Madonna hold a concert in Barcelona on June 21th 2001. People found a new fashion clothes in the local Zara store after three days, which is the same as the clothes in Madonna’s concert. Its price is affordable to most common customers. The clothes are on fire soon. The concept of Zara is to offer its product with fashion design and provides products at reasonable price (D´Andrea & Arnold, 2003).
Developing a strong business model is important. Zara is well-known as its high-fashion, low-cost business model. Young people pursue fashion but don’t have enough money. José María Castellano stated that “the fashion world is in constant flux and is driven not by supply but by customer demand. Zara provides consumers what they want (News,2013).
Factors affect pricing decisions
Four biggest fashion companies are all fast-fashion companies, including Topshop, Zara, Uniqlo and H&M. These fast-fashion brands have cheap labor, cheap materials and fast production schedules. These factors enable Zara to adopt low pricing strategy. ZARAwas recognized as its first-class image,second-class production and third-rateprice. It doesn’t have expensivedesign, advertisingandraw materialcosts. Zara’s prices are about 1/4 of other brand’ prices. In Singapore, women’s coat usually sells at 19-26 dollars in Zara’s shop. However, the same type products in other shop sale at 40-60 dollars.
Two different types of pricing strategies
It is a little crazy to say that luxury fashion brands need pay attention to the increasingly activities of Zara. Most luxury fashion brands adopt high pricing strategies. They aim to provide high-quality products for high-income groups. We understand that being expensive is a significant marketing strategy to build a luxury brand. However, Zara provides products at a reasonable price to target customers. Zara will win on price. Zara’s prices are less expensive than luxury fashion brands’. Gucci, Chanel and Louis Vuitton raise the price of products in recent years. Compared with these luxury fashion brands, one of real competitive advantages for Zara is price (Ghemawar&Nueno,2003). Zara’s pricing strategy not only the value proposition is evident, but also is affordable to most customers. Luxury brands have to admit Zara has a strong position in the global market.
In consideration of optimizing development and training costs, the current pricing strategy is suitable for Zara. It mainly uses value-based pricing approaches. The strategy focus on customers’ perceptions of value rather than company’s costs to set price. Its target customers want fashion clothes but could not afford the high price of luxury fashion brands. Zaracounts broken code andunsalableproducts every day.These products will be sold at low price. In addition, it often provides discounts at the end of season.
The reason for change their prices
Zara does not have a large design team. At the same time, it doesn’t have factories close to target markets. In order to solve its problem, Zara uses low-cost Asian factories produce its products. In the recent years, the cost of materials and labor in Asian countries increase. Zara is forced to increase prices in response to increased materials and labor wages (News,2013).
More expensive clothes and less exciting design have bad influence on business model. Although this fast fashion industry dominated the clothing market, they will face some environmental impact of the industry.
I wonder: Would you mind paying more at fast-fashion clothes, such as Zara and H&M? Would like to you stop shopping at Zara?
In a word, Zara is an excellent clothing brand worth considering because of its reasonable price. Increased cost will be a challenge for Zara. I think keeping reasonable prices may be a good strategy for development.
D´Andrea, G. and Arnold, D. (2003), Zara, Harvard Business School Press.
News. (2013), Will Zara Be Able To Keep Clothes Cheap as Labor CostsRise from http://www.racked.com/2013/3/4/7684835/some-fastfashion-companies-will-survive-increased-labor-prices-but
News.(2016),Zara’s Business Model, Information and Communication Technologies, and Competitive Analysis from http://www.123helpme.com/view.asp?id=97642
What are the secrets behind Zara's success? ›
The success of the brand lies where customers appreciate and desire the brand, which is over and above product level benefits and strongly driven by the brand experience. Zara uses its store location and store displays as key elements of its marketing strategy.What is the price positioning of Zara? ›
Zara has a low pricing strategy due to low labour, cheap material andfast production schedule. Zara costs one-fourth the cost of other brands due to less expensivedesigns.How does Zara keep prices low? ›
These fast-fashion brands have cheap labor, cheap materials and fast production schedules. These factors enable Zara to adopt low pricing strategy. ZARA was recognized as its first-class image, second-class production and third-rate price. It doesn't have expensive design, advertising and raw material costs.What are the key strategies of Zara have led the brand to success What is Zara's biggest competitive advantage over other retailers? ›
The Zara brand strategy
The secret to Zara's success has largely being driven by its ability to keep up with rapidly changing fashion trends and showcase it in its collections with very little delay. From the very beginning, Zara found a significant gap in the market that few clothing brands had effectively addressed.
Zara's strategy is to offer a higher number of available products than its competitors. While most clothing retailers manufacture and offer to the public for sale 2,000 to 4,000 different articles of clothing, Zara's production has been markedly higher, at over 10,000 pieces produced per year.What are Zara's three main winning marketing strategies for keeping its offerings fresh? ›
- Zara has evolved to the new 4Es of marketing strategy—Experience replaces Product; Exchange is new Price; Evangelism is now Promotion; and Every Place is new Place—that puts the customer at the center.
