower prices. Zara achieves this successfully by means of its pricing and sourcing strategies that will be discussed later in this report.
The merchandise range I observed at the Zara store in Lithuania included a merchandise assortment for varying buying preferences. The common feature of all the merchandise items was that they were stylish and trendy. The merchandise assortment was such that there was something available for all age groups and all fashion sensibilities. There were outfits in bright colors and outfits in sober colors as well. Because of the location of Lithuania in northern Europe and because of the cold temperatures, there was an abundance of winter wear like overcoats and jackets. The merchandise I saw was similar to the merchandise in Russia the previous year and it confirms that fashion retailers develop merchandise on the basis of cultural clusters (Warts & van Everdingen 2006).
The clothes were all very trendy looking but the quality was good as I tried on some of the clothes. There was also clothing to wear near the sunny beaches as well as skirts, trousers and blouses. There were other items to complement the clothes. I could see footwear and headgear on display as well as a few bags for the mobile customer. These products helped to break the monotony and create variety in the merchandise range.
Marketing communications play a very important part in retailing. Especially in a store like Zara where the business model is based on high merchandise turnover and new designs introduced several times a month, it is even more important to convey the arrival and unique features of the designs to customers regularly. Marketing communications take the form of various media but the retailing experience itself provides the most effective opportunity to communicate with the customers. The communication and promotional objectives for a retailer have to be tied to its strategic objectives (Fernie et al. 2003, p. 136). For Zara, that strategic objective is to position itself a fast fashion brand I the mind of the customers.
Zara has a unique marketing communications strategy that differentiates it from its competitors and gives it a competitive advantage over them. Zara spends very little on advertising as part of its marketing communications. The fashion retailer relies more on the store location and the strategic use of window displays. I observed that Zara stores were located in the busy shopping districts of the city and the customers came to visit the Zara store when they were in the shopping center.
In Lithuania, I visited the Zara store in the Akropolis shopping mall in Klaipeda and saw that the window display was one of the best in the mall. Several shoppers were admiring it. They said that it was to see the window display changed every week or so that they would often come to the mall. The strategic use of the window display as a marketing communications tool helps the brand to convey the image of fast fashion because a new set of clothes is put on display every week or fortnight. This also encourages customers to quickly purchase the clothes before the designs go out of fashion. The aesthetic appeal of the window display also attracts many people to view the store and increase the foot traffic in the store. In fact, an attractive window display may be the most crucial factor in a customer choosing to enter the store for the first time (Lochhead & Moore 1999, p. 247-256).
Zara also relies on how the interior of the store communicates its message of fat fashion and customer service to its customers. The layout and the design of the store carries an image about how the shopping experience is perceived. According to the Echevarria who was the chief communications officer of the parent company Inditex in 2008, the image of the Zara stores is renewed or changed after every six to eight months to communicate the freshness of its approach and fast changing merchandise (Business and Leadership 2008).
A fourth aspect of the marketing program at Zara is the use of merchandise and the goods display unit. The goods display inside the store does what the window display does for customers outside the store. It attracts them towards the products and conveys the unique combination of fashion, high quality and affordability. However, this may not be the case with all the customers. I asked a few shoppers about what the atmosphere of the store communicates to them. One of them who had visited a Zara outlet for the first time told me that she was surprised at the affordable prices because the environment is very classy and she felt that it would be an expensive place to shop.
Store Layout, Design and Visual Merchandising
Visual merchandising involves making strategies and decisions about various aspects of merchandising including how the merchandise to be packaged, how it is to be displayed in a way that maximizes exposure yet makes effective and efficient use of store space. It is necessary for firms to make effective stock keeping strategies to minimize the use of storage space so that it can be used as a display area. Zara keeps very short lead times as part of its strategy so that it does not need much storage space at all.
A visual merchandiser makes decisions about the merchandise to be stocked and the quantities of each item to be stocked. At Zara, the visual merchandiser needs to be in touch with the latest fashion trends so that those trends can be introduced through merchandise that will be most attractive for the customers. The visual merchandiser also needs to possess financial knowledge to make the most cost-effective merchandising decisions for the store. He or she also needs to have a good aesthetic sense so that he or she may design the store and its layout to showcase the merchandise for maximum exposure and facilitate customer movement in the store and interaction with the merchandise (Bhalla & Anurag 2010, p. 78).
