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Zara in China Fashionably Fast An International Marketing Case Study
Zara in China Fashionably Fast An International Marketing Case Study
Sammy Al Moukadem, Mark Boutilier, Katherine Cameron, Mark Hamilton, Allison Jeffcoat,
Zara was founded in 1975 by Amancio Ortega and his ex-wife Rosalia Mera , in La
Coruna, Spain. Before Zara had an official name, he founded Confecciones Goa in 1963 which
was a dressmaking manufacturer. Later on, he wanted to improve the manufacturing interface,
thus leading him to opening the first Zara store in northern Spain. Throughout the 1980s, Zara
started to operate nationally including in the United States. Inditex is the parent company to Zara
and became the holding company to it by 1985. “Ortega created a new design, manufacturing,
and distribution process that could reduce lead times and react to new trends in a quicker way,
which he called “instant fashion”. This was driven by heavy investments in information
technology and utilizing groups instead of individual designers for the critical “design element.”
Zara has grown to be one of the world’s largest fashion retailers with over 2,000 stores
that operate in about 90 countries. With that many stores, they have around 13,000 employees in
their stores, manufacturing warehouses and corporate side of the company. In recent years Zara’s
revenue has been low but in 2018 and 2019 the company has reported higher profit and sales in
their online platform. For 2019, they posted that their annual revenue was 3.44 billion euro. Most
of their revenue comes from their online store which is in many different markets around the
world. One of Zara’s most important markets is China. They first came to China in 2006 with a
flagship store in Shanghai and now they have over 500 stores. Zara’s market strategy into China
was focused on differentiation and their short supply cycle. They also focus on putting Zara
Home outlets across their major cities. Zara usually puts their stores in either fashionable
Zara markets to young, price-conscious consumers who are highly sensitive to the latest
fashion trends. The target market is not defined by segmenting ages and lifestyles, which gives
them a broader audience and an advantage over other retailers. By the early 1990s, they started to
expand internationally by offering cutting edge fashion at affordable prices by following the
latest fashion trends. When new trends start to arise, other retailers take 4-12 months to start
having clothes ready to sell. Zara, on the other hand, can have their clothes ready to sell in the
market in thirty days. They do this by “controlling almost the whole garment supply chain design
to retail.” Through cutting down their production time, Zara has become increasingly successful
throughout the years. Zara earns more of its profits from its online platform, but their brick-and-
mortar stores are the center of communication because they only advertise twice a year. To stay
above their competition, they use a pull marketing strategy by creating customer curiosity. Their
biggest global competitor, H&M, still focuses on pushing out their products. For Zara, keeping
their customers attracted and interested in the brand is the key to their success on both domestic
The Country
China is easily known as one of the powerhouse countries of the world. China is the most
populated country with approximately 1.39 billion people (Blazyte, 2019). Most of the
country resides in the eastern half of the country as the western half is defined by mountainous
terrain and harsh conditions. The higher populated areas are often found to be along many of the
rivers and Beijing, the country's capital. China is also a large country sizing at 9,596,960 square
kilometers which ranks 5th in the world. (The World Factbook, 2020). The country’s GDP in US
dollars amounts to $12,237,700m or about $8,827 per head with a real GDP growth of about
ZARA IN CHINA 4
6.1%. (Europa World, 2019). Many citizens of China are victims of low wages and a decrease of
value in their assets. (Making a Breakthrough in Reform, 2013). Yet, China holds the title of the
world’s largest economy and exporter! (The World Factbook, 2020). China’s success as a
country plays a huge role in nearly every economy’s stability. USA Today reported, “China is so
big a part of the global economy that any hiccup in its growth rate or signs of instability in its
markets affects everything.” This is where China’s government comes into play, China is
based on the ideas of one that controls nearly every aspect of a country such as its government,
citizens and economy. Yet there is discussion whether China should be classified as a market
China has a rising middle class but as shown below; many perceive themselves to be
middle class when they actually fall into upper class status due to income. Many residents of
China actually work a job that doesn’t fall in the middle-class category. A huge reason for this
success could be credited to China’s education. China is a country that prides itself on its
emphasis on education. China has a literacy rate of 96.4% as of 2015. (The World Factbook,
2020). One report writes “A total of 333,000 people have graduated from China’s MBA
programs in the last 20 years, with 150,000 granted the MBA degree.” (Economy, 2011).
China formerly had a “one-child policy” that was uplifted due to its rapidly aging
population. (The World Factbook, 2020). The fourth diagram below shows the breakdown of
China’s age groups dividing them by sex. China’s male to female ratio is 105.5 males to 1
female. See the fourth diagram for a further breakdown of how disproportionate China’s gender
ratio is.
