zara apparel manufacturing and retail case study answers

How Zara became the undisputed king of fast fashion?

Zara is one of the biggest international apparel brands. Zara invites customers from around 93 markets to its organization of 2000+ stores in upscale markets on the planet’s biggest urban communities. With these stores, Zara generates 18 billion Euros annually.

The brand has been fruitful in keeping up its central goal to give quick and reasonable designs in the world of fashion. Zara’s way to deal with configuration is firmly connected to its clients. This story is about how Zara became the undisputed king of Fast fashion.

Fashion is the imitation of a given example and satisfies the demand for social adaptation. . . . The more an article becomes subject to rapid changes of fashion, the greater the demand for cheap products of its kind. — Georg Simmel, “Fashion” (1904)

History of Zara: The Long Story Cut Short

Amancio Ortega launched the first Zara store in 1975 in Central Street in downtown A Coruna, Galicia, Spain. The main Store included low-value look-a-like designs of famous and better-quality dress styles. The store ended up being a triumph and Ortega Began opening more Zara stores throughout Spain.

During the 1980s, Ortega began changing the plan, assembling and dissemination cycle to diminish lead times and respond to new patterns in a snappier manner in what they called “Moment Fashions”.

In 1980 the company started its international expansion through Porto, Portugal in the 1990s, with Mexico in 1992. Since then Ortega has continued to grow and create brands such as Pull & Bear, Bershka , and Oysho . It has acquired groups like Massimo Dutti and Stradivarius . Even though these brands have been contributors to their parent group Inditex’s success, Zara is still the principal growth driver.

Zara’s Customer-driven Value Chain

Product line-up:.

Unlike other Inditex chains, Zara has focused on manufacturing fashion-sensitive products internally. The latest designs were continuously in production as per changing customer’s preferences. Many competitors were producing just a few thousand SKUs whereas Zara was producing several hundred of thousands of SKUs in a year. These SKUs varied as per color, size, and fabric.

Zara’s designs are not dependent on design maestros. Instead, its designers carefully observe the catwalk trends and try to implement them for the mass market. The design team continuously creates variations in a particular season. Thereafter expanding on successful designs.

Fast Supply Chain:

Zara’s flexible supply chain allows it to dispatch new ranges to shops two times per week from its central distribution center that is an approximately 400,000-square-meter facility located in Arteixo, Spain. This kind of business system called vertical integration eliminated the need for local warehouses. The strategy here was to reduce the “bullwhip effect”. Let’s see what the bullwhip effect is:

The bullwhip effect is a distribution channel phenomenon in which demand forecasts yield supply chain inefficiencies. It refers to increasing swings in inventory in response to shifts in consumer demand as one moves further up the supply chain. Wikipedia

It was a matter of a few weeks and a new design was on the shelf for the customers. Isn’t cool? These designs of clothes and accessories were quickly moved to fancy stores in prime locations but at a cheap price. This strategy has attracted a lot of fashion yet money conscious customers.

We want our customers to understand that if they like something, they must buy it now because it won’t be in the shops the following week. It is all about creating a climate of scarcity and opportunity. Luis Blanc, one of the former Inditex’s international directors

Zara’s Retailing Strategy

Zara instead of focusing on improving its manufacturing efficiency focused on improving its retail strategy. This retailing strategy was about following fashion trends quickly even it means there is an unmet demand. As was previously discussed, this also helped Zara in creating a FOMO for its products. The two components of its retailing strategy were dependent on its upstream operations: Merchandizing and Stores.

Read: The Torchbearers of Sustainable Fashion

Merchandising.

Merchandising is the promotion of goods and/or services that are available for retail sale. It includes the determination of quantities, setting prices for goods and services, creating display designs, developing marketing strategies, and establishing discounts or coupons. Investopedia

• Zara placed emphasis on the freshness of its designs. It wanted to create a sense of exclusivity. It never focused on creating bulk items of one design. Zara had confidence in its fast supply chain of twice a week shipment to the store with the latest designs. Thre quarter of its merchandise gets replaced in just a month. How about that?

The success of your business is based in principle on the idea of offering the latest fashions at low prices, in turn creating a formula for cutting costs: an integrated business in which it is manufactured, distributed, and sold. Amancio Ortega

Fun Fact : An average customer visits a Zara store 17 times in a year where the number is 3-4 times for its competitors.

• Zara understood the importance of store locations very well. Zara prices are not expensive but its store location and design made its products look expensive. The brand wanted its customers to have a premium feel at a reasonable price.

We invest in prime locations. We place great care in the presentation of our storefronts. That is how we project our image. We want our clients to enter a beautiful store, where they are offered the latest fashions. Luis Blanc, one of the former Inditex’s international directors

Store Operations

Zara has stores in most upscale markets and shopping centers in the world. You name it and they have a store there. Champs Elysées in Paris, Regent Street in London, and Fifth Avenue in New York to name a few. As per its latest annual report the value of these properties is valued at almost 8 billion Euros. But the way these stores are managed is a strategy to learn for all retailers.

• We all love grand stores with a lot of variety. Zara has emphasized on creating a grand image of its stores. Imagine a big store at a posh location. How much impressed you would be. The average size of Zara stores has continuously increased over the years. In 2001 the average store size was 910 sq.m whereas in 2018 the size has more than doubled.

