Retail Management Assignment

Retail Format and Site Location Strategies

Submitted By: Kahni Kashiparekh Submitted to: Dr. M. Sathish

PRN: 19020841127

Retailer: Zara
Overview:
Zara is a Spanish fashion brand, established in 1975 in Galicia, Spain; where the first store
featured low-priced apparel items similar to the products that were popular and high-end.
Now, the company specializes in fast fashion, and its catalogues include products such as
clothing, accessories, shoes, swimwear, beauty, and perfumes.
The expansion process for the retailer came under consideration in 1985, for which a parent
company was set up – the Inditex group, and Zara is the biggest retailer under Inditex. The
actual expansion began in 1988 in Porto, Portugal, and Zara went on to enter the US market
in 1989, and the French market in 1990; and has since entered 96 countries and opened nearly
3,000 stores globally.
Zara’s USP lies in its ability to react to new trends in a quicker way, and develop and bring a
product into its stores within 2 weeks, whereas other fashion retailers take up to six months.
As of July, 2020; the brand is valued at $14.7B, with sales of $21.9B, but it does not spend
heavily on advertising expenses.
Zara has a “high-fashion-at-a-low-price” philosophy, and therefore gives utmost importance
to its location strategy, the Zara stores are never unappealing, instead they are grandiose and
aesthetically appealing. In 2011, Inditex bought a 3600sq. ft. store in the Tishman building on
666 Fifth Avenue, New York, for an amount of $324 million, making it the most expensive
piece of real estate ever sold in Manhattan.
  Retail Format:
Zara has always followed a “Multi-Channel Retailing Format”, which essentially means
that they sell their merchandise through more than one retail channel.
For Zara, these channels are:
1. Physical Stores: Zara has almost 3000 retail outlets spread across 96 countries, that
see a high footfall daily.
2. Online presence: Through own website, Zara has an eCommerce arm operating in 41
countries, which provides same-day delivery in cities that have both stores and
eComm presence; and also, interactive social media channels.
3. Mobile App
But, recently, Zara has started shifting to an “Omni-Channel Retailing Strategy” by
opening concept stores. In Omni-Channel, customers can use multiple sales channels to help
them make a single purchase. All of these sales channels are integrated with each other, in
Zara’s case, their physical stores, online presence and their mobile app.
For example, at a new London flagship store, shoppers can swipe garments along a floor-to-
ceiling mirror to see a hologram-style image of what they’d look like as part of a full outfit.
When it comes to the product assortment, Zara has a relatively smaller breadth (men’s,
women’s, children’s, home), and follows a price strategy that can be considered mid-range.
 Store Layout:
All the stores more or less have the same exterior and interior layouts, outlined below, post
which the entire store layout will be mentioned.
Exterior Aesthetics

Storefront Glass fronts and large windows; new stores

tend to be in grandiose buildings, sometimes
of historic importance (eg. The store in Fort,
Mumbai)
Marquee The brand name “Zara” written in a
minimalistic fashion in
Black/White/Silver/Gold letters
Entrances A total of 3 entrances, with 2 being very
 wide
Display Windows Large window displays having latest trends
on display with changes being made every
day
Building Size Minimum 2 storeys tall

Visibility High Visibility since the stores are always

located in prime locations that witness high
footfall
Adjoining Stores Luxury Retailers

Accessibility Prime store locations ensure easy

accessibility to the stores
Parking Available

Interior Aesthetics
Flooring White ceramics

Lighting Ambient, yellow lighting to provide a warm,

comfortable feeling
Walls Plain walls, to ensure that the clothes speak for
themselves
Trial Room Located on the furthest sides, away from the
entrance
Colour Scheme Minimalist, black and white colour scheme

Store Materials and Décor Glossy and Classy muted tones and Screens.

Store Layout:
Floors Two
Layout Boutique layout or free-form layout
Traffic Flow Wide passages between racks, shelves, and
other fixtures to ensure ease of movement
Signs Atop racks & suspended from ceilings
Product Displays Best-selling products placed towards to the right
of the entrance

 Factors to be considered before selecting store location:

The following factors seem to be taken into consideration for selecting locations for Zara
stores:
1. High-Street: Zara stores are only opened in high-street shopping districts or the
central areas of metropolitan cities. These locations generally tend to have premium
and luxury brands operating there, for example, on Fifth Avenue in New York, Zara’s
neighbouring stores include Tiffany & Co., Saks, Prada, Gucci, Louis Vuitton,
Versace, Valentino, etc.