ZARA IN CHINA 5
Overall, China is a huge opportunity for any company to venture into. China is the most
populated country and you could only benefit from the potential growth in business from an
extra billion people. The greatest challenge will be to try to adapt to the culture of the country
Industry
The global apparel retail industry accounted for $1 trillion in revenue in 2017 and is
projected to grow. Much of this growth is expected to be in the Asia-Pacific region which
accounts for 37.1% of the industries total value and has had a growth rate of 6.9% since 2017
(MarketLine, 2015). A subsector within the global apparel industry is an industry referred to as
“fast fashion,” which is worth $35 billion USD (2019 Fashion Resale Report, 2019). The fast
fashion industry replicates luxury fashions of the runways for cheap prices. The word “fast” in
this context describes the nature of the expedited production and consumption of clothing
articles. Due to the increased accessibility, consumers are enticed to keep up with the latest
fashion trends. As a result, suppliers release many new styles in smaller batches every few weeks
so that the consumer can constantly replenish his or her wardrobe (Mohn, 2018).
Zara specializes in fast fashion and offers from 2,000 to 4,000 clothing items in its stores
(Anwar, 2017). After experiencing major success in Europe, Zara expanded into the Chinese
market in 2006 with its affordably priced fast fashion products. The market for fast fashion
Competitive Landscape
It has been speculated that the fast fashion industry in China is becoming more
oligopolistic with the top competitors enjoying the respective market shares: Uniqlo 29.8%.
H&M 22.3%, and Zara 13.7% (Gi 2019). Zara’s main competitor is the Japan-based store
Uniqlo, with other competitors including H&M, Gap, and Benetton (MarketLine, 2015). (An
Currently Zara is outperforming Uniqlo with a larger global presence, more efficient
supply chains, and better manufacturing networks. Both Zara and Uniqlo are pressured from the
increase of e-commerce and rising costs of production. However, although Zara outperforms
Uniqlo on a global scale, Uniqlo enjoys a larger market share of 29.8% in China (Gi, 2019).
H&M plans to expand further into China after experiencing a sales increase of 11% and
the success of its current 299 stores with plans to open an additional 240 stores (Schlossberg,
2015). H&M reported record annual sales of 8.85 billion yuan, which is approximately 1.2
Local brands also challenge the expansion of companies like Zara and Uniqlo because
consumers tend to favor native brands over emerging markets (Anwar, 2017).
An expansion into the growing Chinese market would make Zara sacrifice its
competitiveness in terms of cheap transportation from its factories to most of its stores that are in
the European Union. If Zara were to expand dramatically into China it would increase lead times
and their current factories would not have the capacity to satisfy the large demand (Hall, 2013).
After reviewing the large amount of market share that Uniqlo, H&M, and Zara enjoy, it is
clear to see that these firms are borderline oligopolistic. Fast fashion is in high demand in China
ZARA IN CHINA 7
and in order for Zara to maintain its growth, it is essential for it to maintain a competitive edge in
The Customer
to buy by displaying unfilled shelves and “limited only” stickers; it creates the urge in the
Zara tries to establish and reach different audiences using their clothing. Zara attracts
different genders to their collection. Their retail is divided into main categories: Women (60%),
Men (20%) and kids (20%). All these categories have accessories associated with them. Zara
introduces their collection in two main seasons: Spring/Summer and Fall/Winter. Their stores
keep restocking all year. Zara collection in China is basically the same all over the world.
However, some elements may vary a little depending on every culture difference. Per example
sizes in China are smaller compared to the United States. Some clothes in the middle east should
The difference between Zara and the other brands in China is that Zara’s supply chain
strategy can adjust quickly to all new fashion trends and have enough supply to meet consumer
The Spanish clothing store increased the variety of materials in their products. This
change helped improve customer satisfaction and enhance competitiveness with other clothing
brands in China. While Zara enhanced the quality of their products, this move later came at a
different cost. Chinese shoppers found themselves getting pushed away from the Spanish luxury
store due to the increase in their prices. (Mehrjoo & Pasek, 2014)
ZARA IN CHINA 8
When products meet expectations, shoppers spread a good word of mouth and attract new
customers. Given the size of China, delivery time can heavily influence the company’s image
and customer service. If the customer does not find what they are looking for in store or get a late
delivery, 20% of the time it tends to turn the customer to the competition with no room for
regaining their trust (Zhelyazkov, 2018). The importance of delivery cannot be neglected and can
affect their market share in the country, and that is why Zara supply chain must always be near
perfection. The shopper needs to feel that they can always rely on the efficiency of the company.