Zara’s average store size has increased by 50%: from 1,452m2 in 2012 to 2,184m2 in 2018. That growth has been driven by new store openings – larger flagship stores – as well as the fact that many of the new openings have entailed the absorption of one or more older, smaller units in the same catchment area. Inditex Annual Report

• Zara has tried to standardize the in-store experience with its store window displays and interior presentations. As the season progresses, Zara consistently evolves its interior themes, color schemes, and product placements. All these ideas come from the central team in Spain and regional teams implement with necessary region-based adaptations. So much so that the uniforms of the staff were selected twice in a season by a store manager from the latest collection.

Anti-Marketing Approach of Zara

Zara has able to maintain profitability ~13% whereas its major competitor like H&M is at 6% . This has been possible not only because of its efficient supply chain we discussed above but also because of its no advertising or limited advertising policy.

This is what makes Zara really one of a kind. The organization just spends about 0.3% of deals on promoting and does not have a lot of advertising to discuss. The usual trend in the industry is to spend 3.5% on advertising. Zara never shows its clothes at expensive fashion shows also. It first shows its designs at stores directly. But why does not Zara believe in advertising? There are primarily two reasons:

• First, as we discussed it saves Zara a lot of money. So much so that it has now one of the highest profitability.
• Second, it brings exclusivity and prevents overexposure of a design. Customers feel like if they purchase a shirt at Zara, five others won’t have that equivalent shirt at work or school.

Read: Viral Marketing over the Long-Haul ft. Burger King

Zara is a perfect case study to learn the perfect operations strategy, perfect marketing strategy, perfect pricing strategy, and whatnot. It’s all strategies are so perfect. It is also a perfect example to understand how a traditional brand is evolving itself with time to stay relevant.

As per its annual report , In 2018, Zara launched its global online store, marking a milestone in its commitment to having all of its brands available online worldwide by 2020. Zara continued to earn global accolades for its collections and initiatives, its integrated shopping experience, and its commitment to sustainability, with over 90 million garments put on sale under the Join Life label.

Zara is just not a brand of fast fashion. Its much more than that now. And that’s why it’s actually the true king of fast fashion.

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How Zara’s strategy made her the queen of fast fashion

Table of contents, here’s what you’ll learn from zara's strategy study:.

• How to come up with disruptive ideas for your industry.
• How finding the right people is more important than developing the best strategy.
• How best to address the sustainability question.

Zara is a privately held multinational clothing retail chain with a focus on fast fashion. It was founded by Amancio Ortega in 1975 and it’s the largest company of the Inditex group.

Amancio Ortega was Inditex’s Chairman until 2011 and Zara’s CEO until 2005. The current CEO of Zara is Óscar García Maceiras and Marta Ortega Pérez, daughter of the founder, is the current Chairwoman of Inditex.

Zara's market share and key statistics:

• Brand value of $25,4 billion in 2022
• Net sales of $19,6 billion in 2021
• 1,939 stores worldwide in 2021
• Over 4 billion annual visits to its website
• Inditex employee count of 165,042 in 2021

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Humble beginnings: How did Zara start?

Most people date Zara’s birth to 1975, when Amancio Ortega and Rosalia Mera, his then-wife, opened the first shop. But, it’s impossible to study the company’s first steps, its initial competitive advantage, and strategic approach by starting at that point in time.

When the first Zara shop opened, Amancio Ortega already had 22 years of industry experience, ten years as a clever and hard-working employee, and 12 years as a business owner. Rosalia Mera also had 20 years of industry experience.

As an employee , Ortega worked in the clothing industry, first as a gofer and then as a delivery boy. He quickly demonstrated great talent for recognizing fabrics, understanding and serving customers, and making sound business suggestions. Soon, he decided to use his insights to develop his own business instead of his boss’s.

As a business owner , he started  GOA Confecciones  in 1963, along with his siblings, his wife, and a close friend. They started with a humble workshop making women’s quilted dressing gowns, following a trend at the time Amancio had noticed. Within ten years, that workshop had grown to support a workforce of 500 people.

And then, the couple opened the first Zara shop.

Zara’s competitive positioning strategy in its first year

The opening of the first Zara shop in 1975 wasn’t just a new store to sell clothes. It was the final big move of a carefully planned vertical integration strategy.

To understand how the  strategy was formulated , we need to understand Amancio’s first steps. His first business, GOA Confecciones, was a manufacturing business. He was supplying small stores and businesses with his products, and he wasn’t in contact with the end customer.

That brought two challenges:

• A lack of insight into market trends and no direct consumer feedback about preferences.
• Very low-profit margins compared to the 70-80% profit margin of retailers.

Amancio developed several ideas to improve distribution and get a direct relationship with the final purchaser. And he was always updating his factories with the latest technological advancements to offer the highest quality of products at the lowest possible price. But he was missing one essential part to reap the benefits of his distribution practices:  a store .

So, in 1972 he opened one under the brand name  Sprint . An experiment that quickly proved unsuccessful and, seven years later, was shut down. Although it’s unknown the extent to which Amancio put his ideas to the test, Sprint was a private masterclass in the retail world that gave Amancio insights that would later turn Zara into a global success.

Despite Sprint’s failure, Amancio didn’t abandon the idea of opening his own store mainly because he believed that his advanced production model was vulnerable and the rise of a competitor who could replicate and improve his system was imminent.

