UNIVERSITY OF NEW YORK IN PRAGUE

European Business Administration

Analysis of Zara in the Czech Republic

2019 Artur Schuertzmann

UNIVERSITY OF NEW YORK IN PRAGUE

European Business Administration

Analysis of Zara in the Czech Republic

By

Artur Schuertzmann

2019 Mentor: William Pattison

Statutory Declaration/ Čestné prohlášení

I Artur Schuertzmann, declare that the paper entitled:

Analysis of Zara in Czech Republic

Was written by myself independently, using information that I gathered through my

research. I duly marked out all quotations. The used literature and sources are

stated in the attached list of references. I am aware that my work will be published

in accordance with § 47b of Act No. 111/1998 Coll., On Higher Education

Institutions, as amended, and in accordance with the valid publication guidelines

for university graduate theses.

In Prague 26.04.2019

Prague: 26.04.2019 Artur Schuertzmann

Acknowledgement

I would like to thank my supervisor Mr. William Pattison for the help and patience. His feedbacks

have substantially facilitated the writing process. Since, I could only find the right track under his

wing.

Also, I would thank all my friends who helped me in research process. It was only possible to

perform study thanks to their participation and genuine dedication.

Contents

Introduction ..................................................................................................................................... 6

Company’s Background .................................................................................................................. 8

1. Marketing ................................................................................................................................ 9

1.1. Segmentation and Targeting ........................................................................................... 11

1.1.1. Zara’s STP ............................................................................................................... 13

1.2. Situational Analysis ........................................................................................................ 15

1.2.1. ZARA SWOT .......................................................................................................... 17

1.2.2. ZARA Five Forces .................................................................................................. 19

1.3. The Four P’s ....................................................................................................................... 20

1.3.1 Zara Marketing Mix...................................................................................................... 24

2. Methodology .......................................................................................................................... 27

2.1. Survey development ....................................................................................................... 30

3. Research result ....................................................................................................................... 31

3.1. Interview’s key takeaways: ............................................................................................. 37

Introduction

There has always been an interest around the brands and their role in the world. Many can

argue about brands and many of them might say there is little importance of their existence. Radical

ones will even support the idea that brands hold somewhat destructive power that helps to stratify

the society into many layers. However, there is one thing that cannot be denied and it is basic need

for a brand. People created them to easily distinguish among myriads of somewhat similar products

and services offered in the saturated markets. Nowadays, brands are pretty much alike human-

being, as they are believed to possess certain qualities and attributes which are mostly related to

man’s characteristics. The same as people, brands have gotten their roles and missions to achieve.

Some brands please the desires of the richest, while some of them fulfill the basic needs of the

lower classes. Anyway, there are definitely brands which settle somewhere in the middle of the

social pyramid and it is exactly what will be covered in this paper. Since, the company, which is a

subject of particular work, is just in the middle of artificially made social hierarchy.

There is famous proverb saying “Clothes don’t make the man”, but piece of clothing is

something that makes first impression and following either facilitates development of relationship

or decelerates its progress. As you could already notice the discourse will be about apparel producer

whose main segment lies somewhere between upper and lower income groups. To be more precise

it is Spanish brand Zara that is part of Inditex group the world’s one of the largest fast fashion

retailer. What makes Zara so unique and how this giant operates, these are the questions which

anyone, who knows about it, might have asked. As one would have thought, I am among these

inquisitive individuals and thus would like to find the answers. However, it does not only mean

finding the information and then just interpreting it in a proper way. Since, this paper does not only

intend to answer the questions, but also it will try to provide with certain suggestions. Therefore,

the work aims to generate set of recommendations that may improve Zara’s performance in the

Czech Republic. The reason for that is outlined in the problem statement.

Problem statement: there is a possibility that Zara loses its customers in “Novy Smichov”

shopping mall. Particular can happen due to many reasons, so it is also important to determine them

and following address them by set of actions. For instance too many competitors in the same area,

bad management of stock, weak performance from shop’s workers and etc. Therefore, the research

will assess the customers’ behavior during their time in the particular mall. More details to be found

in “primary research method” section.

Project goal: identify the key determinants that influence sales performance of Zara both

external and internal. Previous can be done in two ways, firstly is to conduct secondary research

and evaluate from merely theoretical perspective. Secondly, it can also take form of primary

research. However, it is more important to find the balance between these two methods. Therefore,

my idea is to combine both methods and finally upon analysis and evaluation to come up with

possible recommendations.

No wonder, fast fashion retail business is quite competitive and it certainly requires being

change adaptable and agile. Hence, after determination of the main customer (customer segment)

and competitor of Zara, next step would be to generate set of recommendations and incorporate

them into plan of actions. Thus it can deliver external and unbiased opinion on some generic

processes that may be improved. The reason is to create solutions for customers and make them

happier and eager to come back. It is mostly valid in case of buyers who did not find what they

need or simply were distracted by some other causes. As a result, they are shopping in other stores.

It can be said my motivation is mainly to step forward in area of marketing and statistics, and

following apply the knowledge I have acquired throughout all these years.

To conclude, covering the entire organizational processes is not seen as a paramount goal

of the paper, but instead to focus on processes taken place within stores in Prague. Luckily, research

was supported by insider, who currently works in Zara store in Prague. Hence it will not be an issue

to have general and even detailed process description. Thus, it will be possible to realize the weak

points of Zara’s processes.

Primary research method: self-conducted research with help of volunteers (my friends).

Customers will be asked to go through the brief interview after they leave Zara store. Then they

will be observed to see whether they purchase something else in different stores. Afterwards,

customers will be approached one more time, if they purchased something in different stores, but

have not bought anything in Zara at the first place. Questions can be found in “Survey

development” section.

Hypothesis is that people, who did not buy anything in Zara, will eventually buy clothes

from different brands. Afterwards, they will be asked again to provide the feedback on why they

did not buy garments from Zara. Also, it is expected that people, who purchased things in Zara,

will following buy less from different shops or do not buy at all. In our case, it is better to apply

descriptive statistics, as it is easier and also that inferential statistics will need some assumptions

that this research might not fulfill. For instance, inferential statistics need to have random sample

input data. Random means that everyone from population will have the same probability to be

chosen. However, it seems impossible since the time the research will be conducted is not covering

some group of people. For example, we may only have people who are currently unemployed,

because employed ones would be in offices at that time. Thus, the use of descriptive statistics seems

more sensible.1

Expected outcome: after completion of the research it will be possible to understand the

essential reasons why purchase has appeared and vice versa. Since, it is believed that customers

may provide with hints and pinpoint the key opportunities of Zara to improve. Also, due to the

conducted interview it will become possible to determine the customer profile of Zara’s typical

buyer. Based on research results, it will be also possible to signify some other important elements

of Zara’s marketing.

Additionally, the work will also incorporate theory of marketing strategy. In order to

describe writer’s vision of marketing and at the same time to be in compliance with fundamental

thoughts of marketing school. Also, it can be seen as a framework for the primary research. Hence,

work will incorporate firm theoretical basis for the thesis. Then, breakdown and analysis of the

results will be presented in the following chapters. Afterwards, conclusion will be derived based

on the study data. Finally, paper will illustrate the processes and their weaknesses or strengths

according to the research results. Hence, I will attempt to do my best and support my ideas by

quoting reputable authors of marketing field and presenting legitimate data.