The need for decreasing delivery time is very important to attain high levels of customer
satisfaction. However, just like Zara did in China, Zara needs to be able to adapt to rapid change
everywhere in the world. Luckily, Zara was able to develop an efficient supply chain system in
China where all designers, suppliers and management are in one place; that allowed them full
Zara has the same goods in every country, but they adopt their retail to different weather,
like in Sydney when it’s summer. Zara focused on making their online stores easy to browse
around. The clothing company wants to be an environmental friendly company that is successful
Product
menswear and accessories, children’s clothing, and footwear. Their product mix reflects the most
current trends and are typically economically emulated from popular designers. Because their
clothing is trendy and affordable, it is in higher demand by a larger market than that of slow
ZARA IN CHINA 9
fashion. This, along with the styles and trends to be discussed are in direct observation from the
customer standpoint.
Currently, their women’s product line is gearing up for S/S and consists mostly of midi
dresses, blouses with balloon sleeves and other “romantic” details, faux satin materials, and high
waisted flare denim. Their men’s product line is focused on unique basics such as relaxed-fit
knitwear, faux leather sling bags, straighter cut cargo pants, and understated floral prints. Their
products rotate on a frequent basis and are made with cheaper materials such as cotton/elastane
blends, viscose, polyester, and other synthetics (Zara 2020). This remains constant on both the
While Zara owns other brands such as Pull&Bear and Bershka, their website’s
merchandise is all under the “Zara” label. These other brands are meant to penetrate new
markets, having very large influence in other countries. Most of these brands have a different
target market, varying price-points, and range of unique product-lines. Zara also has a home
section where they sell bed linens, home furnishing, and kitchenware (Hanbury 2019). Having a
variety of different brands gives Zara a competitive advantage in the market and aids in
Zara also provides value in their products through merchandising and creating a positive
store atmosphere. Zara has a similar aesthetic all over the world, including China. Their
headquarters in Spain has pilot stores where merchandising specialists create a “mock store” that
is completely private from consumers, specifically for mastering their store’s aesthetic and
sharing with the rest of the company. The company opts for a minimal, sleek visual appeal,
where the garments stand out. The visuals also focus heavily on new products, as stores receive
new pieces every two weeks (Hanbury 2018). As the industry continues to get more competitive,
ZARA IN CHINA 10
Zara is able to consistently be a frontrunner, as they have added digital screens and other
innovations, new products constantly rotating, and a sleek aesthetic that help attract their target
market.
Zara’s big competitor, Uniqlo, offers trendy fast fashion garments that are presented to be
minimalistic and sheek. Their line of Uniqlo U garments and the various collaborations they do
are big for their company. Zara must pay close attention to this as they move forward in China,
as Uniqlo has not been slowing down, releasing new collaborations with JW Anderson and
Pricing
Zara, first entered China’s clothing market in 2006 and has become the fourth largest
selling brand when it comes to apparel and footwear (Sofya, 2019). During that time, growth rate
was almost halved by having their GDP growth be about 13% (GDP China, 2006).
Currently, 1 Chinese Yuan equals $0.14 dollars in the United States when you convert
their currency on Google. On their website, they have prices ranging from as cheap as 99 Yuan,
which would equal to $14.27. One of the highest prices on their website, 899 Yuan, would equal
to about $130.
Zara’s pricing strategy had a report of rise in sales of 16%, as well as profits that were up
by 20% in the first three quarters of 2016(Yusuf, 2016). Half of the goods Zara makes are in
their home country, Spain, while the rest are made in factories in China, making the prices for
their goods cheaper(Hall, 2013). Based on the two websites, for example, a men’s faux leather
jacket is 89.95 euros and when you convert it to US Dollars, it’s $100.46. And if you go on the
China site, the same item runs for 899 yuan. And if you convert it to US dollars, it runs for
ZARA IN CHINA 11
$126.68. Because half of their goods are made in China, this helped ease themselves into the
market, as they adapted to China’s economy during the first years when they introduced the
company in China. However, over time, they still struggle in gaining customers because although
they have factories in China, Spain, where Zara originated, will overall be the cheapest place to
buy any Zara products. For example, cloth could be purchased in Spain for 29.99 Euros, whereas
The country with the highest prices is in South Korea, which is recorded to be 96% more
expensive than their home country, Spain, While USA is 92%, and China being 78% (Ceballos,
2015). Because of this, Zara in China is still to this day trying to innovate ways to regain more of
their market presence in China even when they have factories there, compared to other countries.