Adding a store to his vertical integration strategy would have a twofold effect:

• The store would operate as a direct feedback source. The company would be able to test design ideas before going into mass production while simultaneously getting an accurate pulse of the needs, tastes, and fancies of the customers. The store would simultaneously reduce risk and increase opportunity spotting.
• The company would have reduced operating costs as a retailer. Since the group would control all aspects of the process (from manufacturing to distribution to selling), it would solve key retail challenges with stocking. The savings would then be passed on to the customer. The store would have an operational competitive advantage and become a potential cash cow for the company.

The idea was to claim his spot in prime commercial areas (a core and persistent strategic move for Zara) and target the rising middle class. The market conditions were tough, though, with many family-owned businesses losing their customer base, giant players owning a huge market share, and Benetton’s franchising shops stealing great shop locations and competent potential managers.

So the first Zara store had these defining characteristics that made it the successful final piece of Amancio’s strategy:

• It was located near the factory = delivery of products was optimized
• It was in the city’s commercial heart = more expensive, but with access to affluence
• It was located in the city where Ortegas had the most customer experience = knowing thy customer
• It was visibly attractive = expensive, but a great marketing trick

Amancio’s team lacked experience and expertise in one key factor:  display window designing . The display window was a massive differentiator and had to be bold and attractive. So, Amancio hired Jordi Bernadó, a designer with innovative ideas whose work transformed display windows and the sales process.

The Zara shop was a success, laying the foundations for the international expansion of the Inditex group.

Key Takeaway #1: Challenge your industry’s conventional wisdom to create a disruptive strategy

Disrupting an industry isn’t an easy task nor a frequent occurrence.

To do it successfully, you need to:

• Understand the prominent business mode of your industry and the forces that contributed to its development.
• Challenge the assumptions behind it and design a radically different business model.
• Develop ample space for experimentation and failures.

The odds of instantly conquering the industry might be low (otherwise, someone would have already done it), but you’ll end up with out-of-the-box ideas and a higher sensitivity to potential disruptors in your competitive arena.

Recommended reading:   How To Write A Strategic Plan + Example

How Zara’s supply chain strategy is at the core of its business strategy

According to many analysts, the Zara supply chain strategy is its most important innovative component.

Amancio Ortega and other senior members of the group disagree. Nevertheless, the Inditex  logistics strategy  is extraordinarily efficient and plays a crucial role in sustaining its competitive advantage. Most companies in the clothing retail industry take an average of 4-8 weeks between inception and putting the product on the shelf. The group achieves the same in an average of two weeks. That’s nothing short of extraordinary.

Let’s see how Zara developed its logistics and business strategy.

Innovative logistics: how Zara’s supply chain evolved

The logistics methods developed by companies are highly dependent on external factors.

Take, for example, infrastructure. In the early days of Zara, when it was expanding through Spain, the company considered using trains as a transportation system. However, the schedule couldn’t keep up with Zara’s needs, which had the goal of distributing products twice a week to its shops. So transportation by road was the only way.

However, when efficiency is a high priority, it shapes logistics processes more than anything else.

And for Zara, efficient logistics was – and still is – of the highest priority.

Initially, leadership tried outsourcing logistics, but the experiment failed and the company assigned a member of the house with a thorough knowledge of the company's operating philosophy to take charge of the project. The tactic of entrusting important big projects to employees imbued with the company’s philosophy became a defining characteristic.

So, one of Zara’s early strategic decisions was that each shop would make orders twice a week. Since the first store was opened, the company has had the shortest stock rotation times in the industry. That’s what drove the development of its logistics methods. The whole strategy behind Zara relied on quick production and distribution. And the proximity of manufacturing and distribution was essential for the model to work. So Zara had these two centers in the same place.

Even when the brand was expanding around the world, its logistics center remained in Arteixo, Spain, despite being a less-than-ideal location for international distribution. At some point, the growth of the brand, and Inditex as a whole, outpaced Arteixo’s capacity, and the decentralization question came up.

The debate was tough among leadership, but the arguments were strong. Decentralization was necessary because of:

• Safety and security.  If there was a fire or any other crippling disaster there (especially on a distribution day), then the company would face serious troubles on multiple fronts.
• Arteixo’s limitations.  The company’s center in Arteixo was reaching its capacity limits.

So the company decided to decentralize the manufacturing and distribution of its brands.

Initially, the group made the decision to place differentiated logistics centers where the management of its chain of stores was based, i.e. Bershka would have a different logistics center than Pull&Bear, although they were both part of the Inditex Group. That idea emerged after Massimo Dutti and Stradivarius became part of Inditex. Those brands already had that geographical structure, and since the group integrated them successfully into its strategy and logistics model, it made sense to follow the same pattern with its other brands.

Besides, the proximity of the distribution centers to the headquarters of each brand allowed them to consolidate them based on the growth strategy and purpose of each brand (more on this later).

But just a few years after that, the group decided to build another production center for Zara that forced specialization between the two Zara centers. The specialization was based on location, i.e. each center would manufacture products that would stock the shelves of stores in specific locations.

Zara’s  supply chain strategy  is so successful because it’s constantly evolving as the group adapts to external circumstances and its internal needs. And just like its iconic fashion, the company always stays ahead of the logistics curve.

Zara’s business strategy transcends its logistics innovations

Zara’s business strategy relies on four key pillars:

• Flexibility of supply
• Instant absorption of market demand
• Response speed
• Technological innovation

Zara is the only brand in the Inditex group that is concerned with manufacturing. It’s the first brand in the clothing sector with a complete vertical organization. And the production model requires the adoption or development of the latest technological innovations.