Company’s Background

At this stage, it will be wise to outline company’s background, even though, it is well-

known clothing brand, but we may end up having some noteworthy information. It all started in

1 Helman, K. (2019). consultation [In person]. University of Economics, Prague.

small city La Coruna, in the Galicia region of northwest Spain. Where, co-founders of Inditex

established nowadays one of the biggest and globally recognizable fashion brands. Amancio Ortega

and Rosalia Mera had business strategy of producing low-priced lookalike clothes of popular and

expensive brands. It is actually still the major advantage of Zara in today’s pretty concentrated

business environment of fashion retail stores. However, with the time the overall processes have

been reshaped, some useless parts of business model have been removed and some new were

added. That is what makes Inditex something special in terms of value delivery and its agile supply

chain technique. Latter one will be explained in more details in the next chapter. Also, importantly

to mention that Zara came into being 10 years after Inditex had been founded. Today, Inditex is

definitely one of the largest fashion retailers with 8 famous brands under its direction. Inditex has

nearly 170 thousand employees and 7400 stores in roughly 100 markets.2 There are seven other

brands, such as Pull&Bear, Massimo Dutti, Oysho, Bershka, Uterque, Stradivarius and Zara Home.

All of them are moderately different in terms of customer segment, but it will not be appropriate to

say there are completely unique. Since, they share the same organizational structure and supply

chain technique. Overall financial turnover reached 25,3 billions of euros in 2017, with Net Profit

of 3,4 billions of euros.3 Today’s Zara is present in 96 markets with more than 2000 stores.4

Zara firstly entered the Czech Republic in 2001 by establishing its own stores, so it did not

take form neither of franchising nor joint ventures. Recently, Zara has opened another store in

“Novy Smichov”. This store will be the subject of our research, firstly due to its convenient

location, as it is the closest Zara store to me and also all research participants leave around that

area. Likewise, this store is quite easier to observe thanks to its relatively smaller size. For instance,

Zara that is at Prikop Street is certainly more problematic place to conduct research on, as there is

usually mass of tourists and they can easily disappear in the crowd.

1. Marketing

This part of the work will elaborate on some basic understanding regarding the marketing.

2 Our story - inditex.com. (2019). Retrieved from https://www.inditex.com/about-us/our-story 3 (2019). Retrieved from: https://static.inditex.com/annual_report_2017/assets/pdf/memoria_en.pdf

4 Zara SuccessStory. (2019). Retrieved from: https://successstory.com/companies/zara

According to Kotler marketing is “Marketing is the science and art of exploring, creating, and

delivering value to satisfy the needs of a target market at a profit. Marketing identifies unfulfilled

needs and desires. It defines measures and quantifies the size of the identified market and the profit

potential. It pinpoints which segments the company is capable of serving best and it designs and

promotes the appropriate products and services”5

It seems wise to first embark upon the evaluation of marketing strategy of Zara in order to

understand its policy and the ways it works. Moreover, it will be also useful to have described

situational analysis of Zara. Previous will illustrate the opportunities, threats and many other

important elements that can be taken into the consideration of company’s overall strategy

development. For the reader situational analysis will provide more detailed view on the market and

its importance for the decision making process. Furthermore, work should also briefly depict the

targeting, segmentation and positioning what they are and why they are so important.

Figure 1-Managing marketing strategies and the Marketing Mix

Source: Kotler, P., Armstrong, G., & Opresnik, M. Principles of marketing

As the image suggests, the marketing strategy should firstly determine the customer segment

for this reason it includes segmentation and targeting. Afterwards, company gets to decide on how

5 Dr.Phillip Kotler Answers Your Questions on Marketing (2019). Retrieved from:

https://kotlermarketing.com/phil_questions.shtml

to differentiate among the competitors and here turn comes to positioning. Finally, firm will design

so called marketing program also well known as marketing mix (4Ps) Therefore, the work will start

discovering Zara’s experience and strategy regarding these problems.

1.1. Segmentation and Targeting

Why do companies segment the market? Actually, firm segments its markets to effectively

respond/provide solutions to the group of potential buyers. Hence, well-developed segmentation

may increase sales and profits of the company. Marketing segmentation requires some level of

generalization such as aggregation and categorization of people based on their needs and wants.

Once it is done company determines the set of actions to reach this group and deliver the product.

Existence of different market segments resulted in evolvement of product differentiation. Previous

can be viewed from broad and narrow perspective. In broader point of view, product differentiation

needs modified marketing mix strategy to persuade buyers about the product’s difference. In

narrower sense, company sells products with certain features in two different markets. Hence, it

does not require having two different marketing mixes for somewhat the same product. Market

segmentation is necessary, when a firm produces only one product and wants to sell in two different

market segments. It is easier and cheaper rather than producing the brand new product for another

market segment. In this case, company uses different communication and distribution channels for

separate market segments. Even though, it may become expensive, but the cost of development of

a new product is still higher. Segmentation is also needed when company produces multiple

products and operates in multiple market segments. For instance, car producers may have

developed many vehicle models to sell in numerous markets.6

6 Berkovitz, E., Kerin, R., & Hartley, S. (1992). Marketing. Homewood: Irwin.

Figure 2-Steps of marketing segmentation, targeting and positioning

Furthermore, there are several ways of how to segment consumer markets. On the whole,

there are numerous variables that can be grouped into two general kinds: customer characteristics

and buying situation. 7

The second step of marketing segmentation is to form products to sell in groups. It may not

be a problem if a firm sells only one product, but it might become an issue if it has myriad of

products to sell. Hence, these products should also be grouped in a way that customers can relate.

Afterwards, firm is to decide on selection of target market. Particular process is similar to

surgery, where an expert has to discern unneeded parts and emphasize necessary ones. However,

too focused approach or narrow targeting can become riskier. Since, company’s produced volume

will not be sold due to insufficient demand from targeted segment. There are also some criteria for

selection process. Therefore, it will be wise to cover them and succinctly explain their meaning.

• Size: literally means the estimated size of the market in the segment.

• Potential Growth: firms do take into account a possibility of market’s growth in the

long run.

7 Towle, L. (2019). WHAT'S NEW IN FREQUENCY MARKETING; A RACE TO WOO THE MOST LOYAL

CUSTOMERS. Retrieved from https://www.nytimes.com/1989/12/03/business/what-s-new-in-frequency-marketing-

a-race-to-woo-the-most-loyal-customers.html

1•Identify market needs

2

•Segment potential buyers

•Form product to be sold in segment

•Select target markets

•Take marketing actions to deliver the solution

3•Execute marketing program

• Competition in a market: the less competition is the more attractive market

becomes.

• At what cost: firms ought not to reach segments, which are too difficult and/or too

costly to be accessed.

Although, we have certain criteria for market selection process, there is not any correct

mantra, rule or formula to summarize a final decision. Since, it is solely people’s decision and they

may have their own pros and cons, and prejudices or preferences. Aforementioned criteria just give

a hint and provide with a basis for general evaluation. However, the final decision is up to managers

who weight importance of these criteria personally. The last step is to develop and take set of

marketing actions that will help to reach the targeted markets. From my point of view, this can be

achieved through marketing strategy represented by the Four P’s.

1.1.1. Zara’s STP

Now, let’s briefly depict segmentation, targeting and positioning strategy of Zara. It can be

thought to be rather easy task, but there is lack of trustworthy sources to which one can refer to.

Hence, this part is mainly writer’s contemplation over the result that was obtained through the

primary research, see “Research result” chapter. However, some articles had somewhat reliable

source information and therefore can be cited. To begin with, segmentation as the Figure (2)

suggests that every segmentation process starts from identification of market needs and then

categorization of potential buyers. Afterwards, there is a preparation step of product portfolio.

