O C T O B E R 2 0 2 0 • S T R A T E G Y

Zara’s International Pricing: A Focus on Southeast Asia

Written by Nur Atiqah Kamarudin, Senior Business Intelligence Analyst

Introduction | A Global Strategy | Category Pricing Across

Markets | Category Pricing by Competitor | Competitively Priced

Category | Key Next Steps

Instagram @zara

O C T O B E R 2 0 2 0 • S T R A T E G Y

IntroductionKey Insights• A Localised Approach: Zara tailored its pricing strategy by market,

which resulted in Southeast Asia generally priced at least 30% higherthan its home country, Spain.

• Competitive Categories: Jeans are more affordable in Zara Malaysiacompared to Indonesia and Singapore, with USD 30-40 as the mostcommon price range amongst the fast fashion brands.

• Tiered Pricing Strategy: Zara has shown success with a clear good-better-best pricing strategy based on fashionability.

Late to e-commerce, Zara’s parent company, Inditex SA, now plans toinvest USD3 billion in online operations, due to Covid-19. The Spanishfashion group has reportedly bounced back from its pandemic woes, asonline sales jumped by 74% in the first half of the year.

To capitalise on the e-commerce boom, more brands are embarking ontheir digital journey. However, prices remain complex to get right,especially in a new market. As 30% of top fashion giants’ sales come fromAsia, let’s look at how Zara deploys its pricing strategy, specifically in theSoutheast Asia region.

This report sheds light on international pricing strategies by Zara in aglobal environment. Over 140,000 data points were screened fromJanuary to September 2020 across the womenswear and menswearcategories on Zara Spain, UK, US, Singapore, Indonesia and Malaysia.

All data used in this report comes from products retailing online as tracked byOmnilytics, unless otherwise mentioned.

A Global StrategyConsumers are used to seeing products priced differently acrosscountries. With more options and information at their disposal, brandsneed to tread carefully when pricing products to effectively serve themarkets.

Localised ApproachConverting to local currency based on foreign exchange rate or applying afixed percentage markup are some common approaches undertaken bybrands expanding to other markets. However, these strategies fail toaccount for local consumers’ perceived values. Instead, brands need totake a holistic approach when setting prices, including understandingmarket demand and assessing the competitive landscape.

Chart 1 shows how the fast fashion giant Zara does it. Data revealed thatthe brand’s products were the cheapest in its own home country, with themedian price at USD31.15. The market with the highest price was theUAE, which was 69% more expensive than in Spain.

In the Southeast Asia region, Zara’s clothing was priced between 32% and59% higher than the origin country. Indonesia and Malaysia were amongthe least expensive, while consumers in Thailand were paying a premiumfor the same product. This is due to the high import tax imposed onforeign brands in Thailand.

C H A R T 1 : O N L I N E M E D I A N P R I C E ( U S D ) F O R Z A R A W O M E N & M E N

3

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31.15

32.38

39.06

39.22

39.38

41.43

42.14

43.78

44.14

44.09

46.75

46.98

49.89

0 10 20 30 40 50 60

Spain

United Kingdom

Indonesia

Australia

Malaysia

United States

Singapore

Taiwan

Philippines

Hong Kong

Japan

Thailand

United Arab Emirates

Median Price (USD)

Category Pricing Across Markets Granular analysis and monitoring pricing by category are critical not onlyfor assortment and pricing optimisation. These actions also enable brandsto spot opportunities in any market.

Competitive CategoriesZara’s products in Singapore were priced consistently higher for bothwomenswear and menswear categories. Men’s Shoes saw the highestprice variation, with a staggering 52% difference compared to Spain.

Meanwhile, the womenswear categories in Malaysia had competitiveprices. Dresses and Outerwear were the cheapest compared to itsneighbouring countries, while Tops, Pants & Leggings and Bags were onlymarginally higher than Indonesia.

For menswear, Jeans was the cheapest in Zara Malaysia. This was drivenby the competitive landscape in Malaysia for the category, which will beexplored when discussing pricing amongst the competitors (Chart 6).Indonesia saw the most competitive price for Outerwear, as it was priced10% lower than in Singapore. Zara tailored its assortment to suit thecountry’s climate, offering 40% more lightweight outerwear SKUs thanthe store in Spain.

This shows how Zara deployed its pricing strategy based on the localconsumer lifestyle and market relevance.

