Pricing Final Report

Pricing Strategies Adopted by Inditex

Analysing Zara and Pull&Bear

By Rousseau Gambit June 25, 2021

Kavya Gujrati Section B

Pragati Gogna VSPW ‘21
Priyasha Sai Ukil
Rhea Jain
Shubhita Arora
1. Introduction
Inditex is a leading fast fashion company, which is also the world’s largest clothing manufacturer.
Zara is Inditex’s flagship brand, but also has several sister brands which have different target
groups with varying price points. As of 2019, Inditex has a sprawling global presence, with 7,500
stores across 96 countries. Additionally, Zara’s online store is accessible to more than 200
countries. Other brands within the parent organisation of Inditex include Zara Home, Stradivarius,
Pull & Bear, Massimo Dutti, Bershka and Oysho. The Inditex Group brings together over a
hundred enterprises involved in a wide range of activities related to design, production, and textile
distribution. The customer is at the heart of Inditex unique business approach, which is founded
on innovation and flexibility. Their understanding of fashion -creativity and quality design, as well
as an agile responsiveness to market demands - allows them the rapid international expansion and
an outstanding public reception for all eight brands. What makes them unique is their vertical
integration and shorter supply chains which are more responsive and manageable as compared
to their competitors. Despite the higher costs incurred, this allows Inditex to observe and respond
to trends rather than predict them- which allows them to be faster. Their computerized inventory
system, state-of-the-art production and warehousing, and a short supply chain cut lead-time to 10-
15 days between design and distribution, compared to the 5-6-month industry average.

While Inditex has a diverse portfolio of brands our report would have a focus on two brands
which are Zara and Pull&Bear.

Zara's chapter started in 1975, with the opening of our first store in the Spanish coastal city of A
Corua, a watershed moment in our company's long history. Zara has kept true to its basic ideals
over the years, which are simply described in four key terms that characterise all of our stores and
online platforms: beauty, clarity, utility, and sustainability. Zara's designers adapt instinctively to
their shifting demands, reacting to the newest trends and continual input collected across its
Woman, Man, and Kids collections, to bring fresh ideas in the right place and at the right time,
cultivating a highly intimate relationship with its customers.

Pull&Bear was founded in 1991 with a clear international aim in mind of clothing young people
who are engaged with their environment, live in the community, and interact with one another.
Young people who want to dress casually, avoid preconceptions, and want to feel good in whatever
they wear. Pull&Bear meets their demands by taking the latest international trends, merging them
with influences found on the street and in the most popular clubs, and reworking them according
to their style, resulting in comfortable and easy-to-wear clothing. Pull&Bear evolves at the same
rate as its customers, constantly on the lookout for new technology, social movements, and creative
or musical trends. All of this is visible not only in its designs, but also in its stores. The product
lines are always being updated and are inspired by the famed Californian city of Palm Springs.
Every retailer in the world receives fresh products twice a week. Pull&Bear is part of the Inditex
Group) and operates in 76 markets with a network of over 970 stores and an online store. Sales at
the end of 2019 was 1,970 million euros. In total, over 139 million items were sold, including over
32 million T-shirts.

2. Segmentation
2.1. Price Segmentation:

Inditex uses pricing segmentation to capitalize on its broad customer base. Price segmentation is a
powerful tool ensuring that all the customers have something available to them and the cumulative
sales also ensures the maximum economic value to the company. It is also a strategy to scale a
business and acquire market share from its competitors, which has played out well for Inditex as
they are one of the largest fashion retailers across segments. Inditex has different brands, all of
which have different target markets and sell at different price points. Because at multiple price
points, all customers can find something affordable and it results in maximum sales, giving the
benefits of economies of scale in the long term.