Based on the research results, it was found that the most important feature of Zara’s product was

design. Majority of respondents (68%), who have pointed that out, were females (76%) under the

age of 26 whose income was somewhat above 21.000 CZK. The rest of the pool referred to either

product’s quality or price. The ones, who emphasized the price, have stated that “it is relatively

cheap clothing store that always has new collections”.

Therefore, it can be stated that Zara seeks to satisfy the needs of young age women with

middle-income. Moreover, these buyers valuated design as the crucial attribute of the goods they

purchase. Importantly to say that Zara is actually capable of producing of nearly 10 thousand

designs during the year.8 Additionally those, who signified the design, are also the ones who follow

the latest trends with average score 3.6. To conclude, Zara mainly segments the market based more

on demographic and psychographic elements. Since, there was clear evidence observed during the

research. Needs of the observed group was homogenous as it is “buying trendy clothes at fair

price”.

As it is evident from the above mentioned data, Zara targets the segments which are price-

sensitive and quite young in terms of age. This market is also quite volatile as the main customers’

preferences are always changing. Thus, it is almost pointless to say something about brand loyalty.

However, it is more important to find out how Zara prospers in such a market. Answering these

questions can be done by describing the company’s key activities such as logistics and production

side.

Another important element is how Zara positions its products. As it is known, that Zara

spends very less on the advertisements and it is somewhat 3% of its sales.9 It can be therefore seen

as a part of differentiation strategy of Zara. Since, positioning is “arranging for a product to occupy

a clear, distinctive, and desirable place relative to competing products in the minds of target

consumers.”10

Since, company does not heavily spend on advertisement it can create certain mysterious

ambience around the brand. Hence, customers will be always lured to come into the store to check

if there is new collection. Nevertheless, it does not mean that Zara by developing such atmosphere

made customer to perceive it as being premium class brand. As many people agreed that Zara is

clearly fast fashion retailer. Zara positioning its brand like fashion retailer that is able to serve the

needs of young individuals who would like to keep up with the latest fashion designs. However,

they are still too immature to earn more and buy first-class brands.

8 The Secret of Zara’s Success: A Culture of Customer Co-creation | Martin Roll. (2019). Retrieved from

https://martinroll.com/resources/articles/strategy/the-secret-of-zaras-success-a-culture-of-customer-co-creation/ 9 Zara Marketing Mix (4Ps) Strategy | MBA Skool-Study.Learn.Share. (2019). Retrieved from

https://www.mbaskool.com/marketing-mix/products/16999-zara.html 10 Kotler, P., & Armstrong, G. (2017). Principles of marketing. Boston [etc.]: Pearson.

1.2. Situational Analysis

What situational analysis actually is and why to even bother carrying it out. This may become

a question of anyone who ever thought of it. Therefore, let’s briefly define the term of situational

analysis. Thus, situational analysis is a process of collecting, storing and analyzing all obtained

data to support decision making process. There are numerous techniques of how to conduct such

an analysis, this work will incorporate two of them.

Let’s begin with one the most widely used and common technique, SWOT analysis that stands

for Strengths, Weaknesses, Opportunities and Threats. It allows companies conducting analysis to

evaluate company’s strong and weak sides so that they would have better understanding of their

competitiveness. However, it is not a perfect tool as companies sometimes fail to appropriately

assess their abilities. For instance, managers might overestimate firm’s strong elements and

underestimate its weaknesses. Also, compаny mаy end up hаving wrong dаtа regаrding some

threаts or neglect some opportunities. Strength and Weakness represent company’s internal factors,

whereas opportunities and threats are external ones.11

Particular analysis is quite easy to carry out and it can also provide with some valuable

information that organization could then use. Moreover, it will be wise to describe how to conduct

this analysis. First of all company should start from its inner advantages and disadvantages.

Afterwards, firm can perceive its strong and weak sides from the customer’s perspective. Particular

method is one of the many ways of how to perform this analysis. Opportunities and Threats show

where it is possible to improve and take countermeasures. This part of the analysis is tricky as

company may fall a prey to incorrect evaluation of its threats (usually overestimate). 12

Furthermore, let’s depict Porter’s Five Forces that is a technique to assess all possible and

existing competition and other determinants which influence company’s strategy. If finding the

main competitors does not sound like a problem, however there are four more factors that firms

will have to be aware of. Hence, it will be useful to cover all them and explain their content.

11 How SWOT (Strength, Weаkness, Opportunity, аnd Threаt) Аnаlysis Works. (2019). Retrieved from

https://www.investopediа.com/terms/s/swot.аsp 12 SWOT Аnаlysis – Discover New Opportunities, Mаnаge аnd Eliminаte Threаts, 2019. Mindtools.com [online],

https://www.mindtools.com/pаges/аrticle/newTMC_05.htm

Figure 3- Porter’s Five Forces

Source: Porter, M. (2008). On competition Updated and expanded edition. Boston (Massachusetts, Estados Unidos): Harvard

Business School Pub.

Porter’s Forces аre illustrаted in а figure аbove. Existing competitors literally means

evaluation of concurrent rivalries. It is one of the key aspects during the decision making process.

Since, it is important to evaluate your potential market share and profitability, as high competition

decrease the attractiveness. Therefore, companies usually start from measuring current level of

resistance stemming from competitors.

Threat of new entry: it is also essential to know about possibility of entrance of new

competitors. It can provide company with some underlying insights of the market and capability

of taking precautionary measures in advance. The main determinant is market barrier, so the lower

the barriers the easier is to enter the market and vice versa.

Bargaining power of suppliers illustrates the negotiation power of the suppliers. However, in

any industry suppliers can also be represented by the labor unions or even labor market itself.

Therefore, this is not only about the raw materials and some basic inputs for production, but also

employees and their skills. For instance, some rare professionals may easily ask great remuneration

for his/her services. Moreover, suppliers can also represent the risk of possible market entrants if

Existing competitors

Threat of new

entrants

Bargaining Power of suppliers

Threat of Substitute

Bargaining power of

buyers

they decide to expand their area of activities. For instance, they may feel that they are being

deceived by their clients, as they get paid less for their supply whereas producers of the final

product make big fortune

Power of buyers shows the degree of buyers’ influence over the producers’ price strategies

and products’ quality. Strong buyers cаn eаsily demаnd lower prices аnd thus put аdditionаl fаctors

for lower profitability. The markets, where customers power is strong, have more pressure on

producers and following increase the risks and costs.

Threat of substitute is an analysis of all possible substitute products that can fulfill similar

functions of firm’s products. It is not difficult to find plausible substitutes, but it is also easy to

overlook. For instance, some products may seem different from the company’s products. However,

it can provide the same qualities and therefore substitute. Poor analysis of substitute can jeopardize

company’s performance in the market. Moreover, companies may start more money on

advertisements in order to be seen different from their substitutes.13

1.2.1. ZARA SWOT

To start with one of the most common and widely used approach, this is SWOT matrix. Thus

it will be possible to evaluate the key factors both internal and external of Zara. Let’s firstly identify

the Strengths and Weaknesses as they stand for internal elements of the organization.

Strengths: strong presence, brand awareness, online market, design and supply chain.

At this stage, it seems sensible to go one by one and explain the aforementioned elements.

In order to give more detailed overview regarding these internal factors. To begin with, strong

presence as Zara is currently operating in numerous markets. In case of the Czech Republic and

especially Prague there are 4 Zara stores.14 Locations of these stores are another determinant of

success, since they are accommodated in one of biggest malls and one is situated right in the

downtown. Hence, there is no issue of getting into a store as a buyer can easily reach one of them.