C H A R T 2 : Z A R A ’ S M E D I A N P R I C E S F O R T O P 5 W O M E N ’ S C A T E G O R I E S B Y M A R K E T

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C H A R T 3 : Z A R A ’ S M E D I A N P R I C E S F O R T O P 5 M E N ’ S C A T E G O R I E S B Y M A R K E T

0

10

20

30

40

50

60

Tops Dresses Outerwear Pants & Leggings Bags

USD

SP SG MY ID

0

10

20

30

40

50

60

70

80

Tops Outerwear Jeans Shorts Shoes

USD

SP SG MY ID

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Category Pricing by CompetitorEvaluating competitors’ full price distribution with sell-out performancehelps brands to gauge the optimal price points to set for the rightproducts.

Different PositioningIn Indonesia, Zara’s Tops mainly sat in the USD 10-40 bracket, with themost SKU count in the USD 30-40 with 903 SKUs. The brand’s strategyin delivering good quality fashionable products enabled it to charge ahigher price in the market. With a clear good-better-best strategy, itdrove an above average sell-out for the category at 69%, despite higherprice points.

Zara’s close competitor, Mango, shared a similar distribution of good-better-best pricing strategy. However, it achieved higher full price sell-out rate than Zara at 81%, backed by consumers’ preference for itspared-back and clean designs. This is in line with the shift towardsminimal dressing.

Meanwhile, H&M’s pricing structure differs largely from the two brands.Its “good” pricing, at USD 0-10 bracket delivered the strongest sell-out,attracting the price-sensitive consumers. Its fashion items in the “best”tier of USD 20 and above failed to drive high sell-outs, despite priced 2xlower than its counterparts.

Analysing the degree of fashionability with varying product attributesgives greater visibility into the pricing dynamic, as illustrated in thesubsequent slide.

C H A R T 4 : P R I C E B R E A K D O W N O F W O M E N ’ S T O P S B Y R E T A I L E R S I N I N D O N E S I A

Women’s Tops Good Better Best

Zara

USD 0-30• Solid and printed basics -

t-shirts, tanks, crop and cami tops

• Ribbed material

USD 30-40• Blouses and shirts• Statement shoulders – shoulder

pads, balloon sleeves, ruffles• Patterned – animal prints,

geometric, florals

> USD 40• More progressive• Intricate details – sequined,

embellished, embroidered, lace• Printed blouses and shirts with

volumes - ruffles and tiers

Mango

USD 0-30• Basic t-shirts in solid and prints • Organic cotton, recycled

cotton, ribbed material

USD 30-40• Printed blouses and shirts – florals,

animal prints, polka dots• Minimal details- buttoned-front,

tie-waist, ruffles, frills, puff sleeves

> USD 40• Relaxed and flowy blouses• Intricate materials– sequins,

metallic, mesh, embroidered, lace, fringe

H&M

USD 0-10• Basics/ essentials – tank tops,

t-shirts, camis in solid and minimal prints

USD 10-20• Blouses and shirts • Minimal details – puff sleeves,

drawstring/ tie-hem, criss-cross detailing

> USD 20• Voluminous silhouette• Puff sleeves, ruffles, flounce

detailing• Intricate materials – lace, glitter,

textured, tulle, organza, crochet

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Category Pricing by Competitor (cont’d) Distinctive StylesOverall, the three fast fashion giants had clear styles differentiating eachprice tier that resulted in strong sell-outs. While all brands did offer in-demand pieces, Zara’s products were more progressive with elaborateand trend-led designs.

Although Tops in Zara Indonesia were priced at least 13% higher than inSpain, the strategy worked for the brand as it remained competitive inthe market. However, Mango’s clean and minimal aesthetics resonatedmore with consumers, as it achieved strong full price sell-out of at least65% across the USD 10-40 range.

Brands studying the competitive landscape need to understand theirpositioning in the market to launch their products at the right price.Establishing direct competitors not only helps brands understand theirpricing and assortment strategies better, but also provides a holistic viewof the market demand.

C H A R T 5 : G O O D - B E T T E R - B E S T F A S H I O N A B I L I T Y B Y B R A N D F O R W O M E N ’ S T O P S

6

Good Better Best

O C T O B E R 2 0 2 0 • S T R A T E G Y

Competitively Priced CategoryMost of the men’s Jeans in Malaysia were competitively priced at theUSD 30-40 range. As with the other categories, Zara deployed a good-better-best strategy with distinctive product attributes. While itconcentrated more in the USD 50-60 range, Jeans in the “better” tier(USD 40-50) garnered the strongest sell-out at 78%.