Zara leads Inditex’s sales, with an average pricing of about €37. Massimo Dutti, which comprises
high-end clothing, has the highest average price point, at about €89. Meanwhile, its sister brand
Pull&Bear, offers completely contrasting styles. It has the lowest average price point within
Inditex, which is € 20.6, with a plethora of cheaper products which focus on accessories and t-
shirts. Bershka, which is also Pull&Bear’s biggest competitor, has a slightly higher average price
point of € 21.3. This is followed by Stradivarius, which falls right in the middle of the spectrum
and has an average price offering of € 22.5.
 Infographic 1: Pricing Assortment Mix of the Inditex Brands

2.2. Demographic Segmentation:

Zara has mastered the art of making the most trending designs and styles available to their
customers, who comprise urban men and women. It offers a wide variety of clothes, especially
dresses, shirts and blouses, with its target age group being 20-45. Meanwhile, Stradivarius has an
assortment of casual wear for young women and Bershka targets teenagers with the latest urban
styles. Pull & Bear offers trending casual wear for young adults and attracts youngsters with
trending collaborations with latest pop-culture movies or TV shows. It also has the highest
proportion of its products which target the male demographic. To add a differentiating consumer
segment, Pull&Bear also established ‘Pull&Bear Heritage’ in 2011, which was a clothing line
exclusively for men in their 30s. Massimo Dutti comprises high-end clothing for a premium target
audience, with emphasis on elegant categories of clothing such as outerwear and formal wear.
Meanwhile Oysho, which distinguishes itself from its sister brands by offering lingerie,
loungewear, nightwear and sportswear and targets young to middle aged women for the same.
 Infographic 2: Age-wise Target Group Segmentation of Inditex Brands

Infographic 3: Gender Based Segmentation of Inditex Brands and their Products

Going ahead we will be analysing the pricing strategies of Zara and Pull&Bear in detail. Both
the brands belonging to the same parent company, have a stark difference in their positioning,
target market and price points.

3. Pricing Strategy

3.1. Value-based pricing

Zara follows value-based pricing. Value-based pricing is a pricing strategy in which a

corporation evaluates and attempts to earn the differentiated worth of its product for a certain client
segment when compared to a competitor. Topshop, Zara, Uniqlo, and H&M are the four largest
fashion firms, all of which are fast-fashion corporations. These fast-fashion brands have low-cost
labour, low-cost materials, and short manufacturing cycles. Zara is able to pursue a low-priced
strategy as a result of these considerations. ZARA was praised for its first-rate image, second-rate
production, and third-rate price. It does not have high design, advertising, or raw material costs.
Zara's pricing strategy not only demonstrates the value proposition, but it is also affordable to the
majority of buyers. To determine a price, the method focuses on customers' perceptions of value
rather than the company's costs. Its target clientele desire fashionable clothing but cannot afford
the hefty prices of luxury fashion labels. Furthermore, it occasionally offers discounts at the end
of the season, though these are rare and on select products.

Zara further uses neutral pricing as the prices are set by the general market prices of the
competitors. It has been said by Shelley E. Kohan, Assistant Professor, Fashion Institute of
Technology, New York, that the most loyal customers for retailers typically account for 80% of
the sales. People who are brand loyalists are also less price sensitive. She further emphasizes that,
“Appealing to the loyal segment of the target market, like Zara does, allows for higher profit
margins and caters to customers who seek out branded value,” she emphasizes. “Inditex appears
to be aware of what consumers are ready to pay based on their income, in addition to pursuing a
pricing strategy adapted to the features of each region.”
3.2. Competition based pricing

Pull&Bear follows a competition-based pricing. Pricing that is based on the rates set by the
industry's competitive leaders is known as competition-based pricing. The majority of retailers
employ competitive pricing to acquire a competitive advantage over the industry's rival brands.
This method is employed by the company to increase sales and achieve a competitive edge through
clever pricing. Given the fierce rivalry from Abercrombie & Fitch Co.'s Hollister Co., Forever 21,
Brandy Melville, and other market participants, it makes sense for the incumbent company to stay
relevant. Pull&Bear further uses penetration pricing as they set prices according to the
competitors. Penetration pricing is a pricing strategy employed by a company that wants to enter
a new market and achieve a large market share by selling at a low price. The goal of penetration
pricing is to gain a loyal client base by giving the most competitive price in the market and
undercutting competitors and well-known brands. Penetration pricing is a marketing technique as
well. The corporation expects that by setting eye-catching cheap prices, it would be able to raise
customer awareness of the firm's entry into the market. Pull&bear started operating in the U.S in
2019 through online medium and is focused on making its presence by competing against the top
brands like Hollister, Abercrombie & Fitch Co. by providing absolutely competitive pricing. Pull
& Bear also marketed a limited edition of T-shirts related to the hit Netflix Inc. show "Stranger
Things" ahead of the series' third season, in tandem with its launch in the United States. Given
Inditex's typical aversion to advertising and major marketing splashes, the collaboration between
an Inditex brand and Netflix gives a hint of caution to its competitors.