Brand awareness, it is another strong side of the company. It is quite difficult to imagine an

13 PORTER, MICHАEL E, 2008, On competition. Boston (MА) : Hаrvаrd Business School Publishing. 14 Stores-+ Info | ZARA Czech Republic. (2019). Retrieved from https://www.zara.com/cz/en/z-stores-

l1404.html?v1=11108

individual who will be not aware of Zara’s existence. To our question “how long have you known

the brand?” respondents were struggling to answer, as they did not remember when they first get

to know about Zara. Design is something that has already been mentioned and it is certainly the

strength that company holds. Zara has young designers who work on discovering of new trends.

Hence, core of the business model is providing new designs at fastest speed possible.15 The last but

not the least, supply chain and it is actually the topic which can alone be a subject of entire thesis.

However, it should be only briefly described here. Thus, the supply chain, which is used by Zara,

is also called agile. It particularly means having time-buffer which allows Zara responding to

current surge of demand.16

Weaknesses: lack of advertising, lack of stock buffer and weak forecasting analysis.

Lack of advertising can be considered as Zara’s weakness, as there are usually very few

people who are aware of promotions. It is always like that “some people go to the store and then

spread the information among the peers”17. Therefore, Zara is highly dependent on word of mouth

as one of the most useful communication channel. Another weakness of Zara is its stock buffer that

they usually do not have. They batch clothes in small quantities and sometimes cannot meet the

demand.18 It is also a problem of forecasting a demand since store managers are responsible for the

ordering of new stock. According to the insider, sometimes managers lack of experience and

knowledge to make appropriate order. It is not uncommon to have shortage in the store.

Opportunities: increase general spending on advertisements, incorporate new technologies

(artificial intelligence) and enhance commitment from working personnel.

First aspect of the list can be argued, as it can also be seen as the unique feature of Zara.

However, it would be good to have at least some sort of banner that would increase audience’s

awareness regarding the promotion. Moreover, Zara should consider a possibility of embracing

new approach towards data usage. Since, there is strong development of machine learning tools.

Previous will be explained in recommendation chapter. Zara can also improve management

15 do, T., Hanbury, M., do, T., & Hanbury, M. (2019). These are the tricks that Zara uses to figure out the styles you

want before you even do. Retrieved from https://www.businessinsider.de/zara-design-process-beats-trends-2018-

11?r=US&IR=T 16 Barratt, Mark, and Simon Eagle. "How Agile is Your Supply Chain?" Supply Chain Management Review 21.2

(2017): 34-41. 17 Petrova, N. (2019). interview with the insider [In person]. Prague. 18 Zigu. “Zara Marketing Mix (4Ps) Strategy.” MBA Skool-Study.Learn.Share., www.mbaskool.com/marketing-

mix/products/16999-zara.html.

relationship with working personnel so that employees will eagerly dedicate their time and patience

at serving the customers.

Threats: intensified competition, regulatory threats and changes of customers’ preferences

Competition is something natural now, but nowadays it becomes quite more complicated,

as other companies do constantly improve and promote. In case of “Novy Smichov”, it has been

noticed that Mango is about to grow and occupy additional space. Therefore, even in terms of one

small area, there is permanent competition. Regulatory threats are more related to possible changes

in legislation considering the working conditions or working hours. However, it is under big IF and

one can barely assume it to be the major threat. On the other hand, changes of preferences can be

definitely understood as something can be tracked. Therefore, this issue can be dealt with.

1.2.2. ZARA Five Forces

Let’s depict the Porter’s Five Forces thаt аre usuаlly referred аs more outwаrd looking

аpproаch.

Existing competition in industry: the major competitors of Zara are as follows H&M, GAP

and Mango. In case of our research the main competition was also coming from New Yorker. It is

quite competitive market where companies should be able to provide in the most effective way.

New entrants: it is quite difficult aspect to evaluate, as due to globalization it can be possible

that new rivalries will emerge from anywhere. However, in the era of digitalization and fast sharing

information it will be always possible to track all trends. Moreover, this business is quite expensive

and hence not any company will be able to enter. Nevertheless, it cannot be omitted that small

domestic fashion retailers could also bring more competition into the market.19

Power of suppliers can be assessed as being moderate. It is mainly due to the fact that it is

quite costly to negotiate new contracts with new suppliers. Therefore, concurrent Zara’s supplier

might enjoy some sort of negotiation power. Nonetheless, Zara signs specific licensed contract so

that restricts suppliers’ flexibility, as the contract requires them to follow certain rules and

procedures.

19TREHAN, G. and MEHTA, D. CHANGING THE FASHION WORLD A ZARA CASE STUDY. Sansmaran

Research Journal, 12, 2014, vol. 4, no. 2. pp. 39-54 ProQuest Central. ISSN 22787801.

Power of buyers is not easy to evaluate, however it seems to be rather moderate than strong.

It is mainly due to the fact of intense competition in this market and unpredictable customers’

choices. Therefore, buyers unintentionally possess certain level of power and following shape

pricing Zara’s strategy.20

Threat of substitute in this case is quite high as substitute can also be referred as direct

competition among existing rivalries. Since, there is actually no tangible or intangible substitute

for clothing. Customers will still want to dress, but their choice is something that significantly

impacts the business sales. In our research almost all stores on the second floor of the mall could

fulfill the needs of customer. However, customers’ choice was driven by numerous factors

(disposable income, time, preferences and etc.)

1.3. The Four P’s

According to Philip Kotler “Marketing Mix is the set of controllable variables that the firm

can use to influence the buyer’s response”. 21 By saying controllable variables Kotler meant 4

elements of this concept which are Price, Product, Promotion and Place. It is thought that all

companies are to find the balance between satisfying their customers and meeting business

objectives. Therefore, it is important to keep in mind each element of the model in order not to

overestimate some aspects and underestimate the rest. Since, each of part is equally significant and

brings its own benefits to the organization. However, the proportion of the mix it is up to business

itself. Hence, the point is to make sure that you address all elements.

Product is literally the product or service provided by the business. However, its meaning

is beyond the typical understanding of material object. Since, one purchases something, because of

convenience it brings. For instance, customer buys a coffee machine to have cup of hot cappuccino

every morning or powerful laptop to facilitate his daily tasks. Hence, clothes produced by Zara also

deliver certain value to its customer and the concept is not limited by tangibility of product, instead

20 Porter Five Forces Model of Zara|Porter Analysis, 2019. Porter Analysis [online], available at:

https://www.porteranalysis.com/porter-five-forces-model-of- 21 Mahajan, N. (2019). Philip Kotler: The Four Ps of Marketing is Still King. Retrieved from

http://knowledge.ckgsb.edu.cn/2013/10/08/marketing/philip-kotler-interview-four-ps-marketing/

it is more about design, availability and other features. The product is at the center of the firm’s

marketing strategy in international markets, as it is in domestic market.22

Since, Zara is international company its marketing strategy should be described from global

perspective. Hence, let’s depict the global product policy which tries to answer questions like what

products to sell in international markets and how to develop products. Actually, there are many

ways of how to do that.

• Company can just export its domestic product

• Product is first tailored to different markets

• Create completely new product for international market

• Joint ventures

Price is part of the marketing mix and it has been argued that it is the only element that

generates the revenue. Since, other three elements are only cost-generating. The key factor is to

understand the relationship between the price and value delivered by product. What’s more, there

are several determinants of pricing strategy that can be classified into three main groups.