- Zara fosters a highly-engaged workforce that translates into highly-engaged interactions with customers.
Price positioning is determined by whether consumers perceive product prices as expensive, neutral, or cheap. This perception is associated with the quality of each brand's products and services. Competitors' movements and fluctuations in supply and demand condition this perception.What is an example of price positioning strategy? ›
This strategy clearly positions your company above the rest; it tells consumers something is special (i.e., worth paying more for) about your products. For example, look at the prices The Old Homestead restaurant has set for their steaks and chops. We can smell the fried onions and seared, aged prime meat already.What is an example of pricing positioning? ›
Pricing and positioning need to align; in other words, you need to price your product correctly for its position in the market. For example, if you're selling a luxury product or service, its position will be at the high-end of the market and so your price point will reflect this and sit in the higher price bracket.What is Zara's unique selling proposition? ›
Develop Time-Critical Value Proposition
Zara's value proposition focuses on keeping up with fast-changing fashion trends. Its activity configuration allows it to spot trends and launch new pieces in less than three weeks. Competitors show two collections per year and take over nine months to get items to stores.
Does Zara hold a competitive advantage? ›
Zara's generic strategy is cost leadership. The brand holds a competitive advantage in the market by offering products similar to high-end fashion and designer brands' styles at modest prices.How often does Zara reduce prices? ›
The second week, we price the sale at 40% or even 50%. During the third week, you can get items for up to 70% to 75% off because everything has to go. It's better to wait two to three weeks for the best sale prices." "Wait for discounts on more expensive and larger pieces such as coats and jackets.What are some of the unique elements of Zara's strategy? ›
- Investing little in advertising. Zara spends very little on advertising, instead relying on stores to create awareness for its brand. ...
- Manufacturing in small batches. ...
- Staying on top of key trends. ...
- Making fashion affordable. ...
- Focusing on novelty.
The first marketing strategy of ZARA is direct sales mode. Zara controls most of the stages on the chain supplying, designing, manufacturing, and distributing its products . Another marketing strategy of ZARA is focus-cost strategy . ZARA positions its goods as high-end products with low price.What sourcing strategies does Zara use? ›
Zara‟s method of sourcing product is very different from the traditional methods used in the fashion industry because the company controls every part of the supply chain. Instead of using an outsider to design the clothes, the firm uses 300 in-house designers and relies heavily on store managers‟ input.What type of marketing strategy does top fashion retailer Zara use? ›
Zara's promotion strategy is focused on creating a strong online presence and engaging with customers through social media. The brand uses platforms like Instagram to showcase its latest collections and offer styling inspiration to customers.What are the strengths of Zara? ›
As pioneers, Zara has the most developed, strategic practices in supply network management. Stores: Zara has outlets in 96 out of the 202 countries it sells in. Zara has the most fashion retail stores in the world, with 2249 locations.How does Zara compete vs its competitors? ›
Zara's business model combines cost-cutting and sustainable practices. Unlike other fast-fashion brands, Zara produces durable and affordable replicas of high-end clothing. It manufactures its apparel and accessories in bulk to provide them at competitive prices.How does Zara's strategy differ from a traditional retailer? ›
Additionally, ZARA uses near-shore production for both fabrics and finishing, cutting out time in transportation to and from factories. The implications of this efficiency are real. Compared to a traditional player, ZARA will spend more to produce a similar garment AND sell it more cheaply (at regular price).What is Zara's biggest competitive advantage over other retailers? ›
High level customer loyalty is a distinct advantage which translates into higher sales and revenue. ZARA generates the highest revenue of all the brands owned by Inditex.
What are the 3 most critical factors of Zara? ›
Zara's Three Success Factors: Speed, Speed, and Speed.What is competitive pricing strategy? ›
What Is Competitive Pricing Strategy? Competitive pricing is the process of strategically selecting price points for your goods or services based on competitor pricing in your market or niche, rather than basing prices solely on business costs or target profit margins.Which positioning strategy is on the basis of price or quality? ›
2. Pricing. This positioning strategy focuses on the relationship between price and quality and the consumer's perception of the value of a product.What are three price positioning? ›
What Are The 3 Pricing Strategies? The three pricing strategies are growing, skimming, and following. Grow: Setting a low price, leaving most of the value in the hands of your customers, shutting off margin from your competitors.What is an example of a successful positioning strategy? ›
A great positioning strategy example would be a computer company that focuses on providing cutting edge technology at premium costs before their competitors. Another example of positioning strategy would be a large chain store that focuses on providing popular goods to many people at a low cost.What are examples of successful positioning strategies? ›
- Tesla. While many consumers think of Tesla as an automaker, the brand increasingly positions itself as a high-performance energy company with a futuristic outlook. ...
