OCTOBER 2020 • STRATEGY

Zara’s International
Pricing: A Focus on
Southeast Asia
Introduction | A Global Strategy | Category Pricing Across
Markets | Category Pricing by Competitor | Competitively Priced
Category | Key Next Steps

Written by Nur Atiqah Kamarudin, Senior Business Intelligence Analyst

OCTOBER 2020 • STRATEGY

Introduction
Key Insights
• A Localised Approach: Zara tailored its pricing strategy by market,
which resulted in Southeast Asia generally priced at least 30% higher
than its home country, Spain.

• Competitive Categories: Jeans are more affordable in Zara Malaysia

compared to Indonesia and Singapore, with USD 30-40 as the most
common price range amongst the fast fashion brands.

• Tiered Pricing Strategy: Zara has shown success with a clear good-
better-best pricing strategy based on fashionability.

Late to e-commerce, Zara’s parent company, Inditex SA, now plans to

invest USD3 billion in online operations, due to Covid-19. The Spanish
fashion group has reportedly bounced back from its pandemic woes, as
online sales jumped by 74% in the first half of the year.

To capitalise on the e-commerce boom, more brands are embarking on

their digital journey. However, prices remain complex to get right,
especially in a new market. As 30% of top fashion giants’ sales come from
Asia, let’s look at how Zara deploys its pricing strategy, specifically in the
Southeast Asia region.

This report sheds light on international pricing strategies by Zara in a

global environment. Over 140,000 data points were screened from
January to September 2020 across the womenswear and menswear
categories on Zara Spain, UK, US, Singapore, Indonesia and Malaysia.

Instagram @zara
All data used in this report comes from products retailing online as tracked by
Omnilytics, unless otherwise mentioned.
OCTOBER 2020 • STRATEGY

A Global Strategy CHART 1: ONLINE MEDIAN PRICE (USD) FOR ZARA WOMEN & MEN

Consumers are used to seeing products priced differently across United Arab Emirates 49.89
countries. With more options and information at their disposal, brands
need to tread carefully when pricing products to effectively serve the Thailand 46.98

markets.
Japan 46.75

Localised Approach Hong Kong 44.09

Converting to local currency based on foreign exchange rate or applying a
fixed percentage markup are some common approaches undertaken by Philippines 44.14
brands expanding to other markets. However, these strategies fail to
Taiwan 43.78
account for local consumers’ perceived values. Instead, brands need to
take a holistic approach when setting prices, including understanding
Singapore 42.14
market demand and assessing the competitive landscape.
United States 41.43
Chart 1 shows how the fast fashion giant Zara does it. Data revealed that
the brand’s products were the cheapest in its own home country, with the Malaysia 39.38

median price at USD31.15. The market with the highest price was the
Australia 39.22
UAE, which was 69% more expensive than in Spain.

Indonesia 39.06
In the Southeast Asia region, Zara’s clothing was priced between 32% and
59% higher than the origin country. Indonesia and Malaysia were among United Kingdom 32.38
the least expensive, while consumers in Thailand were paying a premium
Spain 31.15
for the same product. This is due to the high import tax imposed on
foreign brands in Thailand.
0 10 20 30 40 50 60

Median Price (USD)

3
OCTOBER 2020 • STRATEGY CHART 2: ZARA’S MEDIAN PRICES FOR TOP 5 WOMEN’S CATEGORIES BY MARKET

Category Pricing Across Markets 60

Granular analysis and monitoring pricing by category are critical not only 50

for assortment and pricing optimisation. These actions also enable brands
40
to spot opportunities in any market.

USD
30
Competitive Categories
Zara’s products in Singapore were priced consistently higher for both 20
womenswear and menswear categories. Men’s Shoes saw the highest
price variation, with a staggering 52% difference compared to Spain. 10

Meanwhile, the womenswear categories in Malaysia had competitive 0

Tops Dresses Outerwear Pants & Leggings Bags
prices. Dresses and Outerwear were the cheapest compared to its
neighbouring countries, while Tops, Pants & Leggings and Bags were only SP SG MY ID

marginally higher than Indonesia.

