From Bollywood celebrities to influencers to your friendly neighbors, this brand is changing how Indians dress. And I'll tell you the crazy part. The brand has yet to spend a single dime on traditional advertising and build a $13 billion empire.
Yup, Such has been the obsession with Zara. in 2009 Zara ended India under a joint venture partnership with Tata Trendz, who owns 49% of Zara India. That's right. Zara’s local partner is none other than Tata. In 2023, Zara and Tata Joint Ventures reported an over 40% year-on-year increase in India revenues, clocking an annual revenue of 2562 crores.
But the question is, how is the brand, which entered India a little over a decade ago, changing fashion and beating Indian brands at their own game?
In today's blog, we will break down How Zara tricked India into falling in love with its fast fashion culture. How it's making way better profits in Indian brands? And lastly, the cost of Zara’s fast fashion trends.
Let's start with Zara’s target demography. Check out this graph We’ve shown you this graph, many times. so by now you ideally should recognize it, but let's revisit it one more time. So India can be divided into three Indias, India one, India two, and India three. This India One and Aspiration India Two are Zara’s main focus because they are the only ones who have enough money to pay ₹3,500 for these torn nickers, But the reason why these people pay that much for Zara is because of the brand.
The premium brand is the first thing that comes to mind when we hear the word “Zara”. Image and perceptions are everything and Zara shouts “rich and premium”. even if it's with a torn nickel.
So how did Zara achieve this?
See Zara invests heavily in the location and appearance of its stores and often secures prime locations in luxurious buildings, often along with big brands like Armani, Gucci, and Louis Vuitton.
So this creates something called a “Halo effect” wherein how you perceive a brand, is enhanced by its association with these other fancy brands around it, just because it looks and feels fancy, it also attracts these high-paying customers. According to Youstory, Zara goes to the extent of hiring neuromarketers, to very strategically design the store windows in a way that will entice the customer to enter.
Next time you walk past Zara, try and notice this. Now this is another strategy Zara adopts will expand its stores. is called the “Oil Stain” strategy. We came across this in a Harvard case study done on Zara. Now have you seen oil stain and how it spreads? So, similar to how an oil stain gradually spreads and then covers an entire area that also only and only expands and opens multiple stores in a country after it fully understands the pulse of the market.
By opening and studying the market through one flagship store. Zara entered India more than a decade ago, but it has only expanded to 20 stores compared to its rival H&M, which has more than 40 stores across the country. But despite this difference, Zara's kicking H&M’s ass with each Zara India store selling 1.5 times more products than an H&M store in the country, and the average monthly sale per India store is almost 10% higher than the global average. Zara's next trick, which has made it so successful, is its customer-obsessed approach. Customer insights are the holy grail of Zara's business. They maintain a database of their customers and use technologies like RFID or Radio Frequency IDentification technology in their stores to track which garments or styles are being picked up by consumers evaluate the demand and quickly respond to these demands to stay on top of the trends. Zara is so obsessed with their consumers that all their designers are constantly in touch with store managers in every country who give obsessive attention to the customers who visit the store and notice what they're buying, what they're wearing, and what are their preferences.
To give you an example, in 2015 sometime, a woman walked into a Zara store in Tokyo and asked for a pink scarf, but she left since didn't have any stock left. Around the same time, the very same incident took place with other women in San Francisco, Frankfurt, and Toronto. Literally within seven days, Zara dispatched over 500,000 pink scarves across its 2000 stores worldwide, which were sold within three days.
Zara has a new design every week in each of its stores. Thanks to this customer obsession and the supply chain that seems as quick as Zepto. Zara produces an astonishing 12,000 designs every year, compared to the industry average of 2,000 to 4,000 which ensures that there's always something new.
So every time you enter Zara, It's like a novel experience because you've got new designs and new pieces to buy.
Now, I want to break down how exactly they can produce these pieces and get them all to these stores this fast.
It is essentially all because of Zara’s supply chain, which is the heartbeat of the whole business. And here's how it works. So Zara owns most of its factories in its home country Spain, and has a centralized distribution centered there which is in constant touch with suppliers and store managers in other countries like India, Bangladesh, and China. So all the clothes are designed here and dispatched from here roughly twice a week to all different parts of the world. Zara’s business model is vertically integrated and owns the whole supply chain. This also gives them the flexibility to increase or reduce production and keep these production costs low. Because of this flexibility in production, Zara can keep the number of goods unsold low, literally as low as 10% when the industry average is usually 17%.
This robust supply chain has them create designs and ship them to stores in just 4 to 6 weeks compared to normal fashion retailers' average of over six months. Now, while all of this sounds super impressive, there lies a very harsh reality behind all of this fast fashion culture. Factory workers in Bangladesh are being exploited by Zara, along with its rival H&M, According to a recent report, which surveyed thousands of factories in Bangladesh.
Zara has also been accused in the past of exploiting workers in China and Brazil with folks in Turkey, even going as far as slipping help notes in clothes And it's not just this Zara and all these fast fashion companies are also taking us closer to a major water crisis. You'll be shocked to know that to manufacture one cotton T-shirt, it takes 2700 liters of water.
On a serious note, We are going through a severe water crisis. The report by the WWF says that over 2 billion people across 40 countries are suffering from water shortages. So while all of us enjoy our flashy cotton shirts and chic pants, our planet is genuinely suffering. So fast fashion might not be so cool after all.
By 2030 India will become the world's largest consumer market. The global fast fashion market is expected to be a $100 billion opportunity by then. And with data showcasing that there's money to be made in the space, Tata and Reliance are already planning to buy their fast fashion empires. Reliance has already launched its Zara rival Azorte and will soon bring back another fast fashion giant Shein in the country.
So while the hopes for the environment look slim fast fashion potential might just put capitalism in India on steroids. Anyway, that's all about Zara and fast fashion.