Zara is one of the hottest fast fashion brands in the world. Born out of Spain and now with more than ten thousand stores around the globe, the story of Zara is an exciting one. The question is, is this decades-old brand here to stay?
In this PESTLE analysis, we review Zara’s current market standings through Political, Economic, Sociocultural, Technological, Legal, and Environmental lenses. As you’ll see in a second, Zara’s future certainly isn’t too bad…
Here are the Political factors impacting Zara:
European Trade Agreements
Zara is a Spanish brand, so it enjoys all of the benefits of operating a business out of the European Union. In a political context, one of the biggest pros of running a company in the EU is the country’s extensive trade agreements. Not only does this make it incredibly easy to import raw materials and export finished products within the European Union, but it also means that Zara can send its merchandise across the world with little effort and for a low cost. Overall, the EU’s free-trade policies are massively beneficial for Zara; let’s just hope the Union continues to thrive!
Here are the Economic factors impacting Zara:
Low Cost of Labor
As mentioned previously, Zara is a Spanish brand. Since Spain has one of the highest unemployment rates within Europe, this means that it has a relatively low cost of labor — especially in comparison to other Western European countries, such as France, Germany, and the United Kingdom. Zara manufactures a good fraction of its products in Spain, so this low labor cost allows them to minimize costs and, in doing so, improve profitability. Again, the low cost of labor in Spain is definitely a positive for this brand!
Zara is a well-recognized brand, so those less familiar with its products might think they’re quite expensive. On the contrary, Zara is considered a relatively affordable brand in comparison to other European highstreet fashion names. This allows the company to thrive even in poorer countries; for example, despite Spain’s slow economy, Zara is still one of the most popular clothing brands in the country. Indeed, Zara has some more expensive products, but what’s most important is that it can cater to the majority of shoppers with the rest of its clothing lineup.
Here are the Sociocultural factors impacting Zara:
Despite its affordability, Zara is a fashionable name for most shoppers. This is where you can only praise the company for its hard work. Zara delivers a good-quality product for not a lot of money. And thanks to the brand’s clever marketing efforts, it feels rather exclusive for buyers. Overall, this strong, positive brand presence allows Zara to collect healthy profit margins for its shareholders, while buyers still feel like they’re getting a great deal.
Online Shopping Trend
There’s no doubt that online shopping is a major trend in the 21st century. Although clothes shopping might not be the best fit for the web, consumers now want to order their garments with the tap of a button, and from the comfort of their own homes. This isn’t necessarily a bad thing for Zara, since they already have a popular webshop. However, Zara will have to pay close attention to the performance of its online store, since consumer’s preferred channels are definitely changing.
Here are the Technological factors impacting Zara:
Use of Big Data
Zara is one of many brands looking to use technology to expand its reach. As one of the world’s most popular fashion retailers, the company has both the money and the audience needed to get the most out of data. As a result, Zara is looking to big data — the study of analyzing huge data sets — to find better ways to reach and appeal to consumers. With both online and in-person customer touchpoints, this isn’t a straightforward task. But if Zara can pull off some successful data analysis, you bet they’ll be able to propel their powerful business even further.
Here are the Legal factors impacting Zara:
Like all of us, Zara has to operate within the bounds of the law. For all fashion brands, copyright law is one of the scariest legal branches out there. Since Zara loves capturing hot clothing trends and making them more affordable, it’s bound to run into some issues with copyright. In fact, the major retailer already has. It’s been accused of stealing designs and clothing concepts from the likes of Adidas and Balenciaga. In past cases, Zara has largely been able to weave itself out of uncomfortable legal situations like these, but who knows if the behemoth brand will continue to have such good luck.
Here are the Environmental factors impacting Zara:
Fast Fashion Impact
The world of fast fashion is often associated with wastefulness. Many fast fashion products simply aren’t designed to last; instead, they’re supposed to be affordable garments that look good in the changing rooms. What’s more, fast fashion is said to encourage shoppers to quickly jump on trends, throwing away clothing just to stay with whatever is hot. Some might classify Zara as a fast fashion brand, so they might be accused of this wastefulness. With shoppers becoming more and more eco-conscious, this could have a negative effect on the brand if it doesn’t begin to take sustainability more seriously.
To show its concern for Environmental matters, Zara’s parent brand Inditex has openly published a sustainability pledge. On its website, the brand shares its “commitment” to water, climate change and energy, biodiversity, sustainable materials, animal welfare, and other environmental and ethical issues in depth. If Zara can adhere to these guidelines, we can assume it will continue to thrive even under scrutinous eyes.
PESTLE analysis of Zara: Final Thoughts
Zara is a big brand for a reason: it creates luxury-feeling fashion products at an affordable price. With lower labor costs ensuring a solid margin for shareholders, the company’s core business model is solid. There are concerns about Legal and Environmental issues, but Zara should be more than mature enough to handle them!
Image by Markus Spiske