CHART 3: ZARA’S MEDIAN PRICES FOR TOP 5 MEN’S CATEGORIES BY MARKET

For menswear, Jeans was the cheapest in Zara Malaysia. This was driven
by the competitive landscape in Malaysia for the category, which will be 80
explored when discussing pricing amongst the competitors (Chart 6).
70
Indonesia saw the most competitive price for Outerwear, as it was priced
60
10% lower than in Singapore. Zara tailored its assortment to suit the
country’s climate, offering 40% more lightweight outerwear SKUs than 50

USD
the store in Spain. 40

30
This shows how Zara deployed its pricing strategy based on the local
20
consumer lifestyle and market relevance.
10

0
Tops Outerwear Jeans Shorts Shoes

SP SG MY ID
4
OCTOBER 2020 • STRATEGY CHART 4: PRICE BREAKDOWN OF WOMEN’S TOPS BY RETAILERS IN INDONESIA

Category Pricing by Competitor

Evaluating competitors’ full price distribution with sell-out performance
helps brands to gauge the optimal price points to set for the right
products.

Different Positioning
In Indonesia, Zara’s Tops mainly sat in the USD 10-40 bracket, with the
most SKU count in the USD 30-40 with 903 SKUs. The brand’s strategy
in delivering good quality fashionable products enabled it to charge a
higher price in the market. With a clear good-better-best strategy, it
drove an above average sell-out for the category at 69%, despite higher
price points.

Zara’s close competitor, Mango, shared a similar distribution of good-

better-best pricing strategy. However, it achieved higher full price sell-
out rate than Zara at 81%, backed by consumers’ preference for its
pared-back and clean designs. This is in line with the shift towards
minimal dressing. Women’s Tops Good Better Best

USD 0-30 USD 30-40 > USD 40

Meanwhile, H&M’s pricing structure differs largely from the two brands. • Solid and printed basics -
t-shirts, tanks, crop and cami
Its “good” pricing, at USD 0-10 bracket delivered the strongest sell-out, Zara
tops
attracting the price-sensitive consumers. Its fashion items in the “best” • Ribbed material
tier of USD 20 and above failed to drive high sell-outs, despite priced 2x
USD 0-30
lower than its counterparts. • Basic t-shirts in solid and prints
Mango • Organic cotton, recycled
cotton, ribbed material
Analysing the degree of fashionability with varying product attributes
gives greater visibility into the pricing dynamic, as illustrated in the USD 0-10
subsequent slide. • Basics/ essentials – tank tops,
t-shirts, camis in solid and
H&M
minimal prints
• Blouses and shirts
• Statement shoulders – shoulder
pads, balloon sleeves, ruffles
• Patterned – animal prints,
geometric, florals
USD 30-40
• Printed blouses and shirts – florals,
animal prints, polka dots
• Minimal details- buttoned-front,
tie-waist, ruffles, frills, puff sleeves
USD 10-20
• Blouses and shirts
• Minimal details – puff sleeves,
drawstring/ tie-hem, criss-cross
detailing
• More progressive
• Intricate details – sequined,
embellished, embroidered, lace
• Printed blouses and shirts with
volumes - ruffles and tiers
> USD 40
• Relaxed and flowy blouses
• Intricate materials– sequins,
metallic, mesh, embroidered, lace,
fringe
> USD 20
• Voluminous silhouette
• Puff sleeves, ruffles, flounce
detailing
• Intricate materials – lace, glitter,
textured, tulle, organza, crochet
OCTOBER 2020 • STRATEGY CHART 5: GOOD-BETTER-BEST FASHIONABILITY BY BRAND FOR WOMEN’S TOPS
Good Better Best
Category Pricing by Competitor
(cont’d)
Distinctive Styles
Overall, the three fast fashion giants had clear styles differentiating each
price tier that resulted in strong sell-outs. While all brands did offer in-
demand pieces, Zara’s products were more progressive with elaborate
and trend-led designs.

Although Tops in Zara Indonesia were priced at least 13% higher than in
Spain, the strategy worked for the brand as it remained competitive in
the market. However, Mango’s clean and minimal aesthetics resonated
more with consumers, as it achieved strong full price sell-out of at least
65% across the USD 10-40 range.

Brands studying the competitive landscape need to understand their

positioning in the market to launch their products at the right price.
Establishing direct competitors not only helps brands understand their
pricing and assortment strategies better, but also provides a holistic view
of the market demand.