This requirement is counterintuitive in the clothing sector.

Most people believe that making big investments in a market as mature as clothing is a bad idea. But the Zara production model is very capital and labor intensive. The technological edge derived from that investment gave the company, in the early days, the capability to manufacture over 50% of its own products while maintaining an extremely high stock rotation frequency.

Zara might be one of the best logistics companies in the world, but that particular excellence is a supporting factor, or at least a highly contributing factor, to its successful business strategy.

Zara’s business strategy is so much more than its supply chain strategy.

The company created the “fast fashion” term and industry. When other companies were manufacturing their collections once per season, Zara was adapting its collection to suit what people asked for on a weekly basis. The idea was to offer fashionable items at a fair price and faster than everybody else.

Part of its cost-cutting strategic priority was its marketing strategy. Zara didn’t – and still doesn’t – advertise like the rest of the clothing industry. Its marketing strategy starts with choosing the location of the stores and ends with advertising that the sales period has started. In the early years of the brand’s expansion, Amancio would visit potential store locations himself and choose the site to build the Zara shop.

The price was never an issue. If the location was in a commercial center, Zara would build its store there no matter how high the cost was because the company expected to recoup it quickly with increased sales.

Zara’s marketing is its own stores.

The strategy of Zara and her Inditex sisters

Despite Zara’s success (or because of it), Amancio Ortega created – or bought – multiple other brands that he included in the Inditex group, each one with a specific purpose.

• Zara  was targeting middle-class women. ‍
• Pull&Bear  was targeting young people under twenty-five years old with casual clothing. ‍
• Bershka  was targeting rebel teens, especially girls, with hip-hop-style clothing. ‍
• Massimo Dutti  was targeting both sexes with more affluence. ‍
• Stradivarius  was competing with Bershka, giving Inditex two major brands in the teenage market. ‍
• Oysho  was concentrating on women's lingerie. ‍
• Zara Home manufactures home textiles and decor.

Pull&Bear  was initially targeting young males between the ages of 14 and 28. Later it extended to young females of the same age and focused on selling leisure and sports clothing. It has the slowest stock turnaround time in the group.

Bershka’s  target group was girls between 13 and 23 years of age with highly individualized tastes. Prices were low, but the quality average. Almost a fiasco in the beginning, it underwent a successful strategic turnaround becoming today one of the biggest growth opportunities for the group. And out of all the Inditex chains, Bershka has the most creative designs.

Massimo Dutti  was the first retail brand Amancio bought and didn’t create himself. Its strategy is very different from Zara, producing high-quality products and selling them at a high price. It’s an extension of the group’s offer to the higher end of the price spectrum in the fashion industry. It’s also the only Inditex chain brand that advertises regularly.

Stradivarius  was the second acquired brand, with the purchase being a defensive move. The chain shares the same target group with Bershka, making it, to this day, a direct competitor.

Oysho  started as an underwear and lingerie company. Its product lines evolved to include comfortable night and homewear along with swimwear and a very young children’s line. The brand’s strategy was aggressive from its conception, opening 286 stores in its first six years of existence.

Zara Home  is the youngest brand in the Group and the only one outside the clothing sector, though still in the fashion industry. It was launched with the least confidence and with immense prior research. An experiment to extend the Zara brand beyond clothing, it was based on the conservative view that Zara could extend its product categories only to textile items for the home. But it turned out that customers were more accepting of Zara Home selling a wide variety of domestic items. So the brand made a successful strategic pivot.

Key Takeaway #2: The right people are more important than the best strategy

It might not be obvious in the story, but a key reason for Zara's and Inditex’s success has been the people behind them.

For example, a vast number of people in various positions from inside the group claim that Inditex cannot be understood without Amancio Ortega. Additionally, major projects like the development of Zara’s logistics systems and the group's international expansion had such a success precisely because of the people in charge of them.

Zara’s radically different model was a breakthrough because:

• Its leadership had a clear vision and a real strategy to execute it.
• People with a deep understanding of the company’s philosophy led Its largest projects.

Sustainability: Zara’s strategy to make fast fashion sustainable

Building a sustainable business in the fast fashion industry is a tough nut to crack.

To achieve it, Inditex has made sustainability a cornerstone of its business model. Its strategy revolves around the values of  collaboration ,  transparency,  and  innovation . The group’s ambition is to make a positive impact with a vision of prosperity for the planet and its people by transforming its value chain and industry.

Inditex’s sustainability commitments and strategy to achieve them

Inditex has developed a sustainability roadmap that extends up to 2040 with ambitious goals. Specifically, it has committed to

• 100% consumption of renewable energy in all of its facilities by 2022 (report pending).
• 100% of its cotton to originate from more sustainable sources by 2023.
• 100% of its man-made cellulosic fibers to originate from more sustainable sources by 2023.
• Zero waste from its facilities by 2023.
• 100% elimination of single-use plastic for customers by 2023.
• 100% collection of packaging material for recycling or reuse by 2023.
• 100% of its polyester to originate from more sustainable sources by 2025.
• 100% of its linen to originate from sustainable sources by 2025.
• 25% reduction of water consumption in its supply chain by 2025.
• Net zero emissions by 2040.

The group’s commitments extend beyond environmental issues to how its  manufacturing and supplying partners conduct their business . To bring its strategy to fruition, it has set up a new governance and management structure.