Figure 4-Price Determinants

Promotion is the next pillar of marketing mix that strives to create awareness and stimulate

interests of customers. Promotion can take form of advertising, public relation events, personal

22 Chee, H., & Harris, R. (1998). Global marketing strategy. London [u.a.]: Financial Times, Pitman.

Market Factors

• Competition

• Market structure

• Income levels

Internal Factors

• Price objectives

• Production costs

• Distribution costs

• Profitablity

Environmental Factors

• Regulations

• Exchange rate

• Inflation

selling and discounts. These elements are not mutually exclusive and they can be used in different

combinations.23

In the table below, you can see the various communication tools which are usually applied.

For instance, customer can get information about the coming price discounts in newspapers or

journals distributed in public events. It is an example of how components are interconnected and

equally important for successful promotion strategy. The communication process includes a

message which is transferred through communication channels, and following being read by the

end receiver.

Advertising Personal Selling Public Relations Sales Promotions

Newspapers

Magazines

Journals

Television

Radio

Posters

Cinema

Sales Presentations

Sales Meetings

Telemarketing

Annual Reports

Events

Lobbying

Corporate Image

Price Discounts

Samples and Coupons

Trade Fairs

Direct e-mails

Table 1-Marketing Communication Tools

Source: Phillips, C., Doole, I. and Lowe, R. (1994). International Marketing strategy (London :International Thomson Publishing

I would like to just briefly mention the main issues or factors influencing communication

situation. To start with language barriers, as sometimes it happens that companies will have to

change their slogans, brand names and promotional materials. Previous is done to ensure that the

core message will not get lost and to avoid translations discrepancies. Moreover, we may highlight

23 Phillips, C., Doole, I. and Lowe, R. (1994). International Marketing strategy (London :International Thomson

Publishing

the role of legal and regulatory factors, as countries do enforce their own regulations and expect

all operating firms abide established rules. Also, media availability factor can affect the ability to

reach out the targeted segment. Since countries may have different level of development or

different regulatory environment. Additionally, we can signify the importance of competition in

the market due to its significance in changing the promotional environment. Since, company will

compete with both domestic and other international firms.

Place does not literally mean physical place, but it also refers to other elements which

contribute to accessibility of a product in the market. I will briefly cover this element and highlight

one of the most important aspects of place pillar. Thus, place consists of channel length, channel

alignment, coverage, inventory management and logistics. Therefore, place can be seen somewhat

as company’s distribution strategy. I would like to succinctly describe each element that is under

the Global channel strategy.

To begin with, distribution density (coverage), there is three types: intensive distribution

also known as mass distribution. Selective distribution means targeting particular segment of the

market and exclusive distribution is for specialty goods.24 Channel length is determined by the

number of intermediaries involved in product distribution. Channel alignment implies the ability

of participants of distribution process to have unified approach. It can be distribution channels with

strong role of center that coordinates all activities or vice versa center is not powerful and

intermediaries have certain level of autonomy. Logistics includes warehousing, transportation,

inventory control and order processing.

All of mentioned above is part of distribution strategy, after company establishes its strategy

it then following designs a distribution channel. It usually refers to channel length and channel

width. Channel design is shaped and tailored according to business objectives. However, there is

so called C’s methods which include important determinants that influence channel design.25 We

will just slightly highlight all of them, importantly to say that first these elements were mentioned

24 Chee, H., & Harris, R. (1998). Global marketing strategy. London [u.a.]: Financial Times, Pitman.

25 Phillips, C., Doole, I. and Lowe, R. (1994). International Marketing strategy (London :International Thomson

Publishing

by Cateora.26 There are six variables that usually taken into consideration by managers: Cost,

Capital, Control, Coverage, Character and Continuity.

1.3.1 Zara Marketing Mix

Product

Company can offer quite wide assortment of products, for instance Zara has also clothes

for kids. However, the main segment is the young generation. Zara also sells accessories and

fragrances. Basically, there are numerous products that one can find in Zara shop. Company can

fulfill the needs and wants of different groups of people. Since, Zara’s stores may offer both

informal casual clothing and formal suits and boots. The same applies for jeans, skirts, t-shirts and

bombers, so it can meet the clothing demand of any kind.

Product is not only tangible thing, but it also service and experience that customers get

during the purchase. Zara made it possible to enjoy the one’s shopping experience, as there are

very productive working personnel who serve to deliver the best experience possible.27 Moreover,

Zara can change almost 70% of its products during a month. Thus, almost each month customers

can find new designed clothes. Previous can be understood as pull strategy of Zara.

Price

Zara sells its products at fair prices, despite that fact that these products are of latest fashion

trends. Zara uses market based pricing strategy. It means that company analyzes how much

customers are willing to pay. Zara sets its budget based on that data. Hence, costs are based on

target price.28 It allows fixing the profit margin to every sold item; hence, it becomes easier to

calculate future profits. Zara can set lower prices due to the fact that company does not spend a lot

26 Cateora, P., & Graham, J. (1999). International marketing. Boston: Irwin/McGraw-Hill. 27 Petrova, N. (2019). interview with the insider [In person]. Prague.

28 Lopez, Cаrmen, аnd Ying Fаn. "Internаtionаlisаtion of the Spаnish Fаshion Brаnd Zаrа." Journаl of Fаshion

Mаrketing аnd Mаnаgement 13.2 (2009): 279-96. ProQuest. 5 Feb. 2019 .

on advertisements, so this money is utilized in other activities. Additionally, Zara has opened low

cost Аsiаn fаctories which аllow ZАRА to produce gаrments аnd аccessories аt lower costs.29

Promotion

It is quite obvious that Zara is not fan of promotional campaigns, as it barely dedicates

funds to finance its advertisements. Zara prefers to stay silent and mainly communicate with its

customers via social networks. Zara’s promotions are not seen in TV or newspapers. Moreover,

Zara does not even promote its upcoming sales, for instance, last Black Friday company did not

promote in advance, until the final day. As it was said before, it is a unique feature of Zara. Since,

company does not irritate customers with multiple ways of advertising, but it follows its own way

of promotion. Nevertheless, what Zara relies on, is word of mouth. According to our research

almost 90% of respondents know about Zara from its inner circle, rather than any other

communication channels.

Zara is quite successful in several social media platforms such as Facebook, Instagram and

Twitter. Zara uses them to promote new fashion designs and upcoming collections. Facebook page

alone accounts for 26 million of subscribers.

Place

Zara is widely present in nearly 96 markets and almost 2200 stores. There are four stores

in Prague. Zara presence is also strong in digital areas, as customers can purchase from the

electronic devices and platforms. It is even possible to make purchase and check the available

clothes online both through web-site and app. What makes it possible, as it has been mentioned

above, place is not only physical place, but it is also distribution channels and logistics involved.

Thus, let’s define how company’s supply chain operates. Zara applies so called agile supply. It

means using local supplier and spare distribution and time management. Agility gives a company

a possibility to effectively meet the demand. Moreover, vertical integration allows controlling the

entire process from the very beginning to the final sale. Another technique, which Zara uses, is

producing in small batches to evaluate the current demand and attractiveness of new clothing

29 Yuchenpаng, /. “Zаrа's Secret to Success Retаil – Its Pricing Strаtegy.” T1 2016 MPK732 Mаrketing Mаnаgement

(Cluster B), T1 2016 MPK732 Mаrketing Mаnаgement (Cluster B), 2 Mаy 2016,

https://mpk732t12016clusterb.wordpress.com/2016/05/02/zаrаs-secret-to-success-retаil-its-pricing-strаtegy/

designs. For instance, Zara sends new collection to one store and analyze the sales. If the sales are

promising then company produces more. It is another factor why Zara rarely has discount sales, as

there is little stock left.30

30 Bаrrаtt, Mаrk, аnd Simon Eаgle. "How Аgile is Your Supply Chаin?" Supply Chаin Mаnаgement Review 21.2

(2017): 34-41. ProQuest. 9 Feb. 2019 .

