Analysis
ZMET
We used a top down approach to derive our net profit by calculating financial figures obtained from the Inditex Annual Report as well as secondary data regarding the performance of Singapore retail industry in 2012. Taking various factors into account, we did a weighted average for net profits earned for the year of 2012. We then take into account the proportional factors by calculating the profits in Asia that is representative of the profits made in Singapore from Zara retail outlets. The figure derived is the Net Profit after Taxes which amounts to $8,460,000.
Stage 1
Segmentation
Calculation of Net Profit
Based on our qualitative (focus group, observational study) and quantitative (survey) analysis done in the previous assignments, we were able to segment the market accordingly. We then used our findings to segment the market into four main categories.
Customer Segments
i) Fashion Chaser
These shoppers are reliant on mass media (advertisements, print and social media platforms) in their buying decision. Fashion chasers view Zara as a desirable brand and a brand with quality, hence we believe that Zara obtains a larger share of their wallet and rakes in the highest percentage of sales (36%).
This group is the smallest segment (8%) and mainly consists of older females, above the age of 26. Although they make up only 8% of the respondents in our survey, we observed that they purchase more from Zara as compared to the other consumer segments. They are fashion trend followers and fashion conscious. Also, they prefer well-known brands and price is of lower priority to them.
ii) Opinion Seeker
This group constitutes 27% of our total respondents in our survey. It composes mainly young people, aged between 18-25. They seek a sense of affirmation in their purchase decisions and are easily influenced by the mass media, social media and people around them. However, people’s opinions are of a higher importance to them over mass media. In particular, they seek advice from their family, friends, and even, sales personnel when purchasing an item.
Given that opinion is important to this segment of customers, the fact that Zara has an overall positive brand image allows it to benefit from this segment. From Assignment 1, we see that words typically associated with Zara include sophisticated, trendy and fashion-forward. This would appeal to this segment of customers who want to feel good about what they wear. This is the brand imagery that Zara has established and continues to remain the leader of it.
Due to Zara’s lack of advertising efforts in Singapore, word of mouth plays an critical role in its success. Thus, opinion seekers would be very much influenced by the word on the street regarding the Zara branding. Our group predicts that this segment will constitute 22% of the percentage sales. The initial intuition would be that this segment should constitute more to the percentage sales since Zara is doing exceptionally well in 2012. However, one of the considerations was that this segment might be easily swayed and are not as loyal to Zara brand as compared to Fashion chasers.
We believe that with improved communications from Zara through various platforms, it will be able to better capture this segment that is willing to spend on a brand with strong image. In addition, people’s recommendations are crucial to the growth of this segment, and Zara could come up with loyalty programs to improve its Net Promoter Score (NPS).
iii) Rational Shopper
This group amounts to 33% of our respondents, forming the largest segment. This cluster is made up of older people, aged 26 and above and there is an equal number of male and female shoppers under this category. We have also observed that, despite Zara’s premium prices for their products, the rational shopper places quality and design as the top attributes. Rational shoppers are willing to pay higher prices for quality items from well-known brands. These shoppers are also knowledgeable about brands and tend to go for a combination of well-established mainstream and alternative brands.
The prediction our group placed for the percentage of sales from this segment is 28%, which is the second highest. We believe that consumers aged 26 and above have better purchasing power and thus are more affluent. From our focus group, we also observed that they are more cautious about their purchases and hence seek to find the best product in terms of quality, with good aesthetic design that fits their image.
iv) Value Buyer
Lastly, this group forms 30% of our respondents and comes from two diverse age groups, namely age 18-25 and ages 36 and above. Both age groups are price conscious, placing price and value over brand names or clothing style. They compare prices between shops before making a purchase.
For the younger age group, they tend to group and benchmark Zara against H&M and Forever 21. As such, they might feel that Zara is expensive or over-priced. An explanation for this finding is that the younger consumers are mainly made up of students with lower purchasing power while that of the older age group prefers functionality over branding.
Another observation we have made is that, despite Zara’s minimum advertising policy, the marketing efforts made by Zara through print advertisements are mainly for sales during the Great Singapore Sale or seasonal periods such as Christmas or Year-End Sales. As such, our group predicts that this segment constitutes 14% of the percentage sales. Although it may be almost comparable to the Opinion Seekers’ segment, it is largely due to the sales and discounts that Zara holds to appeal to Value Buyers.