The Board of Directors is responsible for approving Inditex’s sustainability strategy. The  Sustainability Committee  oversees and controls all the proposals around the social, environmental, health, and safety impact of the group’s products, while the  Ethics Committee  makes sure operations are compliant with the rules of conduct. There is also a  Social Advisory Board  that includes external independent experts that advises Inditex on sustainability issues.

Finally, Javier Losada, previously the group’s Chief Sustainability Officer and now promoted to Chief Operations Officer, will be leading the sustainability transformation of the group. Javier Losada first joined Inditex back in 1993 and ascended its rank to reach the C-suite.

Inditex is dedicated to its commitment to reducing its environmental impact and seems to be headed in the right direction. The only question is whether it’s fast enough.

Key Takeaway #3: Integrating sustainability with business strategy is a present-day necessity

Governments and international bodies around the world are implementing more stringent environmental regulations, forcing companies to commit to ambitious goals and developing a realistic strategy to achieve them.

The companies that are impacted the least are those that always had sustainability as a  high priority .

From the companies that require significant changes in their operations to comply with the new regulations, only those who  integrate  sustainability into their business strategy and model will succeed.

Why is Zara so successful?

Zara is the biggest Spanish clothing retailer in the world based on sales value. Its success is due to its fast fashion strategy that is based on a strong supply chain and quick market feedback loops.

Zara's customer-centric approach places a strong emphasis on understanding and responding to customer needs and preferences. This is reflected in the company's product design, marketing, and customer service strategies.

Zara made fashionable clothes accessible to the middle class.

Zara’s vision guides its future

Zara's vision, as part of the Inditex Group, is to create a sustainable fashion industry by promoting responsible consumption and production, respecting the environment and people, and contributing to the communities in which it operates.

The company aims to offer the latest fashion trends to its customers at accessible prices while continuously innovating and improving its operations and processes.

Growth by numbers (Inditex)

Zara Case Study: How Zara Lead The Fast Fashion Market?

Supti Nandi

Updated on: April 8, 2024

You asked, and we listened! Get ready to dive into the fascinating world of Zara with our highly requested Zara Case Study. 

Recently, Zara has been trending in Instagram reels and YouTube shorts for its funky model poses. You must have seen it too! Have you wondered what made this Spanish brand so famous?

You may say that Zara works on the concept of fast fashion, which makes it win in the competitive market. 

Well, that’s true but it is not the only reason. Let’s uncover the secrets behind Zara’s success through the Zara Case Study.

Let’s begin!

(A) Zara: A Brief Overview

Zara, a notable name in the fashion industry, is a Spanish retailer known for its distinctive approach to clothing and accessories. Operating on a fast fashion model, Zara excels in swiftly adapting to evolving fashion trends, setting it apart in the market. With a vertically integrated process, the brand manages everything from design to production in-house, allowing for efficient and responsive operations.

You’ll find Zara stores globally, each offering a diverse range of trendy and affordable clothing for men, women, and children. The brand’s commitment to delivering fashion-forward pieces at accessible prices caters to a broad audience, reflecting its significance in the industry.

Do you know what is fast fashion?

Fast fashion is a business model characterized by quickly producing affordable, trendy clothing items to meet rapidly changing consumer demands.

Zara works in the same way. We will look into its details in the upcoming section. Before that, let’s go through the profile of Zara-

What makes Zara stand out is its ability to balance responsiveness in manufacturing, a well-structured supply chain, and a keen understanding of consumer preferences. This combination has established Zara as a trendsetting and influential player in the fashion landscape. Its adaptability and dedication to making fashion trends accessible have solidified Zara’s place as a recognizable and influential name in the fashion industry.

(B) Zara Case Study: History & Evolution

Zara’s journey began with a dress-making factory called Inditex, established by Ortega in 1963. Over the years, Zara expanded its presence from Spain to Portugal and eventually to other European countries, the United States, and France.

Today, Zara boasts nearly 6,500 stores across 88 countries worldwide.

Let’s dive into the history of Zara in detail-

Zara is the flagship brand of the Inditex group, which is one of the world’s largest fashion retail conglomerates.

The head office of Zara is located in Arteixo, in the province of A Coruña, Galicia, Spain. Inditex also owns other popular brands like Massimo Dutti, Pull&Bear, Bershka, and Stradivarius.

(C) Brand Philosophy of Zara

Do you know why Zara stands out among its competitors? Due to its brand philosophy! Sara’s success hinges on several key principles-

Zara’s strategy is strikingly different from traditional fashion retailers. Reason? Fast fashion concept and in-house production of clothes! Go through the next section for detailed information.

(D) Zara Business Model: Effective Working Strategies

In this section, we will dive into the business model of Zara to determine its working strategies that played a huge role in its success-

Let’s dive into the details-

(D.1) Fast Fashion Model

Zara is known for its “ Fast Fashion ” approach. It releases new collections frequently, sometimes launching over 22 new product lines per year. This agility allows Zara to respond swiftly to changing trends and customer preferences.