- Apple. ...
- Trader Joe's. ...
- Dollar Shave Club. ...
- Nike. ...
- HubSpot. ...
- Drift. ...
One common product line pricing strategy is to price each product at a different price point. For example, a clothing company might have a budget line and a luxury line, with each item in the budget line being priced lower than its counterpart in the luxury line.What is the importance of pricing in positioning? ›
A price position gives the product a unique selling propostion and makes that product stand out from its competitors. Adding to that, a price position is also ideal when the business can charge a higher price and fend off the competition.How important is price positioning? ›
Products of a higher price tend to be associated with higher value. Attract buyers: If a price is too high, the customer may not be able to afford it. The ideal price should be set at a level that attracts people to buy your product or service, compared with a competitor.Which of the following are examples of pricing methods? ›
- Cost-plus pricing. Calculate your costs and add a mark-up.
- Competitive pricing. Set a price based on what the competition charges.
- Price skimming. Set a high price and lower it as the market evolves.
- Penetration pricing. ...
- Value-based pricing.
What is Zara's successful formula for fast fashion? ›
In an industry that traditionally allows retailers to change a maximum of 20 percent of their orders once the season has started, Zara lets them adjust 40 percent to 50 percent. In this way, Zara avoids costly overproduction and the subsequent sales and discounting prevalent in the industry.Which element of Zara's strategy do you believe best explains its success? ›
a.) Zara's success is largely due to its supply chain strategy and information control systems. These are measures taken to achieve the mission and vision(the larger objectives of the firm). It is really important to decide on how we are going to ac…What are Zara's major strengths? ›
- Speedy Supply Chain. ...
- Retail Fashion Stores. ...
- Fashion Industry Pioneer. ...
- Online Store & E-Commerce. ...
- Better Customer Experience. ...
- Affordable Prices. ...
- Poorly Treating Employees/Ethical Concern. ...
- Less Presence in Asia & the US Market.
Overall, Zara's approach to achieving and sustaining competitive advantage is based on speed, flexibility, and customer-centricity.What sets Zara apart from their competitors? ›
Zara's customers value variety, design, and the ability to access the latest fashion trends. 2. Value Proposition – Zara's key value proposition lies in its ability to design, produce, and deliver the latest fashion trends to customers before its competitors.Why is Zara expensive for fast fashion? ›
Unlike most fashion brands, its products are not that cheap. Because Zara's items are priced based on market demand, not on manufacturing cost. Plus, 85% of its items are sold at full price compared to the fast fashion industry's year-long sales and discounts.How is Zara business model different? ›
Because Zara manufactures only a limited supply of items, it doesn't have to deal with excess inventory or constant markdowns. Each store has a limited inventory of items in each style that are replenished based on demand. New styles based on latest trends arrive constantly.What is Zara's sourcing strategy? ›
Zara‟s method of sourcing product is very different from the traditional methods used in the fashion industry because the company controls every part of the supply chain. Instead of using an outsider to design the clothes, the firm uses 300 in-house designers and relies heavily on store managers‟ input.Is Zara's competitive strategy aligned with supply chain strategy? ›
In conclusion, Zara's success in the fashion industry can be attributed to its highly responsive and efficient supply chain management system. The company has achieved a strategic fit by aligning its supply chain operations with its business strategy and competitive priorities.How can Zara increase profitability? ›
The recommended options that should be applied by Zara are to improve distribution by opening regional distribution centers and to achieve increased online sales volume by creating a unique selling point.
What are key components of Zara's value chain? ›
In the case of Zara, a fashion retailer, the value chain activities would include design and concept development, raw material sourcing, manufacturing, distribution, marketing and sales, and customer service.What are Zara's market characteristics? ›
The market segmentation strategy of Zara focuses on customers who want a fast-changing wardrobe in keeping with the very latest fashion, yet also of good quality and at an affordable price. Zara customers are typically loyal: Zara ranks higher than competitors on the Net Promoter Score®.What are Zara's goals and objectives? ›
WE ARE NOT PERFECT, BUT WE ARE DEDICATED TO MAKE THINGS BETTER. WE HAVE SET DOWN AMBITIOUS SUSTAINABILITY GOALS TO BE ABLE TO ADVANCE IN THE TRANSFORMATION OF THE TEXTILE INDUSTRY, IN COLLABORATION WITH THE SCIENTIFIC COMMUNITY, SOCIAL AND ENVIRONMENTAL ORGANISATIONS AND OTHER COMPANIES IN THE SECTOR.What is Zara's current source of competitive advantage? ›
Zara's generic strategy is cost leadership. The brand holds a competitive advantage in the market by offering products similar to high-end fashion and designer brands' styles at modest prices.What is Zara's value proposition to its customers? ›
Zara's Value Propositions
Zara value propositions consist of: The brand can provide cheap, low-quality clothing accessories which mimic current high-fashion trends.