Zara Competitors Analysis

Latest posts by Maddy Chiffey (see all)

The media constantly remind us that in-person stores are under threat from online shopping. I don’t know about you, but I’ve noticed this too in my home town – one by one, shops are disappearing, which is especially true regarding clothing retailers.

Fortunately, some fashion businesses have maintained strong sales online and in physical stores, one of which is Zara.

Zara is one of the largest international fashion companies specializing in fast fashion. It sells everything from clothing and accessories to perfume, all while maintaining its carefully curated image as a stylish, classy brand with a higher price point than alternatives like ASOS.

By 2026, economists have forecasted that the fast fashion market will reach a value of $133 billion; in 2021, its value was $91.23 billion. For clothing companies, it isn’t a matter of small change – there is a lot of money at stake, but there are also many obstacles to overcome.

I believe strongly in ethical business practices, which is why I’ve spent a portion of my career consulting firms in a range of industries on the best way to improve the sustainability of their operations. Fast fashion is one of the industries most in need of change; it’s problematic for many reasons, including its enormous carbon footprint and over-reliance on plastic fabrics, to name just two.

Companies like Zara still have a long way to go, and moving away from fast fashion while maintaining high margins will be one of the company’s biggest challenges over the next few decades. In this Zara competitors analysis, I’ll offer insight into how Zara fits into the fashion industry, its main competitors, and where the industry might be heading in the future.

The Bottom Line Up Front

Zara is one of the world’s most successful fast fashion companies, with a value of around $13.2 billion. While the fast fashion industry is highly competitive, I think Zara stands out thanks to its clothes’ quality and reputation as a more stylish alternative to brands like ASOS.

To achieve this reputation, Zara has taken advantage of the growing demand for e-commerce while maintaining an exceptional in-store experience. Even more importantly (at least from my perspective), Zara is actively taking onboard criticism regarding the sustainability and ethics of its business operations.

List of Zara’s Main Competitors

  • ASOS
  • H&M
  • Mango
  • Uniqlo

Zara Business Strategy

Zara

Zara is a Spanish retailer founded in 1975 with headquarters in Galicia, Spain. It is part of Inditex Group, the world’s largest apparel retailer, so there is a lot of power and money behind the Zara brand. Other brands owned by Inditex include Massimo Dutti, Pull&Bear, Bershka, and Stradivarius.

Zara has almost 3,000 stores – including children’s and home stores – with 547 in Spain alone. The company operates in 88 countries, including the US, UK, China, France, and Russia. Its business strategy involves offering more available products than competitors while projecting an image of high-class fashion using digital marketing.

Zara’s image focuses on it being a more stylish brand for fashion-forward individuals. This allows the retailer to sell its clothes at a higher price than other fast fashion companies.

Zara uses a production revenue model involving manufacturing and selling clothes online and in-store. However, this process is rapid because Zara operates in the fast fashion industry. Fashions change quickly, the company produces garments quickly, and consumers buy and wear garments quickly – usually discarding them after a few uses.

One of the most prominent arguments against fast fashion is that people stop wearing garments too quickly, resulting in an enormous amount of waste – over 92 million tonnes a year, according to some estimates.

However, Zara’s clothes are usually of a higher quality than other fast fashion brands. Many retain their style value even when a new season of clothes becomes available, so the problem is less prominent than for some of Zara’s competitors. Nevertheless, the brand has still come under fire from ethical fashion activists.

This controversy isn’t the only one the brand is involved in; far from it.

In 2011, a Brazilian TV show accused Zara of using sweatshops after a factory that produced its clothes was closed for poor working conditions. In 2013, Bangladeshi garment workers protested, demanding a $100/month minimum wage (at the time, they earned only $38/month), and in 2017 Zara customers found handwritten notes in their garments from workers asking people to put pressure on Zara and Inditex to pay unpaid wages.

Inditex has repeatedly issued statements with explanations or excuses, but accusations like these can severely damage a company’s reputation.

In 2021, Zara had the highest net sales of the Inditex group, amounting to slightly less than 20 billion euros, and the brand was valued at 13.2 billion. Inditex’s total revenue for that year doubled to 3.2 billion euros.

Part of Zara’s success, despite criticism of its supposedly unethical business practices, can be attributed to the brand’s customer-centric focus. Customer co-creation is a big part of Zara’s strategy; if enough people decide they want pink scarves, you will find them in Zara stores a few weeks later.

Other pillars of Zara’s successful strategy are shorter lead times, lower quantities, and more styles.

Interestingly, Zara is famously minimalist in its advertising, opting for high-quality social media content and carefully placing Instagram influencer posts. If you ask me, this is the future of retail marketing – the best way to make people want to buy your clothes is for them to see other stylish, successful people not only wearing them but showing them off.

Zara’s market share in the global apparel industry is 11%. In 2020, the brand ranked 41st on Forbes’ list of the world’s most valuable brands.

Zara Competitors Analysis

Zara competes with the following brands in the retail industry.