• Rapid Trend Replication: Harnessing cutting-edge information technology, Zara excels at swiftly replicating prevailing fashion trends. This enables the brand to stay ahead of the curve, delivering the latest styles to customers promptly.
• Group Design Approach: Departing from the conventional individual designer model, Zara adopts a collaborative approach. Teams of designers work in synergy, fostering enhanced creativity and efficiency in product development. This collective effort ensures a diverse range of products aligned with dynamic market demands.
• Cost-Effective Materials: Zara strategically utilizes affordable materials without compromising on quality. This approach allows the brand to maintain competitive pricing while delivering products that meet or exceed industry standards. The focus on cost-effective yet quality materials contributes to Zara’s accessibility and broad customer appeal.
• Competitive Pricing: Zara optimizes its production costs by outsourcing to countries with cost-effective labor. This global approach not only supports competitive pricing but also facilitates the brand’s ability to swiftly adapt to market demands. The combination of efficient production and competitive pricing reinforces Zara’s position as a leader in the fast fashion landscape.

(D.2) Product Range

Let’s briefly look at its product range too-

• Clothing: From chic dresses and tailored suits to casual wear and activewear.
• Accessories: Including bags, shoes, belts, and jewelry.
• Beauty Products: Fragrances and cosmetics.
• Perfumes: Zara has its line of fragrances.

(D.3) Vertical Integration: In-House Operations & Logistics

Zara’s way of doing business centers on something called vertical integration. Here is how it works-

• Design: Zara takes charge of creating its designs, meaning it controls how its clothes look and stay on-trend. This ensures that what you find in Zara stores reflects the latest fashion trends.
• Manufacturing: Zara doesn’t just design; it also makes its clothes in-house. This is a big deal because it lets Zara make changes to its products fast. If there’s a new trend or customer feedback, Zara can respond quickly, which is pretty cool.
• Shipping and Distribution: Zara doesn’t stop at making the clothes; it handles everything from getting them to the store to making sure they’re sent to the right places. This full control of the supply chain ensures that the clothes you see in Zara are not only stylish but also reach the stores efficiently.

In short, the fast fashion concept, vertical integration, and supply chain efficiency helped Zara to achieve impressive milestones.

(E) Revenue Model of Zara: How does Zara make money?

Do you know Zara earned Rs.2,562.50 crore in India? That’s not all. It earned over 23 billion euros from its stores worldwide.

That’s quite amazing! Isn’t it?

But how does Zara earn such a whopping amount of money? Due to its impressive revenue model.

Let’s go through them one by one-

Let’s briefly dive into Zara’s finances for the years 2022 & 2021-

That’s how Zara is going through its purple patch in terms of revenues!

(F) Zara Marketing Strategies

Zara, the renowned Spanish fashion retailer, has crafted a distinctive marketing strategy that contributes to its global success. In this section, we will delve into the key elements of Zara’s marketing approach-

(F.1) Fast Fashion Strategy

The fast fashion model functions as a highly effective marketing strategy for Zara in several ways. First and foremost, the rapid turnover of collections, with over twenty product lines per year, creates a sense of urgency and novelty for customers. This continual introduction of fresh styles not only keeps Zara top-of-mind but also fosters a dynamic shopping experience, encouraging frequent visits to discover the latest trends.

Moreover, the quick response to changing trends and customer preferences positions Zara as a trendsetter, appealing to fashion-conscious consumers. The ability to swiftly translate runway trends into accessible and affordable pieces reinforces Zara’s image as a go-to destination for staying in vogue.

Additionally, the limited production batches contribute to an atmosphere of exclusivity, prompting customers to make timely purchases to secure unique and in-demand items. This scarcity-driven approach enhances the perceived value of Zara’s offerings.

In essence, the fast fashion model serves as a powerful marketing tool for Zara by creating a sense of immediacy, exclusivity, and trend relevance, fostering customer loyalty and consistently attracting a diverse audience seeking the latest in fashion.

(F.2) In-Store Experience

Zara places a strong emphasis on crafting an exceptional in-store experience, carefully curating showrooms to exude an atmosphere that is both exclusive and professional. The meticulous design choices contribute to an ambiance that goes beyond a mere shopping space, creating an environment where customers feel engaged and inspired. 

The meticulous attention to detail is aimed at ensuring that every aspect of the in-store setting is carefully considered, from layout to lighting.

This focus on the in-store ambiance goes beyond aesthetics—it becomes a vital part of Zara’s marketing strategy. The thoughtfully designed physical stores act as powerful marketing tools in themselves, drawing in customers by providing a memorable and immersive shopping environment. 

By enticing shoppers to explore the latest trends in this carefully curated setting, Zara not only enhances the overall customer experience but also reinforces its brand image as a trendsetting and sophisticated fashion destination!

(F.3) Affordability & Differentiation

Zara strategically positions itself by prioritizing affordable pricing while maintaining a commitment to quality. This dual emphasis allows the brand to resonate with a wide range of customers. By providing stylish clothing at reasonable prices, Zara ensures accessibility, making fashion-forward designs attainable for a diverse audience.

The effectiveness of this marketing strategy lies in Zara’s ability to differentiate itself in the market. The brand stands out not only for its trendsetting designs but also for its adept balance of fashion-forward aesthetics and accessible costs. 

This unique blend positions Zara as a go-to destination for those seeking both style and value, enhancing the brand’s appeal and solidifying its market presence. The affordability and differentiation strategy contribute to Zara’s ability to capture a broad customer base and maintain its status as a leading player in the competitive fashion landscape.

(F.4) Word of Mouth and Limited Advertising

Zara strategically leverages the power of word of mouth and customer recommendations as primary drivers of its marketing efforts. In a departure from traditional advertising-heavy approaches, Zara relies on the subtlety of customer satisfaction and positive experiences to promote its brand.

