Research Paper: The impact of low-cost companies in the competition of fashion market industry: A comparative case analysis of Zara and Topshop Company

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Research Paper: The impact of low-cost companies in the competition of fashion market industry: A comparative case analysis of Zara and Topshop Company

(1700 Words)

“The impact of low-cost companies in the competition of fashion market industry: A comparative case analysis of Zara and Topshop Company”




Fashion industry market as of the present is growing and is booming as there are sectors focused on the type of business. But, how come low cost fashion companies do impact in competition within the fashion industry? Is there really an issue pointing towards these companies such as Zara and Topshop? Fashion industry can have greater demands from various customer types and due to globalization, such low cost fashion companies can be in to prove its worth in the fashion market. The research can be used to determine underlying factors in such cases to be taken from Zara and Topshop and thus, provide awareness to the fashion business of such impact in the market mostly, to those first class fashion companies.



The problem can be that nowadays, low cost fashion companies can possibly dominate the industry of today and in the future and the situation for competition in the fashion industry can amicably be on high demand on such products and services and that there is evidence of business risks as possible. The interest of the paper will be to determine how low cost fashion companies impact the competition within the fashion industry in the aspect of its market stance. There should be awareness and assessment on the presence of the two low cost fashion companies, Zara and Topshop will be considered as the focus for this study


Relevant literature: This section will demonstrate your knowledge of the literature and make the link with the situation to be investigated. At this stage it will indicate the key texts you will draw on.


A consumer preference for brands with a global image, even when quality and value are not objectively superior, has been proposed as a reason for companies to consider global brands (Cited from, Shocker et al., 1994Taylor and Raymond, 2000). Therefore, Fashion Company needs to identify the response of consumers worldwide to its global advertising for such specific consumer segment. For instance, the fashion industry for women is particularly relevant in terms of examining the feasibility of cross-national segmentation. Research indicates that females tend to be more fashion conscious, be more knowledgeable about fashion brands (Cited from,Blyth, 2006), and read more fashion magazines than male consumers (Cited from, Chamblee et al., 1993; Putrevu, 2004). This implies that marketers need to pay special attention to women when expanding and advertising fashion brands to international markets. The fashion industry is characterized by a considerable amount of standardized advertising. In fact, global advertising in fashion magazines such as Vogue and Elle helps create the image of a designer brand name for fashion goods, such as apparel, accessories, and perfume, and has been used by many leading firms (Cited from, Blyth, 2006). Increasingly, some fashion marketers have discovered that their advertising is directly linked to retail sales and strong retail performance (Cited from, Callan, 2006).


 Fashion lifestyle segmentation

In recent years, it has been suggested that we are seeing the emergence of a new group of consumers who have similar preferences and buy similar brands that are promoted globally as well as in local media. These new consumers have been referred to as “global consumers,” who exhibit similarities to people in other nations in terms of lifestyle and consumption patterns (Cited from,Hassan et al., 2003). Although differences abound in music, values, and cultures, some have argued that commercial advertising on mass media (TV, magazine, and internet) has contributed to a global consumer culture, particularly for global brands (Cited from, Arnold and Thompson, 2005). In various contexts, it is important to examine whether evidence really shows support for the notion of global consumer context. Thus, again, it is important to examine whether fashion segments cut across national boundaries. Lifestyle segmentation has received considerable attention in fashion products, such as clothing, accessories, and sportswear. Fashion lifestyle is defined as consumer attitudes, interests, and opinions related to the purchase of fashion products (Cited from,Gutman and Mills, 1982Ko et al., 2006). In a study of the female apparel market in the USAShim and Bickle (Cited from, 1994) outlined three fashion lifestyle segments: symbolic/instrumental users, who are younger, innovative, fashion-conscious, and represent higher social class level; practical/conservative users, who are oriented more toward comfort and function than toward fashion or appearance and are not likely to enjoy shopping; and apathetic users, who tend to patronize discount stores. In another study from the USA, Kim and Lee (Cited from, 2000) identified six fashion lifestyles – price-consciousness, fashion-consciousness, information seeking, self-confidence, attitude toward local stores, and time-consciousness and was related to different segments that sought benefits from catalog shopping. As Lee et al., (Cited from, 2004) divide TV home shoppers into four segments based on fashion lifestyle the aesthetic group, the economic fashion innovator group, the showy uncritical group, and the fashion-uninterested group and discuss their different responses to product advertising on TV home shopping. Finally, Ko and Mok (Cited from, 2001) found that fashion lifestyles have significant effects on advertising effectiveness in an Internet shopping context (Cited from, Ko and Park, 2002). The low cost companies can be guided by philosophy of producing fashionable cheaply made clothing, but adapts its clothing lines to each country and ensures that stores are permanently restocked. To strengthen brands that involve such mixture of fashion and cheapness, there can be collaboration among celebrities and famous designers available at low prices.