Meanwhile, Mango and H&M were more focused on delivering basicstyled jeans, as more than half of their assortments sat in the “good”bracket.

C H A R T 6 : P R I C E B R E A K D O W N O F M E N ’ S J E A N S B Y R E T A I L E R I N M A L A Y S I A

Men’s Jeans Good Better Best

Zara USD 30-40• Essential jeans• Clean, minimalist look

USD 40-50• Worn details – faded, ripped

effect, frayed hem• ‘Join Life’ collection

> USD 50• Highly worn details – paint splatter,

patches, embroidered slogan• Premium material

Mango

USD 30-40• Basic jeans• Clean, minimalist look• Stretch cotton fabric

USD 50• Medium to light wash• Premium fabric • ‘Committed’ collection

N/A

H&M

USD 10-30• Essential jeans• Regular washed finish• No detailing

USD 30-40• Washed, stretch denim• Worn details – quilted, ripped-

effect • Made partly from recycled cotton

> USD 40• Classic style with minimal worn

details• Made of high quality, performance

fabrics - ultra-flexible stretch, moisture-wicking features

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Competitively Priced Category (cont’d)As depicted in Chart 7, Zara’s jeans were the most progressive comparedto Mango and H&M, with clear good-better-best pricing strategy thatmatched the product detailing and finishes.

Mango and H&M offered more classic styles, with each pricing tierdifferentiated by material quality and performance feature. H&M’sfunctional ranges in the “best” tier, namely Freefit and Coolmax, deliveredthe highest sell-out for the brand. These ranges boast sweat-wicking andoptimal comfort features, yet still priced competitively in the USD 40-50bracket.

C H A R T 7 : G O O D - B E T T E R - B E S T F A S H I O N A B I L I T Y B Y B R A N D F O R M E N ’ S J E A N S

8

Good Better Best

N/A

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Adopt a Localised Approach: While it is common to apply a fixedpercentage markup, one price does not always fit all. Simply convertingyour price to the local currency will not work either. Instead, a tailoredassortment with a localised approach in pricing is the way to go. Brandsshould also look out for competitive categories in each market, as offeringoutside of the ‘normal’ price brackets can be deadly.

Pay Attention to Competition: Benchmarking against competitors’pricing strategies and actions can help brands in setting their prices. Byidentifying the relevant competitors and their offerings, brands can makeinformed decisions to launch their products at the right price. Brandshave the choice to then price their products lower, higher or the same ascompetitors. However, setting prices higher than competitors requiresbrands to justify the increased price through the value of their products.

With Omnilytics, brands have the ease to study competitors’ pricingstrategies with sell-out performance, which indicates a validatedconsumer demand.

Implement Good-Better-Best Tiers: As consumers continue to look forquality and value, brands need to make sure that they meet these needs.Pricing products against the equivalent good-better-best fashionabilitytiers can help brands to reflect customer perceived value effectively. Asseen in Chart 6, Zara’s clear and distinctive style attributes across thepricing tiers revealed a strong demand for its Jeans in the “better”segment. The brand can use this finding to optimise its assortment toreflect consumer demand.

Key Next Steps

Instagram @zara

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Metric Description

Assortment SKUs Count The total count of stock keeping unit (SKU) i.e. the number of styles that a brand offers. In the report context, it is the total product count within a data set.

Median Price Refers to the price of the product at the mid point of the data set.

New-In The products that are newly added to the retail website within the timeframe selected.

New-In Contribution % Calculated by adding the number of new-in product count over the total new-in count within a data set.

Discounted The products that were listed with a markdown within the time frame selected.

Sell-Out A product registers a sell-out event when it is indicated as out-of-stock or no longer published on the website.

Sell-Out Rate Calculated by dividing the number of out-of-stock product count over the total product count within a data set.

Sell-Out Rate at Full Price Signals consumers’ willingness to pay at full price. It is calculated by dividing the number of out-of-stock product count at full price over the total number of out-of-stock product count.

Sell-Out Contribution Calculated by dividing the number of sell-out product count over the total sell-out count within a data set.

Definition of Key Metrics

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insights actionable so that businesses can make decisions with confidence and speed. At the core of what

Omnilytics does is the belief that information is power; pairing deep industry expertise and ground-breaking

technical innovation to bolster businesses’ agility with data-driven insights.

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