This unique strategy involves cultivating a strong and positive buzz around Zara’s collections, encouraging customers to share their experiences and recommendations. The reliance on word of mouth creates an authentic and organic promotion of the brand, fostering a sense of trust and credibility among potential customers.

The limited advertising approach doesn’t diminish Zara’s impact; rather, it aligns with the brand’s commitment to providing an outstanding in-store experience and quality products. The positive buzz generated by satisfied customers becomes a powerful force, driving foot traffic to Zara’s stores and contributing to the brand’s sustained success in the competitive fashion market.

(F.5) Social Media Marketing

Zara actively embraces social media platforms as a crucial component of its marketing strategy. The brand leverages platforms like Instagram, Facebook, and Twitter to engage directly with its audience, creating a dynamic online presence.

The strategy involves regular updates across these platforms, keeping followers informed about the latest arrivals, ongoing trends, and behind-the-scenes glimpses into Zara’s fashion world. By maintaining an active and visually appealing presence, Zara not only stays connected with its audience but also cultivates a sense of anticipation and excitement around its offerings.

In addition to direct engagement, Zara strategically collaborates with influencers. These collaborations amplify Zara’s reach, tapping into the influencers’ follower base and creating a ripple effect of brand awareness. 

Through this multi-faceted approach, Zara effectively utilizes social media not just as a promotional tool but as a means to foster a dynamic and interactive relationship with its audience, contributing to the brand’s overall success in the digital landscape.

(F.6) Personalization & Community Engagement

Zara adopts a customer-centric strategy by customizing its offerings to cater to local tastes and preferences. This personalization ensures that Zara’s collections resonate with diverse communities, creating a more inclusive and relatable shopping experience.

Community engagement takes center stage in Zara’s approach. Events like fashion shows or store openings play a pivotal role in fostering a sense of belonging among customers. By actively involving the community in these events, Zara goes beyond being a retailer and becomes an integral part of the local fabric.

Crucially, Zara prioritizes customer feedback. Actively listening to what customers have to say, the brand adapts and evolves its offerings based on this valuable input. This responsiveness not only enhances the overall customer experience but also reinforces a sense of collaboration between Zara and its community. 

In essence, Zara’s commitment to personalization and community engagement contributes to a brand image rooted in customer satisfaction and a genuine connection with the diverse communities it serves.

(G) Sustainability Efforts: Crucial Part of Zara Case Study

Do you know what Zara is famous for apart from fashion? Its sustainability efforts to preserve mother nature! Let’s look at the sustainability efforts of Zara-

Thus, Zara is increasingly conscious of sustainability. The brand aims to reduce its environmental impact by using eco-friendly materials and promoting recycling. Such initiatives resonate with socially aware consumers.

(H) Challenges Faced by Zara

The journey of Zara was not free of challenges. Let’s look at some of the major challenges of Zara- 

Zara brilliantly addressed those challenges to produce effective results that ultimately helped them grow their business.

(I) Summing Up: Zara Case Study

Zara’s remarkable success in leading the fashion market can be attributed to its unique blend of rapid fashion cycles, vertical integration, and a customer-centric approach. By staying ahead of trends with its fast fashion model, ensuring control over the entire production process, and tailoring offerings to local tastes, Zara captures a diverse and loyal customer base. 

The brand’s commitment to affordability, engaging in-store experiences, and strategic use of social media further solidify its market leadership. Zara’s story showcases the power of adaptability, responsiveness, and a strong connection with customers in navigating the dynamic landscape of the fashion industry!

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Apart from selling clothes and accessories at higher prices, still it is among the favourite ones for many!

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Fashion retailer ZARA has achieved spectacular growth via a distinctive design-on-demand operating model. This case describes this model and outlines a number of challenges facing the company, with a…

• Length: 26 page(s)
• Publication Date: Mar 11, 2003
• Discipline: Marketing
• Product #: 503050-PDF-ENG

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Fashion retailer ZARA has achieved spectacular growth via a distinctive design-on-demand operating model. This case describes this model and outlines a number of challenges facing the company, with a particular emphasis on its international expansion. Includes color exhibits.

This case is available in only hard copy format (HBP does not have digital distribution rights to the content). As a result, a digital Educator Copy of the case is not available through this web site.

Learning Objectives

To understand the key elements of a distinctive retail model and to examine the challenges facing retailers as they internationalize.

Mar 11, 2003

Discipline:

Geographies:

Industries:

Apparel industry, Retail trade

Harvard Business School

503050-PDF-ENG

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Home » Management Case Studies » Case Study: Zara’s Supply Chain Success Story

Case Study: Zara’s Supply Chain Success Story

Zara is a Spanish fashion clothing manufacturer and retailer, formed in the 1970’s It is known that only two weeks are required for Zara to complete the development and shipment of a new product to its stores , which outweighs the average of fashion industry of six months, thanks to the collaborative relationship with customers and suppliers. Zara mainly targets on young and urban female customers and acceptable prices are offered. There are always new products in Zara stores. Even though usually Zara stores are spacious but the stock is displayed in limited quantity. This kind of strategy gives customers a sense of originality and exclusivity. Most of the stores display clothes only when they have a full set of major sizes, so customers would not be upset to find out that the needed size is not available. As shoppers enter the stores, reaction between Zara and customers starts with creating a sense of “buy now since you won’t see it next time” because of the rapid turnover environment. Customer relationship between Zara and shoppers is then strengthened by, instead of offering VIP services and discounts, showing a sense of scarcity by displaying unfilled shelves, limited offer notes on certain items and deliberate undersupply impression to encourage customers to run to the counter.