Thus, for instance, Hennes and Mauritz there can be the support of singers such as

and Chanel designer

have all worked with H&M and their collections have sold out in hours. Hennes and Mauritz reported then, such sales of €8.6 billion approximately $11.9 billion, putting it slightly ahead of its nearest rival in the clothing retail industry, Spanish group Zara, as the principle remains the same: fashion and quality at the best price. The emergence of international low-cost fashion chains such as Hennes and Mauritz is linked to shopping trends as the success of these brands is evidently down to their low prices, which is the main point. (Cited from, The Local, 2007 in Business Region Goteborg)  The people and the environment where people live in are affecting the changes in fashion. These changes are influenced by celebrity culture, demand for cheap, fast fashion and the ever-increasing demand to help save the planet. Fashion brands realize the needs and act upon it to keep people interested, and to keep people from buying their brand. However, the regular consumer doesn’t know about seeding, so therefore she believes that the celebrity has bought into a brand they trust.

Zara is the flagship chain store for the SpanishInditex Group owned by Spanish tycoon  who also owns brands such as Massimo DuttiPull and BearStradivarius and Bershka. The group is headquartered in A CoruñaGaliciaSpain, where the first Zara store opened in 1975. Today, Inditex is probably the world’s fastest growing retailer with over 3,100 stores around the world in over 70 countries the Zara format taking around 1,000 of those stores. In March 2006, the group overtook Sweden’s Hennes & Mauritz to become Europe’s largest fashion retailer. For instance, it is claimed that Zara needs just two weeks [1] to develop a new product and get it to stores, compared with a nine-month industry average, and launches around 10,000 new designs each year. Zara has resisted the industry-wide trend towards transferring production to low-cost countries. Perhaps its most unusual strategy was its policy of zero advertising; the company preferred to invest a percentage of revenues in opening new stores instead.


Zara was described by Louis Vuitton fashion director as “possibly the most innovative and devastating retailer in the world”. Zara has also been described as a “Spanish success story” byCNN The clothing industry followed design and production processes that required long lead times, often up to six months, between the initial design of a garment and its delivery to retailers. This model effectively limited manufacturers and distributors to just two or three collections per year. Predicting consumer tastes ahead of time presented inherent difficulties, and producers and distributors faced the constant risk of becoming saddled with unsold inventory. The company’s instant fashion model, which completely rotated its retail stock every two weeks, also encouraged customers to return often to its stores, with delivery day becoming known as “Z-day” in some markets. The knowledge that clothing items would not be available for very long also encouraged shoppers to make their purchases more quickly. An article in Businessworldmagazine describes Zara’s fashion strategy as follows: “Zara was a fashion imitator. It focused its attention on understanding the fashion items that its customers wanted and then delivering them, rather than on promoting predicted season’s trends via fashion shows and similar channels of influence, which the fashion industry traditionally used.”[11] Shortening the product life cycle means greater success in meeting consumer preferences.[13] If a design doesn’t sell well within a week, it is withdrawn from shops, further orders are cancelled and a new design is pursued. No design stays on the shop floor for more than four weeks, which encourages Zara fans to make repeat visits. An average high-street store in Spain expects fans to visit three times a year. That goes up to 17 times for Zara.[14]


Zara’s success story

While retailers concentrate their money and efforts on building a brand image through advertising campaigns, their lack of control over sub-contractors has left many open to accusations of using sweatshop labor when unacceptable practices are uncovered at factories producing their merchandise. The company’s success lies in it having total control of every part of the business. It designs, produces and distributes itself. By controlling the entire process from factory to shop floor, Zara can react quickly to changing fashion trends and customers’ tastes, providing a “newness” that has taken Europe by storm. Shoppers addicted to the Zara brand know exactly when the deliveries will be arriving at their local shop and some even turn up before opening time on delivery days to be the first to pick up the latest lines.

The company’s success is proof that it is still possible to build a massive brand by doing no more than meeting a market need.  It has achieved this without any advertising or promotion and without outsourcing its manufacturing to countries where labor is cheap.