Overview and analysis of ZARA's business model,as well as a proposed smart application to drive growth and revenue.

1. Smart Application Development
Sungkyunkwan
University
Spring 2012
JuneHyo Ahn
SunHo Lee
Chris Lopez

2. Contents
 Background Overview
 SPA Brand
 Company Introduction
 Product Concept
 Business Analysis
 Trend & Environment Analysis
 3C Analysis
 SWOT
 STP
 Market Analysis
 Consumer Needs & Wants
 Segmentation & Target
 Consumers’ Journey
 Consumers’ Pain Point
 New Service Concept

3. 1
Background Overview
SPA Brand
 Specialty store retailer of Private label Apparel
 One Company manages all processes of design,
producing, marketing, retailing
 Quickly understanding consumer’s lifestyle
 Short-term design improvement
 ZARA, MIXXO, SPAO, Uniqlo, H&M etc

4. 1
Background Overview
SPA Brand
SPA Brand Factors
MIS
Manufacturing
products
Design
Marketing

5. 1
Background Overview
Company Introduction
History of Zara
1963 : founded INDITEX
1975 : opened the 1st ZARA store in Spain
1988 : opened the 1st oversea ZARA store in Portugal
1989 : entered to the Americas in New York
1991 : entered to Asia market opening in Japan
2005 : opened ZARA store in Indonesia

6. 1
Background Overview
Product

7. 2
Business Analysis
Trend & Environment Analysis
Consumption Increase rate
09 first 09 second 10 first
10 second
Industrial Growth Rate
Spain
UK
Japan
Korea
In spite of economic depression, SPA Industry has been growing

8. 2
Business Analysis
Trend & Environment Analysis
Company
Sales
Growth
CAGR
Shinsegae Int
5,832
32.8%
21.3%
Louis Vuitton
4,273
14.8%
21.3%
Gucci
2,731
-3.2%
14.3%
Prada
1,757
46.9%
45.5%
Ferragamo
821
16.6%
11.4%
Zegna
330
7.1%
9.5%
Dior
304
-4.1%
4.6%
Burberry
1,850
16.5%
11.7%
Uniqlo
2,260
84.3%
61.7%
Zara
1,338
67.4%
57.4%
H&M
375
<2010 Sales Analysis of Foreign Capital Companies>

9. 2
Business Analysis
Trend & Environment Analysis
SPA Brand Awareness
Awareness
SPA Brand Preference
Preference

10. 2
Business Analysis
3C Analysis
Company
reasonable price, products' fast rotation, high awareness of the brand
- Method for reducing cost : direct distribution process, few of staff at the store
- following the frequent trends change
- fashion consciously change
- no inventory by reducing exhibit in the store
- plenty of stores all over the world with mid-low level of price
Customer
prefer high quality with low cost level
cheap and chic design
emotional & impulse buying more than rational purchasing
importance of "word of mouth"
consumption focused on the trend
prefer polished place to shop

11. 2
Business Analysis
3C Analysis
Competitors
The World’s first SPA Company
Low & Middle price in U.S
Combination QR with SPA
Simple, Effectiveness, Durability
Benchmarked GAP
Low & Middle price in Korea
SPA through Becoming lager from 2001
The first SPA in Korea from 2000

12. Business Analysis
Priced higher than SPA competitors
Limited stock available
Emerging highly competitive market
Lack of traditional advertising
Competitors online stores
Limited transmission of virtual closet
Threat
Greater individualized advertising
Lively communication
(between consumers and firm)
Convenience of one stop shopping
(for entire family)
Increased point of purchase stimuli
Opportunity
Strength
Broadly defined market
Highly responsive vertical organization
Flexible supply chain organization
Huge variety of styles
Styles are closely linked to current trends
High quality
Weakness
SWOT Analysis
z
2

13. 2
Business Analysis
STP Analysis
Segmentation
Segment1
Segment2
Segment3
AGE
Mid-Teen ~ Mid-Twenties
Mid-Twenties ~ Mid-Thirties
Mid-Thirties ~ Forties
%
12.7%
23.1%
20.5%
▸Trendy, Impulsive Buying
Interest
▸fashion-conscious
▸Utilitarian
▸Price & Design
Style
Preference
Market Share
Purchase
Channel
▸Casual
▸Casual & Formal
▸Differentiation
▸ 19%
▸ 29.4%
(Cheap Price)
▸Luxury Brand
▸Practicality & Quality
▸Formal
(Price & Design)
▸Bonded mall & Online mall
▸ Department store & On/off line
mall
▸ 30.6%
▸Department store & Outlet

