“How did Zara Capture the Chinese Market?”

Damak Donia 杜宁

Marketing Management

• What is Marketing Management?

• Overview Zara– Zara’s Success: Its Business Model

• Marketing environment: – China Marketing Environment– Market Attractiveness– Learning from Competitors: H&M and Esprit in China– SWOT Analysis:Threats and Opportunities– Key Success Factors to enter the Market

• Strategic Recommendations− Business, logistic and marketing strategy

What is Marketing Management?

Marketing management is theart and science

of choosing target markets and getting, keeping, and growing

customers throughcreating, delivering, and communicating

superior customer value.

From choosing target markets and building profitable relationships

with them?????

Questions to ask:

1. What customers will we serve?What is our target market?

2. How can we best serve these customers?What is our value proposition?

Target Marketing

Market Segmentation:

Divide the market into segments of customers

Value and Satisfaction

Expectation Performance

108

Expectation Performance

810

If performance is lower than expectations, satisfaction is low.

If performance is higher than expectations, satisfaction is high.

• Business• The world’s fastest growing fashion retailer of Spanish Brand

• Ranks among the three “global winners” with Gap and H&M

Compelling mix of fashion, price and quality

• First store in 1975. Today 536 stores within 30 countries worldwide

199 openings in 2009

• Financials• Sales: €4.5 Bn in 2008

• International sales 60% of total turnover

OverviewOverview

Business Model

Supply• Whereas most retailers designed 60% at start season, Zara

designed 15% Dump unpopular product line

• Deliver fashion “when the customer desires”

• Twice a week delivery schedule

Demand• No advertising or promotions

• 10,000 new items at highly competitive price

South America: 30 stores

Africa: 41 stores

Asia - Oceania: 7 stores

Europe: 407 stores

North America: 47 stores

Around the world

The industry Environment

The Natural Environment– Free access to natural resources for textile clothing

Demographic Structure– 1.7 billion people– 85.2% literacy rate – Skilled labour available– English speakers Exist

Social Structure– around 8 national languages–Country of two speeds: urban vs. rural – ‘New’ middle class with purchasing – Cultural shift in urban areas

Technology– Easy access – Financial benefits

Chinese Economy– GNP per capita $ 5890 – GDP growth of 10.7%– Industry/service economy

Government & Politics– Deregulation of most sectors –New textile policy– Stable communist country

Marketing Environment: China case

Market attractiveness Demand

Industry

• Estimated GDP growth of 6-7% in fashion industry • Undersupply for branded fashion products

Target markets

• 30% potential customers for branded fashion products• 60% estimated for 2010

Supply Design

• World class design schools

Production

• High innovation potential for manufacturingprocedures• High productivity potential• Cheap and skilled labour force• High investment in technology

Distribution

• High investment in customer delight’ malls

                                     

Learning from Competitors: H&M and Esprit in China

• Clothing, fragrances, sunglasses and home textile

• Introduced watches and accessory (departure from its global tradition)

• luxury brand

• High Prices

• Shopping mall and shopping aria

• Advertisement in the streets and in the metro stations

• Want to be known as a provider of quality Product

Esprit• casual, formal and party wear

• three collections per year

• Brand extensions: bags, caps, sunglasses, wallets and fragrances

• Premium price

• Strong control on promotions

• International option at high quality / price ratio

• international format in major cities (large shopping malls)

• Focus on metros and modern cities

• Strong support on printed media (adapting to Chinese culture)

H&M

Product

Price

Place

Promotion

SWOT analysis: Threats and Opportunities

• Huge untapped market

• Changing lifestyle and clothing preferences

• Demand outstrips supply!!

• Cheap labour and opportunities for local sourcing

• High productivity potential

Opportunities

• Low entry barriers• Customer bargaining

power• Unpredictability of

consumer behaviour• Product quality• Traditionalism

Threats

Key Success FactorsValue

Latest fashion with Chinese touchBest PricesProduct qualityVariety

Cost/SpeedLocal sourcing of raw materialVertical Integration of supply chainFast time-to-customerMass customizationLow process costs

Strategic Recommendations to Capture the Chinese Market

Business Strategy

Goal • Fast growth in China

How Implement Zara business model • Introduce European supply chain system with fine tuning

to suit the Chinese market • Customise the marketing mix

COMPANYCOMPE-TITOR

CUSTOMER

COST/SPEED

VALUE/SPEEDVALU

E /SPEED

Logistics Strategy

• Localise and implement just-in-time and ‘quick response times’ to demand

• Modernising the supply chain with the use of information technology

• Forge strong relationships with ‘value chain partners’ (suppliers and delivery co)

Marketing Strategy

Product• Introduce the occidental range of clothes for men and women

• Introduce a small section of Chinese clothes designed by ‘upcoming Chinese designers’ through mass customisation

• Introduce cotton clothes for the summer and woollen/synthetic one for the winter collections

Price• Use penetration pricing (20% lower than Esprit)

• Stay away from the promotion by ‘sale’ paradigm of H&M

Promotion• Promotion targeted at increasing awareness about Zara and

the concept of ‘Fashion at great value’• Use of print and television media

• Tie up with colleges to sponsor their festivals to increase awareness and ‘catch them young’

Place• Set up factory in the Factories area

• Find at least more then 5 stores in the big cities.

• Open Zara stores in the most shopping avenue and big malls.

Marketing Strategy

Thank You For Your Attention