Zara: worldwide pricing strategy revealed by study
On March 18, the Inditex Group released the results of its 2014-2015 fiscal year, which saw net profits of 2.5 billion euros. A few months later, its founder, Amancio Ortega, became the second richest man in the world with a fortune estimated at 64.3 billion euros.
In this context, global retail players have wondered what has been Inditex’s secret in achieving these historical sales figures.
In order to analyze the Spanish company’s pricing strategy in the 88 countries where it is present, the bank Morgan Stanley, with the assistance of research firm AlphaWise, conducted a survey comparing nearly 7,000 products from 14 sites in markets where Zara is present, the brand representing two thirds of the company’s physical stores.
According to the results published in the newspaper El Confidencial, with Spain serving as a base with a score of 100, and taking into account the exchange rate at the time of the study, Zara’s clothing was priced between 22% and 24% higher in France, Italy and Germany, an increase that rises to 50% in Mexico and Britain.
The market with the highest prices was South Korea (96% more expensive than in Spain) followed by the USA (92%) and China (78%). Given these results, it’s not surprising that Asia recorded the largest sales in 2014 for Inditex, accounting for 21.1% of the company’s total turnover as compared to 20.4% during the previous year.
Spain accounted for 19%, as compared to 19.7% in 2013, while the rest of Europe accounted for 46%, as compared to 45.9% one year earlier. Latin America, meanwhile, generated 7.9% of sales.
It thus appears that beyond following a pricing strategy tailored to the characteristics of each market, Inditex is attentive to what consumers are willing to pay based on their income.
Amancio Ortega’s company thus responds to client’s demands and meets the particular needs of a fast fashion industry that requires flexibility and innovation at affordable prices.
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