14. 2
Business Analysis
STP Analysis
Targeting
▸ Mid-Twenties ~ Mid-Thirties
▸Trendy, Impulsive Buying
▸Utilitarian
▸Price & Design
Marketing
Mix
Segment 2
▸Casual & Formal
▸Differentiation
▸ 29.4%
(Price & Design)
▸Department store & On/off line mall

15. 2
Business Analysis
STP Analysis
Positioning
Zara creates Customer Value with Trendy Items, Reasonable Price
Design
Differentiation
Reasonable
Price
Customer
Value
Fast Trend

16. 2
Business Analysis
STP Analysis
High Price
TIME
MINE
Codez
combine
Casual
DKNY
SYSTEM
ZARA Mango Leshop
Soup,
On&on
Top shop
Roem
FOREVER21
Low Price
Formal

17. 3
Market Analysis
Customer Needs & Wants
Rocha’s
Clothing and
Fashion
Indicators
Climate; moral
conventions;
health
Age
appearance,
activities to
execute,
comfort;
durability;
price
physical
adequacy;
welfare;
balance; easeof-care;
fashion;
versatility
beauty;
elegance;
body exposure;
brand;
detachment;
sensuality
attraction to
particular
clothes; color;
personal style;
taste;
boldness
Maslow’s
Human Needs
Physiological
Safety
Social
Esteem
Self
Actualizing
Flugel’s
Motivation for
Clothing
Protection
Modesty
Decoration

18. 3
Market Analysis
Segmentation & Target
Zara does not define their market by strictly segmenting ages or lifestyles
Allows them a strong competitive advantage over traditional retailers through a
much broader market
0 – 40+ age range
Five Clothing Brands
Zara Woman, Zara Basic (for women), Zara TRF (for younger women), Zara Men
and Zara Kids
Product line 60% Women, 25% Men and 15% Kids
Target Consumer
Young, Price Conscious and highly sensitive to latest fashion trends
Average shopper comes to the store 17 visits/year versus industry standard of 3
visits/year
•Increased visits due to very high turnover of clothing offered
•Zara offers 12,000 styles/year versus industry standard of 3,000/year

19. 3
Market Analysis
Customer’s Journey
Store location
Always located in high traffic, iconic areas that impart a prestigious air to Zara
•Unique external and internal architecture
Lack of advertising
Zara does not use traditional advertising
•Only 0.3% of revenue
•Window displays are the first thing to greet potential customers
•Meticulously designed to be artistic and attention grabbing, while highlighting
the newest designs
In-store design
Stores are designed to seem airy and light
•Music is played at a muted volume
High turnover of styles removes need for large storage spaces
•Inventories are small, creating a high demand for limited pieces
Highly trained staff

20. 3
Market Analysis
Customer’s Journey
Window Display Ex

21. 3
Market Analysis
Customer’s Journey
Zara Interior Design
Rome
New York
New Delhi

22. 3
Market Analysis
Consumer Pain Point
Limited runs of clothing
Zara focuses on high turnover fashion with very limited inventories available
•Consumers may not be able to purchase desired pieces
Lack of advertising
Zara uses physical stores and large window displays to showcase new designs
•If consumers do not physically visit the store it is difficult to keep abreast of new
styles
Pricing
While Zara is marketed as affordable designer fashion, some consumers may feel it
compares unfavorable to more utilitarian fashion such as SPAO or Uniqlo

23. 4
New Service Concept
Service Concept

24. 4
New Service Concept
Steps to Use
1. Download the App
2. Scan and list-up clothes
3. Search for near by store
4. Visit the store
5. Pop-up : shopping guide
advertisement
promotions
6. Scan codes : suggest matching items to the possession
7. Purchase
8. Individualized advertisements
Customer feed-back
9. Use the App : auto coordination

25. 4
New Service Concept
Consumer Decision Making Process
2.
1.
Need
recognition
I.
II.
III.
IV.
V.
Information
search
3.
Evaluation of
alternatives
4.
Purchase
decision
5.
Postpurchase
behavior
Encouraging them to find ‘need recognition’ easily by sending individualized advertisement
Helping them to find new arrival items / near by stores / auto matching to possession
Compare to each items at the virtual store on the app
Make them visit the store and purchase with either pop-up coupon when they get in or
shopping guide book
When they get back to home, they will receive information of related items / Also send any
query or feed back to the firm

26. 4
New Service Concept
App Design

27. 4
New Service Concept
App Design

28. 3
Market Analysis
Consumer Pain Point
Pain Point Solutions
Limited runs of clothing
Virtual closet app highlights upcoming styles
•Informs consumer of sold out items and offers alternative suggestions
Lack of advertising
Virtual closet app offers individualized advertising at minimum cost to Zara
Pricing
 Virtual closet app advertises sales, as well as showcasing designer level of
clothing

29. Q&A
Thank You