2. Accessibility: Zara stores need to be easily accessible to consumers, and the central
areas ensure that easy modes of commute are available for the customers.

3. Space: Zara stores tend to be huge in size, and thus the location would need to be one
that offers well over 10,000 sq. ft. or more space for the store’s operations, along with
an added floor.

4. Visibility: The site locations of the stores are chosen keeping in mind the visibility
they provide to the shoppers, especially since Zara stores tend to be grandiose, and
hence, require high visibility to pedestrians.
  Analysis of Site Location (Pro’s and Con’s):

Pro’s:
1. By selecting a site location that is home to high-end, luxury brands; Zara has the
opportunity to attract customers interested in high fashion, and thus is able to create a
false sense of exclusivity and premium level of customer base.

2. By opening aesthetically pleasing stores in high-street locations that have long been
popular, it is possible that such customers are attracted who are merely there to
window shop, but end up purchasing some or the other item anyway, meaning, an
increase in sales.

3. By selecting the site locations that Zara selects, it is able to create and maintain a
certain brand image of quality and customer experience, that leads to increased brand
loyalty.

Cons:
1. It is highly possible that opening stores in high-end shopping streets can damage
Zara’s brand image, since the quality of its merchandise will be perceived as being
lower than that of its surrounding stores. For example, the surrounding luxury brands
ensure that only rich and wealthy shoppers visit the location, who are specifically
looking for luxury merchandise and thus would not want to shop at Zara.

2. By opening stores in central high streets of metropolitan cities, Zara alienates a large
segment of consumers who wouldn’t visit their stores because the trade area consists
of brands they cannot afford and will not purchase. For example, the 666 Fifth Ave.
location is home to brands such as Coach, Gucci, Versace, etc., and these brands are
out of reach for the majority of shoppers, and thus only attract the rich and wealthy
shoppers.

 Creation of Competitive Advantage through Location/Retail Format:

Zara’s choice of locations has helped it create a competitive advantage through:
1. Existence in Malls: Apart from high-street districts, Zara also has stores in malls,
where the aesthetically pleasing interiors of Zara remains. This helps the retailer to
pull in more customers in the form of walk-ins. In a mall where competition is fierce
and customers have a variety of stores to choose from, this sets Zara apart.
2. High-Street Location Aura: The customers that visit Zara stores in high-end locations
would be those that already own Zara merchandise, and thus will be repeat customers.
 This means that Zara manages to successfully pull in its target audience and build
brand loyalty.

3. Boutique Style Retail Format: This format allows the retailer to use its spaces for
implementing differentiators such as screens and digitally enabled shopping
experiences, which in term helps customers have a much better shopping experience.

 Innovative Practices used by the Outlet to Improve Competitive Advantage:

In recent years, Zara has been focusing a lot on innovating their customer’s experiences,
which it does by focusing on high-tech such as AR and VR.
For this particular section of the analysis, Zara’s digital store in Westfield, Stratford
(London) has been taken into consideration.

With a space of almost 50,000 sq. ft., the store at Westfield is enabled by extreme high-tech.
Apart from the regular Women’s, Men’s and Kid’s sections, the first floor features a custom-
built digital area for purchase and collection of online orders along with two automated
online order collection points that has the capacity to handle 2,400 simultaneous orders.
Customers can simply use the scanner on the QR or pin code provided to them in the receipt
mailed to them, and take it to the pickup point where a robotic arm works behind-the-scenes
to organise packages and deliver them to customers in seconds.
If the online orders are placed before 2pm, they are made available in-store on a same-day
basis, or the next day the orders are placed in the afternoon. Moreover, a self-checkout area
has been created in addition to the regular cashier tables, featuring a system that
automatically identifies the garments being purchased. All the customers need to do is
confirm their products on the screen in the self-checkout area before making a payment with
their card or mobile phone.
The store is furnished with interactive mirrors equipped with RFID (radio frequency
identification) technology that detects a garment being held by the shopper and then makes
outfit suggestions in the mirror.
Zara is implementing such technology backed strategy in multiple store locations to help
improve its competitive advantage.