Store Layout and Design
The display of the items in the store and the layout and design of the store are also important aspects to be considered in the visual merchandising role. The store layout determines how the goods will be sorted, arranged and displayed in the store. It answers questions such as whether the merchandise is to be placed on shelves or hung from racks.
It also answers the question of which merchandise items are to be placed close together to enable a customer to make related purchases or to compare different items of merchandise in a better way. It is necessary to be aware of how customers make purchase decisions at the store to make the best use of the store layout. The store layout also influences how customers move around the store and which pieces of merchandise they notice first. Several alternative store layouts may be used including the grid layout, the boutique layout, the free-flow layout and the controlled flow layout (Okonkwo 2007, p. 82.)
Upon my visit to the Zara store I found that the store uses the free-flow layout to achieve its strategic goals. The merchandise was displayed on racks and hangers at various points in the store. Some products like shoes, bags and hats were also placed on shelves. Tables were also used at various points throughout the store to display folded clothes. There was a lot of space to walk around comfortably and to see the various merchandise on display. I found that the merchandise was sorted and arranged according to the personality of the buyer. For instance, the winter wear and dark-colored skirts were placed in a separate portion of the store and the colorful and bright outfits for younger customers were placed in a separate area of the store. Semi-formal and casual clothes were also places separately. One area was designated for footwear while bags and hats were displayed throughout the store on shelves above the clothes display unit.
This layout allowed customers to walk around freely and come into contact with other items similar to what they are looking for more often. For instance, someone who wanted to buy a red colored top could also find stoles and trousers nearby to go with it. He or she would not be distracted by a long overcoat on the nearby shelf.
Merchandise Display and Showcasing
I spoke to a few shoppers and they were of the opinion that the merchandise was displayed attractively and it was easy to find what they were looking for. The merchandise was arranged neatly and was visible clearly to all shoppers. A combination of racks, shelves, hangers and tables was used. This created variety and was also inviting for shoppers to visit the different types of display units to compare the merchandise. The tables, in particular, invited more interaction with the merchandise since they were easy to unfold and try out compared with merchandise hung on the hangers for which the shoppers had to take them out of the hanger and were uncomfortable with taking it out and then putting it back on the hanger after trying it out.
Customer Service and Facilitating Services
The customer services of any retail organization plays an important part in its success. Having an effective and sound customer services strategy can help to distinguish the shopping environment and retailing experience for the shopper. The retailer has to find ways of encouraging shoppers to visit the store again and again by making the experience an enriching and useful one. The customer services of any retail firm affect how easily the shopper is able to find the merchandise he or she wants, how easily he or she is able to find alternatives for comparison and make purchase decisions. The customer service personnel need to be in a position that they are able to provide the most updated and accurate information about the merchandise to the customer. This increases the credibility of the retailer and encourages customers to visit again and again.
For Zara, this is a very crucial part of its retail management strategy because the success of its business model depends on the high traffic of customers and repeat visits by them several times during a month. The level of customer service decides whether the customer is satisfied enough to visit the store a second or a third time to view the merchandise on offer.
I found the customer service professionals at Zara to be highly informed and courteous. They were not interfering and gave the customers free space to move around and view the merchandise. At the same time, they were accessible and available whenever a shopper needed any information about the sore, the merchandise or the price of the merchandise. They also guided the people about where they could find related merchandise and about new merchandise that would be available in the coming days.
Facilitating services are also important for any retailer. These services include assistance in shopping, bagging, taking the purchased items to the car of the customer, accepting credit cards and cheques, and so on. These facilitating services help to augment the service that the retailer actually provides. The actual or core product is the fashion merchandise that other stores may copy or replicate. However, the facilitating services offered by a retailer impart a human element to the shopping experience and can differentiate the retailer form others. In fashion retailing it is important that the self-image and esteem of the customer be enhanced after the retailing experience. This means that customer service and facilitating services should play their part in making the customer feel pleased and delighted after the experience.
Zara provides several facilitating services. They accept most of the credit cards that foreigners like me can carry with them. I also saw the manager of the store offer to walk with one customer to the door with her shopping. I was later informed y the customer service professional that this was a regular shopper and had been visiting the Zara store for several years.