1. ASOS

ASOS

ASOS is a UK-based fashion and beauty retailer founded in 2000 with headquarters in London. The brand’s original target demographic was young adults and its name – short for “AsSeenOnScreen” – came about because it exclusively sold imitations of clothing from TV and film.

Today, ASOS operates a dual business strategy; it sells over 850 brands but also has its own-brand range of clothing available in every country in the world. That’s pretty impressive if you ask me.

The company’s hybrid revenue model incorporates markup and production. It buys garments wholesale and sells them for a profit while also manufacturing garments, which is part of the reason the ASOS brand has become so well known over the past decade.

Like Zara, ASOS has come under fire for its involvement in fast fashion, but its reputation is much worse. ASOS’s clothes are noticeably lower in quality and price than Zara’s; they are rarely worn again. Some people have consequently coined the negative term “ultra-fast fashion”, the blame for which sits right at the door of ASOS, among others.

In 2010, ASOS introduced a collection called the “Responsible Edit”, which consisted of clothes, beauty products, and accessories with a supposedly lower environmental impact. Ten years later, the brand introduced its “Circular Collection”, which focused on sustainability.

Critics have rightly pointed out that ASOS is only paying lip service to the issue of sustainability and ethical fashion because it is a trend that can be monetized, but does this really come as a surprise? The company was established to generate profit by selling cheap, low-quality clothes, and a complete overhaul of its business model would be no less than financial suicide.

Furthermore, to point out the obvious, ASOS is simply meeting the demands of your average modern consumer. It has embraced the rise of digital – for example, by creating a streamlined app – to provide affordable clothing delivered quickly.

You only have to look at the numbers to see that, right now, sustainability is a background concern for most people. In 2021, ASOS saw an incredible 46% growth in sales in the UK and a 274% increase (yes, you did read that right) in profit. The company’s revenue that year was £3.91 billion, putting it just ahead of Zara.

ASOS’s two-pronged marketing strategy, which harnesses the power of digital influencers and the influence of customers, has played a significant role in the brand’s success. The company knows its target demographic and precisely how to reach it – primarily through Instagram, Tik Tok, and TV advertisements (particularly reality TV).

One of ASOS’s most significant vulnerabilities is its complex supply chain network, which became patently clear in the first quarter of 2022 when the company saw an 87% plunge in profits following reduced stock availability.

Given ASOS’s business model, supply chain issues are pretty much unavoidable. Fortunately, I’d say it’s a big enough company to recover.

2. H&M

H&M

H&M Hennes & Mauritz AB, known simply as H&M Group, is a multinational clothing company founded in Sweden in 1947. Like ASOS and Zara, it focuses primarily on a fast-fashion business model, selling clothes for women, men, children, and teenagers.

H&M operates in 75 markets globally, with over 4,800 stores. Hennes & Mauritz AB is the international retailer behind Inditex, so H&M has some links to Zara, though both are in fierce competition.

While Zara manufactures its products, H&M outsources its production to over 900 independent suppliers, primarily in Asia and Europe. You’d think this would help the company evade accusations of unethical business practices, particularly concerning poor factory conditions. Still, research in 2018 revealed that many people making clothes for H&M live below the poverty line.

H&M has also faced heavy criticism in other areas, particularly for its “greenwashing” practices. A report released in June 2021 slammed H&M in particular for misleading consumers with claims about its supposed green credentials, which in reality do not exist.

This shows how marketing campaigns from fast-fashion companies can rapidly backfire if they propose an alternative narrative to the one most people know to be true: that, while convenient and attractive, fast fashion is killing the planet.

H&M’s faltering progress over the past few years reflects the impact of this backlash. The company had considerably higher sales in 2017 ($27,696 million) compared with 2021 ($22,043 million). Further, in the first half of 2018, H&M’s stock price dropped by 40% in 6 months.

It does appear that H&M is beginning to bounce back following the pandemic – its online sales grew 30% in 2021 – but I find it difficult to envision a long and prosperous future for the company.

However, the executives of H&M must see something I don’t because, in 2022, they announced plans to double sales by 2030 through a multichannel strategy, halving the company’s carbon footprint. Only time will tell whether growth remains strong for the company over the next decade.

3. Mango

Mango

Mango is a Spanish clothing company founded in Barcelona in 1984. The company uses a production revenue model because it designs and manufactures the clothes it sells in over 1,200 stores in 91 countries worldwide.

Thanks to an in-house logistics system, Mango is the second-largest textiles exporter in Spain. Its business model focuses primarily on franchising, a vital part of the company’s global expansion plans.

While Mango produces garments, it recently announced a plan to incorporate complementary brands into its offering, including Rituals cosmetics. This is smart because it allows the company to attract new customers who are already loyal to the Rituals brand.

Zara and Mango have very similar business propositions, and their products cater to the same demographic, so the incorporation of new brands could be one of the things that pushes Mango ahead.