Distribution
One of Zara’s greatest strengths is in their short supply chain. Because Zara produces
their own styles in their own factories, the company has been able to enjoy organizational
flexibility, product variety, and quicker turnaround than their competitors. This competitive
advantage is further achieved by frequent, small-batch deliveries from factories to stores that
keep up with the consumer’s quick changing tastes. The factories dedicate specific segments of
their operation for in-season production, with a much smaller segment for the next season
(Bhana, 2018).
Zara believes in lean production when referring to their raw materials as well as finished
products. Optimization models allow company management to decide how much product needs
to be produced and delivered to each of its retail stores. The quantity delivered is extremely
Along with their in-factory strengths, the company has strategically placed its
headquarters, the majority of its factories, and its design center in its home country of Spain. The
location of these factories along with the design center in Galicia, Spain has kept distribution
costs low as most Zara stores are located in the European Union. Parent company, Inditex, has
been able to take advantage of cheap truck transportation costs over more expensive air freight
options.
However, Translate Media reports that the number of stores have grown in China by 60%
between 2007 and 2012 (Bhana, 2018); thus making China one of Zara’s most important
markets. They have 514 stores in China, which makes up 7% of the sales(Sofya Manager, 2019).
In 2014, Zara created its own flagship website for China, in order to create more of a presence in
e-commerce (Sofya, 2019). However, over time, they closed most of their stores because of the
declining interaction from customers. In order to regain control, they have decided to expend
more of their resources more in-store experiences, as well as improving their delivery by having
As the popularity of Zara in China increases, Zara will begin facing a few major
obstacles. With expansion in Asia, the company will have to employ more air freight services in
order to keep up with quick-changing style trends. Thus, causing a sharp increase in
In order to combat these costs, experts have suggested the company build an additional
design center along with low-lead time factories in mainland China in order to take advantage of
China’s inexpensive freight services. However, this may be unlikely for the company since the
owner, Amancio Ortega Gaona, is reluctant to make this move in fear of loss of company culture
Communication
For any company competing in the global retail industry, it is important to develop an
effective integrated marketing communications strategy. Zara focuses heavily on social media
presence as a part of their IMC. As of February 2020, Zara has 1.3 million Twitter followers,
38.3 million Instagram followers, and 27.3 million Facebook likes. One social media platform,
Instagram, has allowed Zara to get a leg up on their competition. Because Zara is able to produce
merchandise in a shorter amount of time than their competition, they are able to see what
consumers demand based on today’s trends as seen on social media and produce merchandise
that allows customers to dress like the models they see on Instagram (Shlossberg, 2015).
Being a business that focuses on offering fast fashion at a medium quality for affordable
prices has impacted Zara’s promotional mix. Unexpectedly in this day and age, Zara’s store is
seen as one of the most effective means of communication (Lopez & Fan, 2009). The quick
turnover of merchandise in the store combined with the emphasis placed on creating a flawless
storefront has effectively communicated a sense of urgency to purchase to customers. This tactic
has also been effective in creating an incentive for customers to return to the store more
Because the store is seen as Zara’s greatest method of communication, the brand has
allocated 0.3% of its revenue to media advertising, which is significantly less than the average
3%-4% fashion retailers typically put towards this area of marketing (Ghemawat & Nueno,
2006). Zara opted to limit advertising to avoid creating an extremely specific image for the brand
and their different clothing lines. Even now as an international brand, Zara chooses only to
advertise twice a year during sales periods, which are influenced by Western European norms
ZARA IN CHINA 14
(Ghemawat & Nueno, 2006). Being a global fashion retailer, this “less is more” execution of
advertising is a very strategic move because it creates the idea that Zara is for anyone by not
In China the potential of the fashion market is huge because of the amount of shoppers
with money they are willing to spend on European fashion. Zara had not previously experienced
a fall in profit, however in 2014, Zara experienced a decline in net profit in China that
contributed to the redevelopment of their marketing strategy. For example, Zara has increased
their presence in China’s e-commerce market by joining a large, online mall called Tmall. With
more active users than Amazon and Ebay combined, Tmall is expected to generate over 310
billion Euros from online sales by the end of this year. Through Tmall, Zara is able to continue to
use their own pricing and logistics and simulates opening a store in a physical mall (Verot,
2014).
Along with increasing their online presence, Zara also claims that one of the keys to their
success in China’s physical stores is delivering new merchandise that has new designs as often as
every two weeks. They produce many new designs often by looking past the traditional ways of
business that start with the design and end with customers. Zara’s business model starts with the
customers and works backwards to ensure they are producing exactly what their consumers want
in China. The differentiation of strategy coupled with the distribution methods of Zara in China,
contribute greatly to their success (Zara in Indian and Chinese Markets, November 2018).
ZARA IN CHINA 15
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Appendix
Appendix 1. Compeititors