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PESTLE Analysis Of Zara

PESTLE Analysis of Zara

 Thomas Bush Jul 24, 2019
Contents
 Political
o European Trade Agreements
 Economic
o Low Cost of Labor
o Relative Affordability
 Sociocultural
o Fashionable Brand
o Online Shopping Trend
 Technological
o Use of Big Data
 Legal
o Copyright Issues
 Environmental
o Fast Fashion Impact
o Sustainability Pledge
 PESTLE analysis of Zara: Final Thoughts
Zara is one of the hottest fast fashion brands in the world. Born out of Spain and now
with more than ten thousand stores around the globe, the story of Zara is an exciting one.
The question is, is this decades-old brand here to stay?
In this PESTLE analysis, we review Zara’s current market standings through Political,
Economic, Sociocultural, Technological, Legal, and Environmental lenses. As you’ll see
in a second, Zara’s future certainly isn’t too bad…
Political
Here are the Political factors impacting Zara:
European Trade Agreements
Zara is a Spanish brand, so it enjoys all of the benefits of operating a business out of the
European Union. In a political context, one of the biggest pros of running a company in
the EU is the country’s extensive trade agreements. Not only does this make it incredibly
easy to import raw materials and export finished products within the European Union, but
it also means that Zara can send its merchandise across the world with little effort and for
a low cost. Overall, the EU’s free-trade policies are massively beneficial for Zara; let’s
just hope the Union continues to thrive!

Economic
Here are the Economic factors impacting Zara:
Low Cost of Labor
As mentioned previously, Zara is a Spanish brand. Since Spain has one of the highest
unemployment rates within Europe, this means that it has a relatively low cost of labor —
especially in comparison to other Western European countries, such as France, Germany,
and the United Kingdom. Zara manufactures a good fraction of its products in Spain, so
this low labor cost allows them to minimize costs and, in doing so, improve profitability.
Again, the low cost of labor in Spain is definitely a positive for this brand!

Relative Affordability
Zara is a well-recognized brand, so those less familiar with its products might think
they’re quite expensive. On the contrary, Zara is considered a relatively affordable brand
in comparison to other European highstreet fashion names. This allows the company to
thrive even in poorer countries; for example, despite Spain’s slow economy, Zara is still
one of the most popular clothing brands in the country. Indeed, Zara has some more
expensive products, but what’s most important is that it can cater to the majority of
shoppers with the rest of its clothing lineup.

Sociocultural
Here are the Sociocultural factors impacting Zara:
Fashionable Brand
Despite its affordability, Zara is a fashionable name for most shoppers. This is where you
can only praise the company for its hard work. Zara delivers a good-quality product for
not a lot of money. And thanks to the brand’s clever marketing efforts, it feels rather
exclusive for buyers. Overall, this strong, positive brand presence allows Zara to collect
healthy profit margins for its shareholders, while buyers still feel like they’re getting a
great deal.

Online Shopping Trend

There’s no doubt that online shopping is a major trend in the 21st century. Although
clothes shopping might not be the best fit for the web, consumers now want to order their
garments with the tap of a button, and from the comfort of their own homes. This isn’t
necessarily a bad thing for Zara, since they already have a popular webshop. However,
Zara will have to pay close attention to the performance of its online store, since
consumer’s preferred channels are definitely changing.

Technological
Here are the Technological factors impacting Zara:
Use of Big Data
Zara is one of many brands looking to use technology to expand its reach. As one of the
world’s most popular fashion retailers, the company has both the money and the audience
needed to get the most out of data. As a result, Zara is looking to big data — the study of
analyzing huge data sets — to find better ways to reach and appeal to consumers. With
both online and in-person customer touchpoints, this isn’t a straightforward task. But if
Zara can pull off some successful data analysis, you bet they’ll be able to propel their
powerful business even further. 

Legal
Here are the Legal factors impacting Zara:
Copyright Issues
Like all of us, Zara has to operate within the bounds of the law. For all fashion brands,
copyright law is one of the scariest legal branches out there. Since Zara loves capturing
hot clothing trends and making them more affordable, it’s bound to run into some issues
with copyright. In fact, the major retailer already has. It’s been accused of stealing
designs and clothing concepts from the likes of Adidas and Balenciaga. In past cases,
Zara has largely been able to weave itself out of uncomfortable legal situations like these,
but who knows if the behemoth brand will continue to have such good luck.

Environmental
Here are the Environmental factors impacting Zara:
Fast Fashion Impact
The world of fast fashion is often associated with wastefulness. Many fast fashion
products simply aren’t designed to last; instead, they’re supposed to be affordable
garments that look good in the changing rooms. What’s more, fast fashion is said to
encourage shoppers to quickly jump on trends, throwing away clothing just to stay with
whatever is hot. Some might classify Zara as a fast fashion brand, so they might be
accused of this wastefulness. With shoppers becoming more and more eco-conscious, this
could have a negative effect on the brand if it doesn’t begin to take sustainability more
seriously.

Sustainability Pledge
To show its concern for Environmental matters, Zara’s parent brand Inditex has openly
published a sustainability pledge. On its website, the brand shares its “commitment” to
water, climate change and energy, biodiversity, sustainable materials, animal welfare, and
other environmental and ethical issues in depth. If Zara can adhere to these guidelines, we
can assume it will continue to thrive even under scrutinous eyes.

PESTLE analysis of Zara: Final Thoughts

Zara is a big brand for a reason: it creates luxury-feeling fashion products at an affordable
price. With lower labor costs ensuring a solid margin for shareholders, the company’s
core business model is solid. There are concerns about Legal and Environmental issues,
but Zara should be more than mature enough to handle them!