4. Pricing Structure

A well-defined Price structure can deliver high profitability and market share by considering the
value that customers assign to their product or service and the cost to serve these customers. The
Pricing structure of Zara and Pull&Bear have some similarities in terms of price metrics and some
differences in terms of price fencing.
4.1. Price metrics
The price a buyer pays for the products from Zara and Pull&Bear is basically for the quality
assurance. And if there is a doubt for the same, provisions for exchange policy apply to it. This
price metric is somewhat standard for any fashion retail brands in the market. Hence, these Inditex
brands go by the process of charging only for what they are known for, and the values they exhibit.
These parameters are basically to satisfy the customer and ensure them to know what they are
paying for, even if it's a bit on the higher side.

But there surely exists some price fences to balance it and to qualify a customer to pay less.

4.2. Price fences

As deduced that Zara follows a Value based pricing strategy, it generally doesn’t have any specific
price fences for the customer segments. It is very rare that Zara would be seen displaying a season
sale or offering any discount. Although it is observed that overtime as a new product appeal fades
in comparison to newer competitive alternatives, Zara discounts its value as the customers are now
willing to pay only a fraction of its original price for the leftover models. This is also referred to
as priority pricing. Zara has been following this strategy over a period of time when they reduce
the prices of not-so-in-trend clothing. This way, customers with high incomes and low-price
sensitivity pay premium prices for the latest styles and models and can choose from a full inventory
of sizes and colors. Over time, as inventories age and the availability of sizes and colors declines,
prices are reduced in successive rounds of promotions to appeal to more price-sensitive buyers
who are willing to wait for the opportunity to buy high-quality, but less trendy, inventory and with
less certainty of obtaining their preferred size or color.

On the other hand, Pull&Bear includes some basic price fences in its pricing strategy such as
Buyer- identification fences as it is often seen offering student discounts, time of purchase fences
which includes season and end of season sales and discounts, purchase quantity fences which
include offers like Buy 3 Get 1 free and more.

Detailed discounting strategies will be discussed in the following segments of the report.
5. Price and Value Communication

In terms of communicating value and price, both Zara and Pull&Bear follow similar strategies.
They both house low cost search goods and clearly communicate the value of their offerings-
adopting a psychological benefit association strategy. Unlike their competitors however, they
follow a minimal advertising strategy focusing on word-of-mouth communication, store appeal
and letting their concept of high fashion, low cost- speak for itself. They value customer interaction
and feedback which ensures that customers feel like their opinions are values.

Given the nature of their products the buying process is relatively short thus their price
communication strategies focus on the selection and fulfillment stage of the process, in which they
follow certain retail best practices but differ in terms of their discounting strategies.

5.1 Low Cost Search Goods

Zara and Pull&Bear both offer products where the relative cost of searching for information about
the differentiating attributes of their offering is low. This means that customers can easily
determine product differences before purchasing their products. In the case of Zara, given that its
supply chain is optimised and that it keeps its stocks purposely low, it is able to hop onto trends
and recreate designer wear items faster thus giving an edge to its product offering. It churns out
new designs every 4 weeks and supplies new products to its stores twice a week.

Pull&Bear similarly has an optimised supply chain that allows it to offer new designs faster. It
often also collaborates with comic book companies, cartoon companies and prestigious brands to
produce limited edition merchandise. Both offer unique merchandise and this differentiation in
terms of designs is apparent whenever you walk into one of their stores or browse their websites.
 Image 1: An example of Zara's high-end fashion design inspired looks

5.2. Psychological Benefit Association

Both brands are customer-centric and target exactly what the customer wants and values- thus
adopting the psychological benefit association strategy. Zara for example knows that customers
want high end fashion clothes but cannot often afford them. It thus offers replications of trends
and styles seen on the runway at affordable prices. Its stores are inspired by Prada giving a
luxurious feeling on entering. Its stores are also strategically located near high-end stores so it can
make its customers feel like they are purchasing similar kinds of products. It thus provides
customers with psychological benefits of status, appearance, pleasure and personal fulfillment
without burning a hole through their pockets. Pull&Bear similarly offers trendy, affordable and
accessible garments for the younger generation providing similar benefits of appearance, pleasure
and personal fulfillment. Both also collaborate with prestigious brands and pop cultural entities,
Marvel for example, to provide unique merchandise that provide psychological benefits to its
customers.
 Image 2: A Zara Store replicating the interiors of a Luxury Designer Store