Store Formats and Locations
The store format and location is extremely important for a retailer and decisions about store format and location have to be made with regard to the shopping and buying habits of the target market segment. In the fashion retail industry, customers like to be delighted and feel flattered about how they look. Not only the merchandise but also the location and format of the store influence their esteem and decided whether they feel good about themselves. The evolution of the retail industry has changed the focus of location from suburban areas to city centers. The store formats have varied from department stores to supermarkets, hypermarkets and even trends of specialized stores like Home depot which specializes in home improvement equipment and IKEA that specializes in affordable furniture.
For a fashion retailer like Zara it is important that the store format be appealing to the target market and should convey the brand image. Zara stands for high quality trendy fashion. Therefore, it should be located in an upscale environment. The store has adopted the boutique format of the specialized store and offers fashionable clothing for children, men and women of all ages. The store format allows the clothes to be displayed attractively and by making the best use of the available space. The boutique format allows the customers to make their purchases single-mindedly without being distracted by other product categories as in a department store or a supermarket. They can browse a greater range of merchandise in a calm and comfortable environment.
The location of the store is also important in determining whether the target market segment prefers to visit the store and is able to do it conveniently (Zentes et al. 2011, p. 203). While other retailers may be present in areas out of the city, a fashion retailer like Zara needs to be located close to the urban area because customers need to visit it more frequently to buy the latest fashionable clothes. This is why Zara locates all its stores in the busy shopping districts of the city center.
The Zara store I visited in Lithuania was in the busy commercial port city of Klaipeda and the store was located in a large shopping center called the Akropolis (Akropolis 2012). There were over 200 stores in the shopping center which invited a lot of shoppers throughout the day. A large volume of customers visiting the Zara store daily is necessary or it to achieve its high turnover targets and sustain its business model economically. Being situated in a large shopping centre where thousands of customers visit each day increases the probability of them visiting Zara to make their regular fashion purchases.
Pricing Strategy and Tactics
The pricing strategy is important for any retailer because it determines the sales turnover which is the main factor in the economical success of its business model. The pricing strategy for a mass retailer would be different from that of a specialist retailer. Zara does not fit neatly into any of the two categories but combines them effectively to create a niche for itself in the market.
Despite being in the fashion retail industry, Zara charges low prices for its exclusive designs. The designs are held for only a very short time and quickly replaced by new designs. For this business model to succeed, Zara needs to have high sales turnover so that the store does not get left with unsold stocks of designs that may not be relevant for the next season. One way of achieving the high sales turnover is through the low prices it offers. The low prices also differentiate the store from its rivals and increase the size of the target market.
Zara is a unique firm in the fashion retail industry. It follows a unique philosophy to attract a large segment of middle-income fashion-conscious consumers. The unique strategy combines various aspects of merchandise range, store layout, visual merchandising, pricing, marketing communications, location and customer service. The merchandise is of a high quality but the merchandise is replaced every week or so with new designs, serving to increase customer traffic and sales turnover. Located in busy shopping areas with attractive store displays and store design, Zara helps to convey its presence and unique offering to the customers. The store layout, format, visual merchandising and friendly customer service help to make the shopping experience pleasant for the customer, ensuing repeat visits and continued high turnover.
Akropolis, 2012. Stores. [online] Available at: http://www.akropolis.lt/index.php/akropoliai/klaipedos-akropolis/shop-in-akropolis/61543 [Accessed 5 May 2012]
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Fernie, J., Fernie, S. And Moore, C., 2003. Principles of Retailing. Boston: Butterworth-Heinemann.
Inditex, 2012. Our Group. Available at: http://www. inditex.com/en/who_are_we/our_group [Accessed 5 May 2012]
Lochhead, M. And Moore, C.M., 1999. A Christmaas fit for a Princes’ Square. In European Cases in Retailing (Dupius, M. And Dawson, J. eds), pp. 247-56. Blackwell, Oxford.
Okonkwo, U., 2007. Luxury Fashion Branding: Trends, Tactics, Techniques. Palgrave-Macmillan.
Radder, L. 1996., The Marketing Practices of Independent Fashion Retailers: Evidence from South Africa. Journal of Small Business Management, 34 (1). Available through: CQU database [Accessed 5 May 2012].
Waarts, E. And van Everdingen, Y.M., 2006. Fashion Retailers Rolling out across Multi-Cultural Europe. International Journal of Retail and Distribution Management, 34 (8). Available through: EBSCO database [Accessed 5 May 2012].
Zentes, J., Morschett, D. And Schramm-Klein, H., 2011. Strategic Retail Management. Springer.
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