Spain-based Zara, the world’s largest clothing retailer and owned by Inditex, is introducing an augmented reality experience in its stores. Shoppers can engage their mobile phones to see models wearing selected fashions when they click on sensors in the store or displayed on AR-enabled shop windows. Initially launched in 120 stores worldwide, such technology is irresistible digital-honey to draw millennials into the store and shop.
Creating customer curiosity is a most powerful pull marketing strategy. Every human being is innately programmed to satisfy it. With this new AR application and in so many other ways, Zara excels by pulling customers into the brand, unlike its closest competitor H&M, which remains fixed on pushing its brand and product out to the customer.
In studying these two oft-compared brands, the essential differences revolve around their overall approach to marketing. H&M still is fixed on the old 4Ps of marketing model—Product, Price, Promotion and Place—where the company and the brand is the focus.
By contrast Zara has evolved to the new 4Es of marketing strategy—Experience replaces Product; Exchange is new Price; Evangelism is now Promotion; and Every Place is new Place—that puts the customer at the center around which the company and brand revolve.
For Zara, it is all about the customer—experiences for the customer, exchange with the customer, Evangelism through the customer, and being every place for the customer. Shelley E. Kohan, assistant professor Fashion Institute of Technology, recently shared an analysis of the Zara difference based upon the 4Es marketing concept.
Product used to be king, but not anymore. In the new retail economy, experience matters more than product in the mind of the shopper. Zara understands this.
“While Zara is an excellent purveyor of product, it also capitalizes on the store experience by continuously offering reasons for customers to visit the stores and catch the hottest trends at affordable prices,” Kohan explains, noting that Zara has cultivated a loyal customer who visits about six times per year, as compared to other retailers in the contemporary market where two to three visits per year are the norm.
The fast-fashion experience formula for success combines frictionless shopping in a highly curated product environment offering scarce supply and new styles that rotate rapidly. “The more quickly and efficiently a customer can navigate through the store to explore and find hidden gems, the better the experience,” she says. “Zara nails that.”
Zara exchanges with customers for value
The old pricing formula—Pile it high, sell it cheap—worked well through the 20th century, but in the new experience economy, it has been replaced by the concept of exchange.
“Exchanging dollars for product is no longer meeting the needs of today’s shopper as they strive for deeper connections with the brand,” Kohan states. “Retailers must adapt to the changing consumer where the top characteristic is value. Today, value is measured beyond price, but also in time and convenience.”
Zara has a deep understanding of the entire value proposition it exchanges with the customers. Its fast-fashion deliverable is available in the quantity, format and time in which the customer needs the product. That translates into great value.
“Branded value aligns customer’s needs with a brand deliverable,” Kohan stresses.
For example, the most loyal customers for retailers typically account for 80% of the sales. These brand loyalists are also less price sensitive. “Appealing to the loyal segment of the target market, like Zara does, allows for higher profit margins and caters to customers who seek out branded value,” she emphasizes.
Zara masters the concept of exchange as it is not the cheapest in the fast-fashion arena, but it consistently delivers branded value of trend-right product at appealing prices.
Zara creates brand evangelists
By making the brand experience meaningful and the exchange valuable, Zara taps the potential of its customers to evangelize the brand. Rather than push marketing out, Zara pulls customers in, cultivates them as brand influencers to improve operations, services and products and stimulates them to spread the word.
“Shopper frequency at Zara is 2x to 3x higher than traditional women’s apparel, which indicates super loyalty to the brand,” Kohan says.
These loyalitsts become brand evangelists who share excitement about the brand with their networks. Zara, for example, has over 25 million Facebook followers, 16 million on Instagram and over one million in Twitter.
Zara has a highly evolved data infrastructure, Kohan also notes, that allows for super-efficient analysis of what’s selling and being said on social media platforms. This data is used to improve various aspects of the business from product offerings to service enhancements.
“The two-way communication between the customer and Zara allows for continual improvement of product and services,” she says.
Personal commerce is the every place where the customers are, rather than only in the physical place the brand is present. This is the new distribution model for retailers today: Delivering the brand experience and products when and where the customer demands it.
Zara does that for them. “Zara has devoted significant time, money and resources to develop a synchronized strategy between online and offline commerce,” Kohan explains. Through this technology and mobile connectivity, it links a customer’s shopping visit and provides access to inventory not present in the specific location. “It is a big win for both the customer and the company,” she says. And the company’s store location strategy is another aspect of its every place factor. It currently operates in 2,213 stores across 93 markets and 39 online markets. The flagship locations are located in the most critical markets that appeal to their most loyal shopper.
“Zara has the courage to continually strengthen their portfolio of stores by closing unprofitable ones, opening new markets, and expanding sister brands in existing markets (Zara Home, Massimo Dutti),” Kohan says.