5.3. Minimal Advertising

Unlike its competitors who spend 3.5% of their budget on advertising, Zara and Pull&Bear only
spend 0.3% on the same, limiting themselves to promotional advertising on Instagram, Facebook,
twitter, Pinterest and YouTube. This is because they believe in word of mouth communication and
in their concept- of having what customers want and need. Zara in particular only produces
products it knows it can sell focusing on keeping stocks low and giving their products a scarcity
appeal- which is coveted in the high fashion world. Rather than focusing on the traditional 4P
marketing mix that its competitors rely on, Zara focuses on a new 4E marketing strategy that
emphasises- experience, exchange, evangelism and every place.

Unlike Zara that follows a pull strategy attracting customers, Pull&Bear does push promotion
where the products are pushed in front of customers by increasing visibility, huge discounts and
frequent sales. It also often launches campaigns and competitions to promote its products rather
than relying on heavy advertising. When launching in the U.S in 2019, instead of advertising
heavily, it collaborated with Netflix and their hit show Stranger Things to enter the market.

Image 3: Pull&Bear Netflix Stranger Things Collection

Both believe they have an edge in the fast fashion space due to their shorter supply chains thus
always having newer designs first and appealing to customers to visit their stores again and again.
Following factors also attract customers to their stores and allows these brands to survive with
minimal advertising:

5.3.1. Store Location and Appeal

Both companies’ store layouts and positioning contribute a lot to their promotional marketing.
Extensive research is done for the same. In the case of Zara, its stores are positioned in hotspots
where footfall is the most and the demographic is relatively well off. Its interiors are inspired by
Prada and it often opens stores near luxury brands as well to maintain its high-end image.
 Pull&Bear similarly positions its stores near train stations, shopping malls and at places it knows
will get a lot of foot traffic.

Image 4: A sprawling Pull&Bear store at a prime location in Rotterdam, Netherlands

Image 5: Zara’s largest, 5-floored store in South Asia at a prime location in Fort, Mumbai
5.3.2. Trend Research and Customer Feedback

Additionally, in the case of Zara, fashion experts are employed and trained to observe and analyse
customer behaviour. Using this information and that gained from customer feedback, Zara creates
new designs as well- making the customer feel heard. The customer thus contributes to the designs
and this helps build both brand loyalty and a responsive supply chain. Pull&Bear also values
customer feedback immensely.

5.4. Price Communication

In terms of price communication, both brands allow easy proportional price evaluation via their
stores, perceived fairness in terms of their sustainability practices and reference price perusal via
their discounting strategy.

5.4.1. Proportional Price Evaluation

Price differences are not evaluated in absolute terms. They are evaluated proportionally. This is
known as the Weber-Fechner effect by psychologists. In terms of Zara- the stores are often
positioned near high end brands. Zara offers similar high-end designs for a quarter of the price of
items from these stores or items seen on the runway. Its store design also makes customers feel
like they are buying high end items at affordable prices. Pull&Bear markets itself as affordable
and accessible as compared to other adolescent brands with the benefit of being trendy as well. Its
store interiors indicate the same and positioning in places with high traffic achieves the same.

5.4.2 Sustainability

Perceptions of fairness are incredibly subjective and customers' assumptions about the seller’s
motives influence their judgement of the company and its prices. In this regard with the need of
the hour being sustainability- Zara’s relative sustainability as compared to other fast fashion brands
are well received by customers. Fast fashion goes against sustainability given that it leads to an
increase in waste. In this regard, Zara using biodegradable packaging and launching a pricier
sustainability line is appreciated by customers who positively respond to the same. Furthermore,
their strategy of low stock inventories reduces waste and their initiative to recycle old clothes with
each store having boxes that say ‘bring any clothes you no longer wear and give them a new life’
is well received. Pull&Bear too practices sustainability to some extent.