2. Methodology

The goal of the paper has already been stated as well as explanation of certain tasks to

achieve the main aim. One of these tasks is to get both qualitative and quantitative data. For that

reason, primary research has been performed in order to get needed information. Thus, I have asked

my friends to join me on this very short, but quite challenging task. Since, it seemed almost

unbelievable to collect proper data by myself within the timeframe I had. Additionally, I have tried

to briefly interview the customers after they come out from the store. Previous was mainly done to

qualitatively determine the major reasons to visit the shop and make purchases. Therefore, I have

come up with set of brief questions which helped me out to find out customers’ experience after

they visited the shop. I did not want to do long interviews, because the time, when I was conducting

them, was not suitable for it. Moreover, I was surprised that people initially did not like the idea of

being interviewed and often ignored me. Hence, the very first day of my project I could approach

only 5 customers. However, the next day my friend suggested offering small rewards in form of

chocolate bars or protein bars and also small red helium balloon in exchange for their valuable

answers. It worked for us, yet it also brought some additional costs. Moreover, I would like to thank

all of my friends who give a helping hand while I was struggling with interviews. As, we live here

in the Czech Republic, it was extremely difficult to understand the Czech speaking respondents

and I had to have one friend who fluently speaks Czech. They also significantly contributed in

questions development activity and suggested excluding some questions, because they might

unintentionally offend someone or rouse negative reaction.

What’s more, I have monitored the customers’ behavior after they left Zara store with no

purchase. It could be done only due to communication channels, we have utilized during the

project. I have decided to use “Telegram” for this purpose. The advantage of this app is that it is

not common as “What’s App” or “Facebook messenger”, hence it would not be used for typical

operations such as messaging friends or checking something else. The process of monitoring

customers was quite odd at first and frankly speaking I did not like this at all. However, it

tremendously facilitated the overall work flow and we could gather proper and reliable records.

Importantly to say the tracking customers’ behavior was the most challenging part of primary

research. As it required 4-5 people to continuously communicate and update on customers’

movement around the shopping mall. Particular observation was taken place in “Novy Smichov”

shopping mall. It was very problematic at first to catch customer and keep them in sight of our

observation. However, that was the motivation to do a research in indoor environment, because it

is apparently easier to track customers in malls rather than open space. For example, we have tried

to do the same in down town and it turned out that customers were simply dissolved in the crowd.

Hence, it was decided to conduct study in aforementioned shopping mall due to its comparative

easiness.

Also, this

location has its advantages in terms of presence of possible competitors on the same floor in case

of “Novy Smichov” shopping mall. As you can see, from the picture taken from mall’s official

webpage, on the first floor we have many shopping stores which offer somewhat the same products.

Unfortunately the format did not allow mentioning all stores on this floor, but we can name them.

For instance, Mango store is also located on this particular floor and it is near the H&M and there

is C&A boutique as well. It has been noted there are actually four clothing brands belonging to

Image 5-Novy Smichov

Source: https://novy-smichov.klepierre.cz/Mapa-centra.

Inditex and due to that fact we would disregard Massimo Dutti, Bershka and Stradivarius as

competitors. Instead, the focus has been put on Mango and H&M stores as we had assumed them

to be the major competitors from the beginning. Probably you have already noticed some red lines

on the image and what they represent is basically the location of my team members. I had only four

assistants in this case, but it was enough to fully cover the whole area.

We were giving chocolate bars and helium balloon; one may ask why red balloon, but it is

only to make tracking process more convenient. Interviewed clients were not aware of being

observed and we did not want to make them feel uncomfortable by secretly watching them. That

is why we have also given them a balloon to see their movement along the way. If they somehow

sense undesirable attention they would easily chalk that up to the funny red balloon. Thus, we could

only track our respondents and because of that our observation was completely random. Since,

some people did want to spend their time on interview and run away, other just threw balloon after

30-50 meters and etc. However, it was enough to collect nearly 67 observations during the one

week of our research in “Novy Smichov”.

Saturdays and Wednesdays were the days when we could conduct our interviews and

following observations. No wonder that Saturday was more productive in terms of number of

participants in interviews. Wednesday was quite busy, as it is a working day and majority of the

customers just drop in buy what they need or do not buy and then leave the store. For that reason,

we may also compare customer behavior on weekends and week days. Actually, it was not initially

a point of a research, but it may give us some additional information to think over. For privacy

reason and reason of conscience we have not taken picture or video of observed participants.

However, we have counted the time they spend in which store and see whether the time spent

correlates with number of purchase they make. For that reason linear regression has been used,

where independent variable X plots against dependent variable Y. Previous can be seen as

additional outcome of the general research.

2.1. Survey development

I would like to determine the customer profile of Zara’s buyers, as many websites suggested

that typical customer looks as follows: it is mostly young women in her early twenties, who is

working part-time and/or has mid-income level. She wants to be trendy and keep up with the

fashion trends. However, design clothes are way too expensive to her. Therefore, Zara offers

solution to this segment of customers. Since, Zara can provide with fashion clothes of relatively

medium quality, but with up to date design. It was very brief description of customer profile. Next

step will be to determine set of questions to collect data that will either prove it or somewhat

disregard.

Hence, my questioner will contain of questions which are both demographic and

psychographic:

• Age (here we will ask them to fill a range: 16-20, 21-26, 27-33, 34+)

• Occupation and level of net-income (below 10.000 CZK; from 10.000 CZK to

16.000 CZK; from 16.000 CZK to 21.000 CZK; from 21.000 CZK to 27.000 CZK;

above 27.000 CZK)

• Interests and hobbies (open question)

• Do you usually follow fashion trends rate it from 1 to 5, where 1 do not follow at

all, 3 represents moderate interest such as checking latest news of fashion once in a

month, and 5 subscribe most of the fashion houses, follow fashion magazines and

check them at least once a week.

• What is the most important feature of Zara’s products you buy (open question)

• How do you know about Zara’s promotions?

• Do you think that Zara is fast fashion retailer?

Particular questions will help to determine the customers who visit Zara in “Novy Smichov”.

Questioner has been printed out and distributed once respondent agreed to go through brief

interview.

3. Research result

At this stage, research results will be illustrated and importantly to say that all data was

collected within almost 2 weeks. To start with, age structure our respondents as you could see the

vast majority represented by young age women as they constitute 75% of all pool.

Figure 6-Age structure

Source: own research

Let’s analyze this major group more deeply and see what interesting could be found. For

now, the male group can be disregarded.

Figure 7-Occupation

Source: own research

Female Male

15

2

35

4533

0

16-20 years

21-26

27-33

34+

Age Structure

5

12

3

4

3

8

Occupation female 21-26

Project manager

Finance

Business analyst

Developer

Auditor

Consultant

35% of them work in finance and 37% work as consultant and auditor. The rest works in

IT area either as software developer or project manager. Three respondents work as business

analyst, unfortunately they did not specify in which area. 10 out 35 work as part-time or internship

and they are equally distributed among these professions.