6
OCTOBER 2020 • STRATEGY CHART 6: PRICE BREAKDOWN OF MEN’S JEANS BY RETAILER IN MALAYSIA

Competitively Priced Category

Most of the men’s Jeans in Malaysia were competitively priced at the
USD 30-40 range. As with the other categories, Zara deployed a good-
better-best strategy with distinctive product attributes. While it
concentrated more in the USD 50-60 range, Jeans in the “better” tier
(USD 40-50) garnered the strongest sell-out at 78%.

Meanwhile, Mango and H&M were more focused on delivering basic

styled jeans, as more than half of their assortments sat in the “good”
bracket.

Men’s Jeans Good Better Best

USD 40-50 > USD 50

USD 30-40
• Worn details – faded, ripped • Highly worn details – paint splatter,
Zara • Essential jeans
effect, frayed hem patches, embroidered slogan
• Clean, minimalist look
• ‘Join Life’ collection • Premium material

USD 30-40 USD 50

• Basic jeans • Medium to light wash
Mango N/A
• Clean, minimalist look • Premium fabric
• Stretch cotton fabric • ‘Committed’ collection

> USD 40
USD 10-30 USD 30-40
• Classic style with minimal worn
• Essential jeans • Washed, stretch denim
details
H&M • Regular washed finish • Worn details – quilted, ripped-
• Made of high quality, performance
• No detailing effect
fabrics - ultra-flexible stretch,
• Made partly from recycled cotton
moisture-wicking features
OCTOBER 2020 • STRATEGY CHART 7: GOOD-BETTER-BEST FASHIONABILITY BY BRAND FOR MEN’S JEANS
Good Better Best
Competitively Priced Category
(cont’d)
As depicted in Chart 7, Zara’s jeans were the most progressive compared
to Mango and H&M, with clear good-better-best pricing strategy that
matched the product detailing and finishes.

Mango and H&M offered more classic styles, with each pricing tier
differentiated by material quality and performance feature. H&M’s
functional ranges in the “best” tier, namely Freefit and Coolmax, delivered
the highest sell-out for the brand. These ranges boast sweat-wicking and
optimal comfort features, yet still priced competitively in the USD 40-50
bracket.

N/A

8
OCTOBER 2020 • STRATEGY

Key Next Steps

Adopt a Localised Approach: While it is common to apply a fixed
percentage markup, one price does not always fit all. Simply converting
your price to the local currency will not work either. Instead, a tailored
assortment with a localised approach in pricing is the way to go. Brands
should also look out for competitive categories in each market, as offering
outside of the ‘normal’ price brackets can be deadly.

Pay Attention to Competition: Benchmarking against competitors’

pricing strategies and actions can help brands in setting their prices. By
identifying the relevant competitors and their offerings, brands can make
informed decisions to launch their products at the right price. Brands
have the choice to then price their products lower, higher or the same as
competitors. However, setting prices higher than competitors requires
brands to justify the increased price through the value of their products.

With Omnilytics, brands have the ease to study competitors’ pricing

strategies with sell-out performance, which indicates a validated
consumer demand.

Implement Good-Better-Best Tiers: As consumers continue to look for

quality and value, brands need to make sure that they meet these needs.
Pricing products against the equivalent good-better-best fashionability
tiers can help brands to reflect customer perceived value effectively. As
seen in Chart 6, Zara’s clear and distinctive style attributes across the
pricing tiers revealed a strong demand for its Jeans in the “better”
segment. The brand can use this finding to optimise its assortment to
reflect consumer demand.

Instagram @zara
Definition of Key Metrics

Metric Description

The total count of stock keeping unit (SKU) i.e. the number of styles that a brand offers. In the report context, it is the total product count
Assortment SKUs Count
within a data set.

Median Price Refers to the price of the product at the mid point of the data set.

New-In The products that are newly added to the retail website within the timeframe selected.

New-In Contribution % Calculated by adding the number of new-in product count over the total new-in count within a data set.

Discounted The products that were listed with a markdown within the time frame selected.

Sell-Out A product registers a sell-out event when it is indicated as out-of-stock or no longer published on the website.

Sell-Out Rate Calculated by dividing the number of out-of-stock product count over the total product count within a data set.

Signals consumers’ willingness to pay at full price. It is calculated by dividing the number of out-of-stock product count at full price over the total
Sell-Out Rate at Full Price
number of out-of-stock product count.

Sell-Out Contribution Calculated by dividing the number of sell-out product count over the total sell-out count within a data set.
 www.omnilytics.co

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