5.4.3 Discounting Strategy

According to the transaction utility theory buyers are motivated by the utility of the actual
transaction in addition to the transaction itself. This implies that they are motivated by the
difference between the price they paid for a product versus what they think is the fair and
reasonable price for the product (also known as reference price). Here the discounting strategy
plays an important role as well as following the best retail practices.

Best Retail Practices

Both brands follow the best retail practices of mentioning sale signs, ending prices in 9 and having
signpost items.

Image 6: An example of Pull&Bear’s T-shirt selling for $7.90

Discounting

Value of a product depends on a customer’s perception and the discounts play an important part
in forming this perception.

Zara has a value-based pricing policy, meaning they charge customers based on how much they
value their product. They have positioned themselves as being a semi-premium fast fashion brand,
which makes it important for them to communicate such value forward. Therefore, they do not
give much attention to discounting and promotions but rather on customer experience and
perception to communicate the value, to create a loyal and a less price sensitive client base. They
are following a strategy of having constant higher prices with very occasional reduction in prices.
They have adopted a pull strategy here, which means naturally attracting the customers interest
to the products and not pushing your brands in front of the market. Zara pulls customers in and
turns them into brand evangelists to spread word of mouth about the brand.

They have been successful in understanding its customers' psyche and capitalized on a customer’s
biggest regret, which is, not buying a product in time only to find out it’s been sold out. They use
their tight supply chains, limited stock and constantly changing designs, to attach a time value to
their products and offer fewer discounts.

But Zara does count the broken codes and unsalable products to sell them at a lower price later on.
Even when they do reduce the prices it is by a small margin like 15%.

Pull&Bear, on the other hand, uses an opposite discounting strategy in the form of push
promotion. They have positioned themselves as a casual affordable brand with much cheaper
prices. The value attached to the products here is not that high and that is why they have used the
push strategy, where the products are pushed in front of customers by increasing visibility, huge
discounts and frequent sales. This brand rather incentivizes people to buy during sales and have a
constant communication of promotional strategies through means like newsletters. They also
have criteria specific discounts and use price fences, like their special 10% discount for students.

Discounting strategies adopted by both the brands complement their overall pricing strategy and
value communication. Perceived fairness is a major factor at play here. Since Pull&Bear is
considered a brand with cheaper, value for money products, customers consider it fair that they
provide a reduction in prices. Therefore, by giving frequent discounts, they are giving what people
want, attracting their attention. Whereas for Zara, since it is more premium, very frequent reduction
prices will not go well with the customers and may seem unfair to them. Here the quality and value
of the product is associated with its price by the people. If there are frequent discounts, people can
feel that they are buying cheap, low quality products. Therefore, it does make sense for Zara to
adopt a strategy with less discounting, to keep up with the overall brand image.

Image 7: Zara’s website’s landing page with very subtle communication on discounting

Image 8: Pull&Bear’s website’s landing pages with noticeable discounting communication

6. Competition
The fast-fashion industry is highly competitive and ever-growing, with Inditex ranking first
among companies in the global apparel manufacturing and retailing industry. Ranking second is
Hennes and Mauritz, the parent company of H&M, making the company and brand Inditex and
Zara’s largest competitors respectively. Both companies have distinct business models,
contrasting pricing and discounting strategies and differing supply chains. Since Zara is Inditex’s
flagship brand, it has been compared with H&M through an in-depth analysis in the following
subsections. Competition with respect to Pull&Bear has also been discussed.

6.1. Competing Strategies

The fast fashion mantra is to drop new collections at a higher frequency rather than on a seasonal
basis. Inditex’s Zara, and its biggest competitor H&M have both been at the top of the global fast
fashion pyramid. However, the frequency of new drops and their returns in general suffered due
to the COVID-19 pandemic. However, Zara is the only retailer with a year-on-year increase of
collection arrival at a rate of 11%, compared to an 8% decrease in H&M’s arrival rate. Not only
does Zara inject new products at a higher frequency, but its strategies help to sell its products at
the same frequency as well.

Zara and H&M have contrasting marketing strategies, which are communicated differently as
well. H&M’s email marketing, for example, comprises latest offers and details of the newest drops
and blurs lines between womenswear, menswear and kids wear in order to create more of a family-
focused offer. Meanwhile, Zara’s email marketing is through a microscopic lens – it is more
targeted and segmented on the basis of age and gender.