Figure 8-Salary

Source: own research

80 % of this particular group has net-salary between 16000 and 27000 CZK. Here we can

signify that no one has salary above 27000 CZK. It is due to age factor as they relatively recently

started working and therefore have not got promoted yet.

Among their hobbies are: reading, jogging, partying, actively use of social media

(Instagram), TV series, travelling.

They have also been asked whether they follow fashion trends and if so to what extent. It

was discovered that most of them do follow the latest fashion news. Since, 20 out 35 do follow the

fashion novelties almost once a week. More detailed breakdown can be seen from Figure below.

2

5

13

15

0

2

4

6

8

10

12

14

16

Female

under 10000

10000-16000

16000-21000

21000-27000

Salary Rate: 21-26 age

Do you follow fashion trends?

It has been also found out the most important features that customers perceive when they

purchase Zara products are: design, quality and comfort. Buyers have also signified that price is

quite fair and they do not feel deceived, as they get fastest design possible at quite cheap price.

32 out 35 perceived Zara as fast fashion retailer and therefore, it can be stated that Zara is

doing well in its positioning strategy. As there is no difference between how Zara’s positioning

works and the customers’ perception. In case if customers considered Zara to be something else

rather than fast fashion retailer, then it would have become a problem. However, as we could see

there is not such an issue.

To our question “how do you know about Zara’s promotions such as sales?” there result

was quite strange since, 10 respondents were not sure about it, as they did not exactly know from

where. 15 respondents said that they usually get this kind of information from their friends who

already went to the store and then shared with the information. The remaining 10 people could not

respond, as they were sure that they have never seen any Zara promotion.

The second part of the research was to find out whether customers’ behavior differs

depending on the day and to track people who did not buy clothes from Zara. Actually, it was

observed that nearly 80% of all our research respondents were participating on the weekend days.

Therefore, nearly 78% of respondents answered that they are employed or work part-time. It

Rate Number of respondents

1 2

2 3

3 10

4 12

5 8

Figure 9-Major Group, average score: 3.6

Source: own research

somewhat contradicts to our expectation, as it was assumed that it would be most likely that

working people will not be participating due to time reason. However, previous was mainly due

to the fact that research was also performed on Saturdays. During the week days customers were

hectic and spent less time in the stores.

Now it would be also wise to demonstrate the number of purchases that taken place within

the general group.

Figure 10-Number of purchase

Source: own research

Answer to our hypothesis was obvious as all 16 people who did not buy in Zara bought

something in other stores. While only 3 out 19, who already bought clothes from Zara, did also

buy from other stores. Therefore 100% in first instance and 16% in the second case.

There is quite high number of people who did not buy anything, following they would be

observed further to see whether they would find what they need in different stores. Therefore, this

general group was divided into the two groups. The second group of 16 people will serve as

recommendations providers. Since, our group would approach them one more time to find out why

they did not buy in Zara, but did so in other shopping stores. Importantly to mention that Inditex

brands were disregarded and if our research participants would buy something in Massimo Dutti

they would not be asked such a question. Thus, only ones, who purchased in H&M, Mango and

other stores (not Inditex group), were going to be approached. It should be also explained why the

14

5

16

Female 21-26

No purchase

One Purchase

Purchase more than one item

Major group: number of purchase in Zara

other age groups were not taken into a consideration. For instance, all male age groups were not

further observed, as 8 out 9 bought at least one clothing item from Zara. Likewise, ladies between

16 and 20 years old, as 10 of them purchased something from Zara and the rest just left the mall

after they did not find anything in Zara. Thus, it was not possible to reach them out and ask why

they did not buy.

The results were as follows 6 people have bought something in Massimo Dutti and 3

participants found what they wanted in Bershka. Thus, the second group has also split into two new

sub-groups. The second sub-group of seven people was the final group that was interviewed the

second time.

Five of them made a purchase in H&M, one in Mango and the remaining individual has

purchased a t-shirt from New-Yorker. Afterwards, their answers have been gathered and evaluated.

Thus, let’s start from the ones who bought in H&M. They emphasized the fact they all checked

Zara’s online shop before going in, but they could not either find needed item or there was no sizes

for them. Therefore, they went for alternative choices in H&M store. Here, it can be highlighted

the fact the Zara’s web-page system has a lag with real time stock management system. Therefore,

it is a question that can be asked in our discussion with Zara’s employee (my acquaintance).

Another important thing, which has been pointed out, is that they also found it time consuming to

wait for the dressing room and some of them were dirty. Overall, it decreases the customers’

experience and they are eager to leave the store with empty hands. Young lady, who bought

garments from Mango, stated that “she actually does not like Zara as she usually finds spoilages

in clothes”. Seven people may not seem to be persuasive number, but it is 10% and considering a

fact that research has been performed only 5 days, it can said that there is quite high possibility that

there are more unsatisfied customers. Therefore, their opinions cannot be disregarded or neglected.

Figure 11-Time spent correlates with number of purchases

Source: own research

Figure above represents linear regression model that shows us that with more time spent

customer will purchase more items. R square means 88.9 % of variation in quantity purchased is

explained by the independent variable x (which is time) and it is quite good figure.31 The equation

represents how many purchases will be made if x takes some value. For instance, buyer spends 20

minutes so the number of purchased items will be around 1.7.

It was possible to identify a customer profile of Zara and also find out weak points thanks

to our primary research. After the research has been conducted, the interviewee was invited to

answer our questions. Here only the main bullet points of this interview will be highlighted as it

was conducted in Russian. Thus it is quite difficult and unnecessary to translate entire interview.

31 Grech, V. (2018). WASP (Write a Scientific Paper) using Excel – 13: Correlation and Regression. Early Human

Development, 122, pp.60-63.

y = 0.0663x + 0.3647R² = 0.8897

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

0 10 20 30 40 50 60

Number of purchases and minutes spent

Linea…

3.1. Interview’s key takeaways

The position of our interviewee will not be discussed as she wished to stay incognito in that

regard. However, she could provide with quite helpful information by answering to our questions.

There are just three of them, but there are derived from our primary research results.

1. Why does it happen that customers cannot find what they already saw from the

webpage?

2. Some respondents said there is problem with dressing rooms, is it an issue?

3. How do you check product quality and what happens with condemned products?

Interviewee’s responses from top to down:

1. According to her words, this problem may have two roots. Moreover, she was not

aware of this issue, as she has never heard any complaint from the customers. She

also mentioned that customers can easily reach out the customer support service on

the Zara’s webpage. Therefore, it seems to her that Zara ought to somehow promote

it and encourage clients to use this service. However, let’s get back to the problem’s

root cause. It is most likely that this happens due to system’s lags, as webpage

information is deriving data from internal ERP system. Sometimes, information

does not get updated even though real transaction has occurred. For instance, one

of the Zara’s stores sold the last piece of clothing of certain design early in the

morning. Although, the sale has been made, the webpage’s information does not

instantly retrieve the data and then automatically update the information. Particular

event takes place due to timer effect as system gets that information within

predefined time conditions. Unfortunately, it was not possible to know exactly the

timer’s settings as it is confidential information. Nevertheless, based on our small

research (we bought t-shirt that was seen available on the website) it showed that

update was done within 3 hours. However, this is not a rule as a second trial

indicated that update was done in almost 6 hours. It may depend on time when

purchase has occurred. It cannot be known for sure, but what was observed is that

the time is quite long.

