Fast fashion is an approach to the design, creation, and marketing of clothing fashions that emphasises making fashion trends quickly and cheaply available to consumers. Fast fashion was an idea popularised in the early 2000s. Its beginnings started when the term “Fast Fashion” was coined by the New York Times at the beginning of 1990 when Zara came to New York. It describes a revolutionisation of fashion products as fashion retailers churned out designs seen on catwalks to current fashion trends.
Zara is a fast fashion retailer and part of the Inditex group – the world’s largest clothes retailer. Established in 1975, Zara was founded by Amancio Ortega Gaona in Spain starting as a small store named Zorba. Zara then expanded its business to many countries around the world and currently, it has amassed around 2200 stores globally, across 88 countries. Zara alone contributes around 65% of sales that the Inditex group earns. It sells clothing collections catering to men, women and children, and these collections include clothing, accessories, shoes and household products . Zara’s key quality as a fast fashion retailer shines when compared to other companies – Zara churns out new designs and puts them into store within one to two weeks while other brands would take six months to get their new design into the market. Today, Zara keeps up with the latest fashion to cater to the needs of customers. However, with this, controversy followed, while Zara plans to become more environmentally friendly and sustainable in the future, they continue to produce large quantities of products to cope with the trend of fast fashion. Keeping in mind this controversy and the history of Zara as a fast fashion company, this report will analyse Zara’s methodology and approach as a fashion retailer in response to the controversies.
As Zara became a successful brand in the fashion industry, it has some strategies to ensure that they can continue their success in the future. The first objective of Zara is to continue operation in existing stores so as to consolidate its position and hence increase its market share. The second objective is to further expand in different countries around the world, such as Switzerland, Italy, and Czech Republic as well as other countries in Latin America and Asia. The last objective is to increase the demand for goods from customers by making new designs and changing the trend of fashion rapidly with the aim to make the products more sustainable to become more profitable.
Zara’s parent company, Inditex then has the aim of having a stable and sustainable supply chain. This will be done by monitoring, training, having continual improvement and commitment to stakeholders in four aspects, namely, identification, assessment, optimisation and sustainability. This can be seen in table 2 which shows their framework for strategic planning.
For Zara, the first objective is that they are highly focused on making clothes in a responsible, sustainable way, that limits the impact on the environment and which challenges themselves to continually work as hard as they can to improve how they manufacture.
Secondly, they aim to do better on a few parts, working on new technologies, new ways to work with recycled materials, and helping create new fabrics that their designers, as well as others in the industry, can work with in the future.
It shows that Zara aims to run as an eco-friendly business in order to become more sustainable.
For Inditex, they aim to offer fashion that compiles with the highest environmental, health and safety standards. In addition, decision making is based on respect and promotion of human rights, transparency and ongoing dialogue with their stakeholders. The relationship of dialogue and collaboration that they maintain with their stakeholders allows them to comply with their objective of creating value in a sustainable way. Inditex performs a materiality analysis which allows it to set priorities for creating economic, social and environmental value while ensuring that their business can grow and generate value.
This chapter will evaluate the power and interest of stakeholders identified as crucial to Zara using a power interest matrix.
The power interest matrix serves as a means to estimate the performance of Zara and identify its most important stakeholders – customers and investors – so that Zara best able to meet their needs and interests. Zara would then be able to plan for the future and more effectively liaise with its stakeholders.
Customers should continue to be informed. They obtain high interest and power in the workings of Zara. They are considered important because they are the consumers of the product. Since they are consumers of the product, they would be curious with the manufacturing process, the price of a product, stores and customer benefit. Moreover, customers have high power as they should be kept satisfied due to the fact that they guide the company to further invest on a certain good or service. Customers should be satisfied by Zara, by obtaining a responsive customer service in order to further attract consumers to purchase Zara products.
Investors need to be managed closely in Zara. They have high interest and power within the company. Investors have high interest as they would own one or several of Inditex’s share – Zara’s parent company. Since they have shares in Inditex, they would want to know how Zara is performing in terms of compliance, good corporate governance and ethical culture as well as value that Zara is creating for shareholders. Investors will also have high power as they are putting money into Zara and if they were to withdraw investments, Zara would have less funds to achieve their sustainability objectives and engage in research and development which are crucial for Zara’s long term survival in the fashion industry.
SWOT analysis is a technique aimed to analyse business’ performance and provide information which can be beneficial to match a firm’s resources and strengths to the competitive environment. It is also utilised to determine how close a business is aligned with their growth objectives and success criteria. This could be referred to the diagram below.