Zara’s online presence is 6% greater than that of H&M. The pricing strategies of both vary,
wherein H&M wins in the core-item ‘basics’ criteria which offer lower price points. H&M’s
average price point for apparel is about €27, whereas for Zara, as mentioned earlier, is about
€10 more.

COVID-19 and consequent lockdowns saw the focus of fast-fashion companies shift to a new
category altogether, which became a competitive point between both Zara and H&M: pandemic
wardrobe/ loungewear.

The following table shows the price ranges within which both companies’ loungewear fit into
as of the end of 2020, falling into categories of sweatpants, hoodies and t-shirts.
 Infographic 4: Pandemic Loungewear Products of Zara and H&M

H&M’s T-shirts fall mostly between the $10-$15 range, followed by a large chunk divided
between the $15-$20 and $5-$10 ranges. This poses strong competition to Zara’s T-shirts, with
most of them lying between the $15-$20 and $20-$25 ranges. H&M’s assortment of hoodies comes
under the $20-$35 bracket, while Zara’s is more elevated, at $35 onwards. With two distinct
pricing categories in the market, the quality of the product, coupled with design detailing play an
instrumental role in consumer purchasing.

Moreover, H&M has not evolved beyond the 4Ps model of marketing. The company also spends
a significant amount on advertising and social media marketing, roughly 3% of its budget.
Meanwhile, as mentioned earlier, Zara has transformed its business model by adhering to a 4Es
strategy that meets the expectations, wants and needs of today’s modern customers. In Zara’s
evolved model, Product is replaced by Experiences, Price is replaced by Exchange, Promotion is
replaced by Evangelism and Place is replaced by Everyplace. As a part of this model, Inditex and
Zara spend a minimal amount of about 0.3% of their budget on advertising. This strategy has given
Zara, and in turn, Inditex, a unique differentiating identity.
In Pull&Bear’s case, a high degree of competition is faced internally from its sister brands which
target similar younger audiences, such as Bershka and Stradivarius. In terms of audience overlap
online, about 54.5% users who visit Pull&Bear’s website, also visit that of Bershka. To deal with
external competition, Pull&Bear adopts several collaboration strategies, an example of which is
its tactic to enter the highly competitive U.S. market online via a Netflix collaboration on official
merchandise for the popular series Stranger Things. Pull&Bear’s collaborations form the highest
product share when compared to other Inditex brands, amounting to about 5.7% of its total
products. They also launched the Heritage Collection which meets the demand for men’s
collection for men in their thirties. Pull&Bear aims to increase sales of the Heritage Collection
and its position in the existing market.

6.2. Competition discounting

H&M has a more aggressive approach to discounting and promotions. They have more frequent
and larger markdowns. One of the major reasons for this is the way they have positioned their
brand. H&M has portrayed itself as a trendy fast fashion, family brand, with a broader market
segment. That is why to attract a larger number of customers and to appeal to its market, it uses
the push strategy, which means putting its products out in the market through frequent discounts
and sales. Meanwhile, as already discussed, Zara’s discounts are subtler and shallower.

Given the situation imposed upon due to COVID-19 in 2020, Zara slightly altered its discount
strategy especially with respect to Black Friday and Cyber Month sales, when compared with
the previous year. This was communicated in the form of “Up to 40% off selected items” in 2020,
instead of 2019’s “50% off selected items”. While more items were discounted when compared to
its competitors, the reduction rate was lower, with majority products offering an average of 27%
off. On the other hand, H&M offered steeper reduction rates, with an average of 44% off over
a smaller proportion of products.

We see that strategies are in line with the brand image and helping their cause. H&M’s customer
segment, while they want fashionable clothes, they also want them for everyday use. They consider
reduction in prices to be fair and needed and rather prefer to do such shopping at time of sale and
discount. H&M’s concentration on making itself a family brand also implies that, because of this,
it is relevant for the brand to have an aggressive discounting strategy unlike Zara, which is a more
premium fast fashion brand. Their differing communication strategies can be identified through
their websites as well, as visible below.

Image 9: H&M’s Landing Page

Image 10: Zara’s Landing Page

Coming to Pull&Bear, its discounting strategies follow distinct price-fencing, an example of which
is its robust student discounts which have already been mentioned earlier in this robust. The brand
faces maximum competition with respect to discounting mostly on an internal front, since its sister
brand Bershka also offers similar discounting strategies. A large proportion of Pull&Bear’s
products comprise T-shirts, even exceeding that of Zara by 30%. This caters to its segmented
target audience of teenagers and young adults. In order to push their assortment of T-shirts upon
their customers, Pull&Bear often has huge offers on T-shirt bundles.