The second potential cause of the problem is that cashiers have to login into the

system and then they can start working. However, it happens that newly joined

employees do not have account set up yet. Thus, the cash desk operates as typical

cash desk without updating of information in ERP system. Final changes of the

stock are stored at the end of the working day before the closure. It is done by the

store manager. Hence, it may take even 8 hours (one shift) without any update in

the webpage. Therefore, customers cannot get the real time information.

2. Interviewee has not seen any problem with dressing rooms, as there is always store

personnel that take care of them. Nevertheless, it was admitted that due to high

traffic of customers the rooms may get muddy, especially in rainy days. Zara store

has no cleaning specialist who would permanently perform his/her working

obligations. Therefore, according to interviewee’s words Zara’s workers clean the

rooms themselves based on composed schedule. The main area is usually cleaned

by shopping mall’s services, but dressing rooms are cleaned by internal personnel

at the end of the day. Hence, it is most likely that some rooms can eventually be

dirty. However, the rooms are checked and once the condition is unsatisfactory,

employees will clean them.

3. There is no specific procedure for that as all merchandise is believed to get

controlled in Spain before the shipment. Thus, the store just gets new stock and

following arranges into the shelves. Spoilage mainly happens as customers

carelessly put them away, after they tried them on. Due to that fact some percentage

of overall stock damaged and then kept until the sales come. However, she also said

that there should be at least some level of control at acceptance of goods stage. In

order to decrease number of reclamations, as it is not possible that all 100 % of

damaged goods solely due to uncaring customers.

4. Recommendations

As it has been previously expected the primary research helped to discover certain

weaknesses that can be addressed and somewhat improved. It was also said that the entire

organizational processes would not be covered. However, it turned out that very first issue that has

been noticed “webpage up-to-date” can only be changed from the headquarter side. Other two

problems are definitely the ones which take place within one shop confinement. Thus, they can be

addressed and solved if needed by store’s internal management. Exception is a quality check at

goods acceptance stage. Interviewee was not certain if all stores, which are directly owned by Zara,

do not have quality control. For instance, some stores might have been opened as franchisee or

joint venture. Thus, they may have different processes for that.

Nonetheless, let’s analyze the first issue that significantly decreases customer’s experience.

Since, it is quite disappointing to come to the store and did not find what was needed. Particular

issue has two possible causes. It will not be appropriate to underestimate one of them and neglect

it, while stressing out the importance of the other one. Hence, from researcher’s perspective it is

better to solve both of them simultaneously. In order to completely erase it and consequently

increase customer satisfaction. To begin with the setting up an employee’s account, it is more

wisely to set it prior to his/her first working day.32 It can be done at the final stage of recruitment

process. As soon as candidate confirms his/her commitment manager can create new user and

request for access in ERP system. Therefore, new employee may start his daily operations and the

system will be up-to-date. Nevertheless, it may not work out if the webpage gets updated within

certain time period. Hence, it would be more appropriate to have set this timer to a shorter interval.

Basically Zara has its webpage integrated with ERP system, but small little tuning is still needed.

32 Creating New Users. (2019). Retrieved from https://docs.magento.com/m1/ce/user_guide/store-

operations/permissions-user-new.html

Figure 12-ERP and website

Source: https://www.outerboxdesign.com/web-design-articles/erp-ecommerce-website-integration

The above is a simple example of data flow between these two business components. Thus,

from the figure, it can be understood that ERP is responsible for correct data input regarding the

stock level. Unfortunately, information regarding the terms of data extraction has not been shared.

Therefore, one can only contemplate over its daily operational settings. Nevertheless, it can

certainly be adjusted so that customers would have real time stock information.

The second problem is more related to the store maintenance process. It is not something

that needs a lot of financing. Since, it can be resolved by simply outsourcing this task to the third

party who would take care of that area. It is not clear how this process will run, whether the store

management can negotiate contract with cleaning companies on its own or the decision should be

made first in the headquarter. However, it is thought that it can improve customers’ shopping

experience. It may not seem to be important enough, but if it is considered from perspective of

thousands. It is most likely that some fraction of them will not return back due to this at first glance

negligible problem.

The last but not least, damaged clothes issue which is something that quite difficult to grasp.

Since, the cause of the issue has not been found. It does not sound convincing that Zara for instance

should use warning signs saying something like “please respect order in fitting room”. Since, it

may even negatively affect customers as being watched by big brother. Hence, finding exact cause

of the problem may substantially facilitate further development of actions that will have to be

performed.

Conclusion

The main aim of the paper was to identify weak sides of Zara store in “Novy Smichov”

shopping mall. Even though, the research focused on one particular location the findings can be

used as an indicator to other stores in the Czech Republic. Additionally, work determined the main

customer segment and their perception of Zara’s brand. It can be stated Zara does quite well in

terms of positioning. Since almost all or significant majority of the respondents see Zara as fast

fashion retail store. Therefore, the policy of spending less on advertisements gives certain benefits.

However, sometimes it would be sensible to use promotion channels, because according to the

interview and results of the research “customers are not aware of sales or some Zara’s website

features”. Research has also proved first hypothesis regarding the purchases in case if buyers did

not buy in Zara. Since, 16 out of 16 of observed customers eventually made a purchase in other

shops. Luckily to Inditex, 9 of them bought apparels in either Bershka or Massimo Dutti. Only 7

people bought garments in other stores. Inditex can preserve their customers by having really strong

presence in that shopping mall and their closeness is another crucial factor. What’s more, research

very briefly depicted the correlation between time spent in a store and number of purchases.

However, it should be not seen as an absolute truth or rule. Since, the number of observation is not

significant enough and there are some other unknown factors that may also influence customers’

decision. Therefore, that illustration only showed that the linear regression is positive, but as it was

said it can be just due to scope of observation and thus cannot interpreted as a canon.

Moreover, the research had a great facilitator represented by one of Zara’s employees.

Thanks to that fact, it was possible to find answers to certain questions that have been developed

after the primary research. However, some specific elements were not determined due to lack of

knowledge and privacy policies. Nevertheless, interview has greatly contributed in research

development process. Since, recommendations could only be drafted after the interview. Otherwise

it would have brought no change, but just describing the current situation.

Finally, the paper provides with small set of recommendations that could enhance overall

company’s performance as well as efficiency and attractiveness of one single store. To conclude,

paper fulfilled its main goal and all associated sub-goals. As it was found out that the key

determinants of Zara’s success is its supply chain and suppleness in terms of making new designs.

According to the research main attribute of the product was its design. However, nothing is perfect

and it has been turned out that even Zara could improve further. Embracing high-tech and right

governance of its ICT architecture may significantly help to improve its online sales as well as

physical sales. Therefore, Zara will eventually tune its support processes to go alongside with its

key process (selling clothes). Hence, everything must finally be in alignment with the central

functions of the company.

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Table of figures

Figure 1-Managing marketing strategies and the Marketing Mix ................................................. 10

Figure 2-Steps of marketing segmentation, targeting and positioning .......................................... 12

Figure 3- Porter’s Five Forces ....................................................................................................... 16

Figure 4-Price Determinants .......................................................................................................... 21

Image 5-Novy Smichov ................................................................................................................. 28

Figure 6-Age structure ................................................................................................................... 31

Figure 7-Occupation ...................................................................................................................... 31

Figure 8-Salary .............................................................................................................................. 32

Figure 9-Major Group, average score: 3.6 .................................................................................... 33

Figure 10-Number of purchase ...................................................................................................... 34

Figure 11-Time spent correlates with number of purchases.......................................................... 36

Figure 12-ERP and website ........................................................................................................... 40