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How Zara Makes Billions In Sales With Minimal Ad Spend

Retail is a cutthroat industry, with competitors constantly amping up their ad spend while slashing prices in an effort to attract customers.

And yet Zara, with more than 6,500 stores and a growing presence online has managed to thrive without going this traditional route.

How does Zara maintain such financial success and popularity without spending big on marketing and advertising? Read on to find out the brand’s secrets.

1. Be Fast, Not First – Zara’s a Fashion Copycat

Image: Zara

Many retailers use the strategy of trying to be fashion innovators, to be trendsetters and capture early adopters. But rather than spend the money on R&D to be first to market, Zara takes a completely different approach: fast fashion.

Rather than setting fashion trends, Zara rides the wave of what’s currently hot and established to provide affordable copycat versions of high-end brands. And to appease its teen and 20something demographic, the store prides itself on getting new designs in stores within 2 weeks.

But does this strategy really work? You be the judge. The brand has grown overall sales by around 50% in five years to $17.5 billion.

2. It Monitors And Responds To Customers’ Feedback

Image: Photospin

Asking for customer feedback is more than lip service at Zara. When a customer says she loves (or hates) an article, this gets reported back to headquarters, and communicated to in-house designers, who apply the feedback to future work.

And its store managers are far from minimum-wage employees. They’re experts in fashion and observation, and are taught how to pay attention to what customers are saying and doing to reflect what moves the brand needs to make next. Try doing that with armloads of statistical data generated on a computer.

By including customers in the design and improvement process, Zara builds massive brand loyalty.

3. It Uses an Anti-Marketing Approach

Image: Instagram
Image: Instagram

Here’s what makes Zara truly unique: the company only spends about 0.3% of sales on advertising, and doesn’t have much marketing to speak of. Consider that the industry average marketing spend for retail is 3.5%, you can see how much of an odd duck Zara is with this approach.

But what appeals to customers is its exclusivity and the fact that the brand isn’t plastered on every billboard. Shoppers feel like if they buy a shirt at Zara, five other people won’t have that same shirt at work or school. The fact that the store stocks little inventory helps with that exclusivity factor. There’s the sense of being in a cool kids’ club when the brand stays underground in terms of advertising.

4. Location is the Most Important

Source: Flickr

While you might think Zara execs are pocketing that extra profit that they’re not spending on advertising and marketing, you’d be wrong. Instead, Zara invests in the location and appeal of its stores, which currently sits at around 6,500 stores in 88 countries.

Zara’s strategy with choosing where to put stores is to identify high-street retail areas in major metropolises. You won’t find a Zara next to Wal-Mart, but more likely near higher end fashion retailers. It’s as if by proxy, some of that high fashion rubs off on Zara, though the prices are much more affordable for its audience.

Still, recently the brand announced that its aggressive store expansion would slow slightly (down from 8-10% to 6-8% growth in new sales) as it puts more focus on building its online sales.

Clearly, going against the grain works for Zara. The brand serves as proof that you don’t necessarily need to spend a ton on advertising if you can make your brand appeal stem from exclusivity and constantly offering new products.

Recap:

  1. Rather than be first-to-market, Zara copycats tried-and-true fashion
  2. The brand takes customer feedback seriously
  3. Rather than invest in advertising, Zara focuses on brand experience
  4. Location is key for Zara’s physical stores
Susan Payton

Susan Payton

Susan has published content on Forbes, Cision, Intuit, AllBusiness, and other respected publications. She also writes about travel.

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