The SWOT analysis identifies the internal strengths and weaknesses of a company and oversee external opportunities and threats within the environment. Discerning these factors, strategies are developed, which supports the development of the strengths, eradicate the weaknesses, capitalise on the opportunities, and possibly tackle the threats. The “internal origin” examines all aspects of Zara, for instance, the products, ethics, and organisational structure. Meanwhile the “external origin” will assess the economic, social, political, and competitive environment in order to identify the threats and opportunities faced by Zara.
Zara, a company dominating the retail industry, obtains several strengths. These include brand loyalty from the customers, vigorous profit, and large economies of scale. Furthermore, Zara has 10,000 stores all around the world and has an established brand name. The company responds towards the changes in trends and follow constant feedback from the customers regarding their collection in order to deliver new products at the right time. Moreover, Zara obtains $18.9 billion annually in 2018. However, Zara also have sundry weaknesses over the years, specifically in the controversy of child labour, being environmental unconcious, and the over-reliance of the Zara name. In Brazil, 14 year old kids were forced to work in factories for 16 hours a day and it took them six months to fix the issue. Another weakness was that Zara uses toxic substances to manufacture their products. In addition, Zara has insufficient advertising as they rely on brand loyalty. This leads to a decline in liquidity and decreasing financial investment rate, hence, slowing down growth.
In the “external origin”, Zara capitalise on the opportunities to increase profit. They reap the benefits of rapid population growth, collaborate with other companies to enhance their products, and market expansion. The company collaborates with Jetlore to predict customer behaviour towards their products and Fetch Robotics to work in factory inventory. Furthermore, Zara takes advantage of the increase in trend of buying online. However, Zara encounters multiple threats. They experience high competition from companies like H&M, stradivarius, and Bershka. Lastly, another threat that could hinder them from producing further is the “Deceptive Pricing” lawsuit which made them pay more than $5 million.
The SWOT analysis is significant to improve Zara’s performance. Thus, two significant points to improve the company is ‘strength’ and ‘threats’.
Strength is chosen in order to improve Zara’s growth objective. Knowing that they steadily expand their store, now approaching 10.000 stores, customers are more aware of their products, thus gaining more revenue for Zara. Another strength that should be focused upon by Zara is offering various products and following the ever changing trends. This would directly affect the customers as they are given more choice and will further profit Zara considering the fact that they produce at a low cost of production.
Threats are important to mitigate risks of a company. Thus, by being aware of the threats surrounding Zara, the company could eliminate risks from its competitors or stocks. Competitors of Zara, such as H&M, Bershka, and Stradivarius could be a huge threat towards their company because those companies focuses on fast fashion and customers might relocate their interest to other brands if Zara cannot endure the pace of the fashion trends. This would lead to a decrease in the revenue of Zara and investors might pull out if they do not see potential growth opportunity.
The STEEPLE analysis is a strategic tool that can help Zara with their planning. STEEPLE analysis consists of social, technology, environment, ethics, political, legal and economic. These help Zara to fund efficient resources and to also prevent illegal or unnecessary mishaps.
Zara achieves the social aspect by considering methods that can attract consumers to buy their products by knowing the trend of style or even ways to advertise. They do activities such as organizing fashion shows and promoting their brand and products through social media. Besides that, they also achieve the technology aspect by knowing which machinery should be used in order to produce efficiently. They do this by having Radio Frequency Identification Technology which helps tracking clothing instantly and ensuring customers’ demands are being satisfied. Zara also tackles the law aspect by doing research if they are allowed to sell their products in that specific country and if the process of operating in the country will be easy or not
For ethics and environmental, Zara uses this tool by seeking new innovative ways that can allow them to operate without harming the ecosystem and also the stakeholders. They do this by having a ‘Join Life’ collection and eco-stores that prioritises sustainable products and also better customer experience and they also ban the act of child labour. Zara also uses the political aspect by seeing if their products are raising any unnecessary political issues or unintentionally being involved in politics to ensure it does not ruin the reputation of Zara. Zara’s economic aspect focuses on
The STEEPLE analysis applies to this report as Zara plans to focus more on contributing to solving the issue of climate change. The two significant points to analyse in depth are ‘environmental’ and ‘ethical’ and reasons will be provided and supported with evidence.
The environmental section in the STEEPLE analysis is chosen considering Inditex, Zara’s parent company, has changed their normal operational routines. According to Tan (2019), Inditex announced that by 2025, 100% of their raw materials such as cotton, linen and polyester used in all of their brands will be sustainable, organic or recycled. This affects the customers and the public as Zara is able to give what the consumers are demanding which are good quality clothes that do not harm the ecosystem and also the public as it is not harming the world by preventing themselves from contributing to climate change.
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