6.3. Supply Chain Comparison

One of the reasons why Inditex has an edge over H&M is because of the control it maintains over the entire
fashion process including the supply chain. H&M and other brands prioritise production cost and
outsourcing manufacturing to China, creating long supply chains. Inditex on the other hand creates short,
manageable and more responsive supply chains- helping the company to react quickly. This shorter supply
chain along with a computerised inventory system and state of the art production and warehousing, allows
Inditex to spend 10-15 days between designing and distributing products whereas it takes H&M and others
5-6 months on an average. This allows Inditex to observe trends and then respond, whereas other companies
like H&M have to predict trends in order to produce designs. Thus, this proves to be beneficial to Inditex.

7. Recommendations
7.1. Price Fencing

As discussed, Zara doesn’t really have any price fences for the customer segments it targets.
Hence, introducing some price fences for even higher profitability and market share might be a
good suggestion.

It can include time-based fences such as sales and discounts on Women’s Day or some festivals
which are very rare for the brand right now. It will lead to increased footfall in the store which
eventually increases the profitability and enhances promotional activities. One very important
aspect of e-commerce in the fashion retail business is express deliveries, which apparently Zara
being such a big brand doesn’t offer till date. Charging a bit extra for the services it offers would
also be justifiable as other brands already do that and is a standard practice in every industry.

Another buyer-identification fencing they can inculcate is providing some student discounts or
even discounts for women on some special days would be a good practice.
7.2. Fairness Positioning

Any increase in price needs to be justified in the consumers eyes through clear communication
which Zara and Pull&Bear aren’t doing currently. Reasons why sustainable clothing is pricier
should be clearly communicated to customers so they can perceive it as fair. Similarly, in case
labour costs increase in countries where products are assembled and made, this should be
communicated to customers by citing employee welfare to help justify the same.

7.3. Communication

It is important for a brand to support its pricing strategy with the message to its customers. In the
case of Pull&Bear there is a mismatch in what is being communicated to the customers in terms
of the image of the brand and the pricing strategy. Through its pricing strategy, the brand wants to
portray itself as an affordable and accessible brand for the younger population. But through its
value communication including the store ambience etc., it comes off as a premium fast fashion
brand. Which can result in the customers not being convinced about the affordability, despite
aggressive markdown in prices. Furthermore, it launched its heritage collection in 2011 catering
to men in their thirties, pulling focus away from its younger demographic and leading to further
confusion. Pull&Bear needs to give more attention to streamlining its value communication to suit
its pricing strategy and at the same to aggressively market itself to its target market, by
concentrating on its low prices for trendy/fashionable products.
.

7.4. Expansion

Pull&Bear can look to expand in developing countries like India, with a large demand for
fashionable yet reasonably priced products. Their pricing strategy concentrating on accessibility
and affordability will be suitable for such markets, if communicated correctly.
8. Conclusion

It is evident that Inditex’s business model that emphasises its shorter supply chains, coupled with
its unique pricing and communication strategies are working in its favour, because of which it
enjoys its apex position as a global fashion retailer. Its eight distinct brands which target diverse
demographics and price points, all contribute to the company’s success. In this report, we have
comprehensively analysed two of Inditex’s most prominent brands, Zara and Pull&Bear. Zara is
Inditex’s first and flagship brand, has a mid to high price point when compared to its sister brands
and pulls customers in their mid 20s and above, from all over the world, through value-based
pricing. Pull&Bear through competitive pricing, pushes its products towards a younger crowd by
positioning itself as a trendy and ‘cool’ brand with latest styles and pop-culture collaborations. In
terms of their communication strategies, they both engage in psychological benefit assurance and
minimal advertising, letting their products, store positioning and websites promote their brands for
them. They differ however when it comes to discounting, Pull&Bear engaging in heavy
discounting whereas Zara refrains from the same. Zara’s main competitor is H&M whereas
Pull&Bear mainly faces internal rivalry. Overall both are strong brands, benefiting from Inditex’s
business model and pricing strategies.
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