Like its rival retailers, activists have also accused Mango of using greenwashing tactics in the past. In 2022, the company seems to be responding to criticism proactively; the Science Based Targets Initiative (SBTI) has approved Mango’s emissions reduction targets, lending them weight. Meeting these targets will be the next big challenge the company faces.

In 2021, Mango saw sales jump by 21.3% to $2.5 billion. That same year, it announced a 67 million euro profit – three times more than before the pandemic. Mango’s drive for global expansion, which focuses on areas including Belgium, Canada, and Austria, is working.

4. UniqloUniqlo

Uniqlo is a clothing apparel company founded in Japan in 1949 as a textiles manufacturer. Today, the brand is recognized globally, with over 2,000 stores in 25 markets.

Like Mango, Zara, and ASOS, Uniqlo operates within the fast fashion industry, but its business strategy is markedly different. Rather than chasing the latest trends, Uniqlo offers functional clothes designed to “inspire the world to dress casual”, which is a very different ethos from that of Zara, a much more fashion-forward brand.

Zara and Mango position themselves as high-end fast fashion stores with desirable clothes and higher-than-average prices; Uniqlo, on the other hand, focuses on affordability.

The visionary leadership of CEO Tadashi Yanai has certainly helped Uniqlo achieve so much so quickly. In 2019, he came 54th on Harvard Business Review’s list of the best-performing CEOs and provided a 700% shareholder return since 2000.

Providing an exceptional customer experience is at the forefront of Uniqlo’s business strategy, so the company invests significantly in employee training and development. For example, in 2000, it built Uniqlo University in Tokyo, where it trains 1,500 new store managers yearly.

I’ve mentioned how essential influencers and celebrities are in digital marketing, so it’s no surprise Uniqlo has tapped into this trend. The company has six global ambassadors, including Australian world-class pro golfer Adam Scott and Swiss professional tennis champion Roger Federer.

So, has this business strategy translated into successful results for Uniqlo? In FY21, the company made a revenue of 930.1 billion yen, a 10% increase year on year, which puts it ahead of Zara and H&M. E-commerce sales also increased by 20%.

Although Uniqlo now commands a larger fast fashion market share than Zara, it’s important to point out that the two brands have very different values and cater to different audiences. Uniqlo primarily provides everyday essentials, while Zara focuses on stylish, fashionable pieces.

Zara SWOT Analysis

Below, I have included a Zara SWOT analysis detailing the company’s strengths, weaknesses, opportunities, and threats.

Strengths

Efficient and fast production

  • Able to pick up on trends as soon as they emerge and get products on shelves quickly
  • Clothes have a reputation for being stylish and desirable
  • A large team of skilled designers
  • A streamlined app that facilitates e-commerce
  • Successfully utilizes influencer marketing
  • Strong online presence
  • Global reach
  • Efficient and fast production
  • Low-cost supply chain management
  • High-quality products compared to competitors
  • Reputation for being stylish, especially compared to some other fast fashion brands

Weaknesses

  • Criticized for unsustainable business practices
  • Vulnerable to supply chain issues
  • Fast fashion has a negative reputation
  • Sizing varies between clothes
  • Expensive for fast fashion

Opportunities

Athleisure is increasingly popular - the company could design a line of clothing for this purpose

  • Digital marketing could be utilized even more
  • Zara could move into the slow fashion industry
  • Global expansion – there are still countries without a Zara store
  • Athleisure is increasingly popular – the company could design a line of clothing for this purpose

Threats

  • Government-imposed sustainability goals could impact Zara’s ability to operate
  • Consumers are increasingly looking for sustainable clothes
  • Many people oppose fast fashion
  • The fast fashion industry is highly competitive
  • People are buying less because global economies are still recovering following the pandemic

Zara Competitors Analysis FAQs

Question: Is Zara the biggest fast fashion company?

Answer: Zara is one of the biggest fast fashion brands, but Uniqlo made more revenue in 2021.

Question: What differentiates Zara from its competitors?

Answer: Although Zara is a fast fashion brand, its clothes are high quality compared to most competitors and are also more stylish. Ultimately, Zara is the kind of brand that is desirable because its products are more upmarket than most fast fashion garments.

Question: Who is the target market of Zara?

Answer: Zara’s target market is young people who are fashion conscious but who would rather pay more for clothes of higher quality which can be re-worn.

Question: What is the difference between Zara and ASOS?

Answer: ASOS has thousands upon thousands of clothes on its website, whereas Zara offers a more elegant collection. Zara’s clothes are more expensive, but they are higher quality and more stylish than ASOS’s clothes.

Conclusion

Zara faces fierce competition from rival fast fashion brands. Some operate in the digital space, while others have hundreds of stores worldwide.

However, the future is digital. Economists expect the retail e-commerce market to grow by 50% over the next three years, reaching over $7 trillion by 2025. In my opinion, thanks to Zara’s impressive online presence and utilization of strategic social media marketing, it is in the best position of any retail brand to take advantage of this expected industry growth.

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