Such a retail concept depends on the regular creation and rapid replenishment of small batches of new goods. Zara’s designers create approximately 40,000 new designs annually, from which 10,000 are selected for production. Some of the goods are high fashion looks-alike, but much cheaper and lower quality and that in many cases allow Zara to beat high fashion designers in sales and profit amounts.

Zara is not a world leader in cloth designs, but it is a high sensitive and flexible fashion trend follower. Zara has design staffs that glen fashion inspiration by interaction with potential customers from competitors’ stores, clubs, fashion shows, university campuses and any other events or venues related to the lifestyles of the target customers. Zara’s networked business designs enable the frequent digital communication from stores to designers, and centralized distribution allow the within-15-day deliveries to ensure the satisfaction of consumers, comparing with the average length of 9 months for the competitors.

Zara’s Supply Chain

Zara’s single, centralized design and production center is attached to Inditex (Zara’s parent company). Inditex Chief Executive Jose Maria Castellano says, “This business is all about reducing response time. In fashion, stock is like food, it goes bad quick.” To maintain a healthy reaction with customers, keeping up with fashion has become one of the main strategies of Zara.

In the first half of the 1990s, Zara’s supply chain consisted of problems of inconsistency, imbalances and market saturation for three of the store chains of Zara, plus the inefficient launch of fashion position had created difficulties in joining the U.S. garments market. It has suffered from a significant financial loss in 2001 and a dramatic decrements in the share price. In May of the following year, the chairman, who failed to reposition to a more fashionable assortment due to a major fashion missing, had withdrawn from his long-term CEO position. The supply chain was restructured in 1990s by lowering the levels of inventories and reducing the number of suppliers. 50% of the production was then shifted back to the domestic manufacturing facilities to compress cycle times, seasonal collections were cut down in order to allow reorders of well selling products in a season’s 3rd month.

Market-driven supply chain (linking customer value to supply chain strategy ) was then applied instead of the traditional supply chain which only designed to optimize the internal operations. The company uses “value net” business design to support the networked operation in order to allow connect customers with the company and its key suppliers. Zara’s “value net” includes: digital customer input provided by Zara stores , Zara designers’ sketch pads of the required styles, globally sourced textiles , hi-tech cutting plant and local workshops sewing/assembly, single distribution system. Based on the “value net”, customer value management is a key issue to obtain a regular group of buyers. Opportunities from current and potential customers can be created by understanding the customers’ hobbies, purchase frequency, behaviors and needs. Further actions hence can be taken including contacts of multi-channel customers and campaigns promotional targeting , offers designed to attract and serve different customers according on their potential and existing values. The current shoppers are frequent and loyal customers who visit 17 times on average to a Zara store per year. Their interest is retained by regularly updating and varying of stocks on shelves.

The design and production center consists of three halls – men’s, women’s, children’s. Unlike most of the companies, especially after Global Finance Crisis has started, which try to reduce labor costs, Zara makes a point of running three parallel, but operationally distinct, product families. Separate sales, production planning , design staffs are responsible for each clothing (men, women, children) line. Any Zara store may receive three different calls from centralized headquarter in one week from a market specialist in each channel, a factory making shirts may deal simultaneously with two Zara managers, one for men’s shirts and another for children’s shirts. Even though it’s more expensive to operate three different and separate channels, the information stream from management to each separate channel is direct, fast and not disturbed by problems of other channels which makes the overall supply chain more responsive. This sort of physical and organisational proximity of all three channels allows increasing productivity , the speed of new customer desired designs and the whole design process and the quality of that process. Zara’s drafting machines can produce a corresponding style or modification to specific requests within 2 to 4 weeks after a requirement is placed and samples would be released shortly throughout varies of medias and further manufacturing may be proceeded upon to the market reactions.

This “fast fashion” system depends on a constant exchange of information throughout every part of Zara’s supply chain – from customers to store managers, from store managers to market specialists and designers, from designers to production staff, from buyers to subcontractors, from warehouse managers to distributors. Zara’s organisation, performance measures, operational procedures are designed to make information transfer easy.

Efficient communication between the company and suppliers is essential in order to reduce production cost and quality maintenance. Comparing with Zara’s competitor United Colors of Benetton which uses Asian resources, about 40% of Zara’s merchandise are internally manufactured, 66% of raw materials are imported from Europe and north Africa, and only a small amount of basic items (items with the broadest and least transient appeal) are outsourced from Asia. The global sourced strategy provides a large range of possible selection of fashion fabrics and reduces the dependence on any particular suppliers. More than half of the material is purchased in gray color and is dyed in one of Inditex’s facilities. Only one week is required for this process to complete which shows the benefit of proximity and domestic control.

Domestic production incurs extra cost of approximately 20% comparing if the garments were produced in Asia, yet Zara does not really suffer from it due to the efficient operation with the Europe manufacturer. The suppliers provide Zara flexibility to postpone the printing and dyeing procedures to adapt product lines according to updated market fashion trend. Holding inventories costs are reduced as well because orders do not have to be placed for a season in advance and kept in the storerooms before the periodic shipment arrives and Zara is able to react and respond quickly to changes of customer demands which also reduces the risk when final demand gets amplified as they are fulfilled quickly by transferring new designs to the supply line.

One of the biggest advantages of Zara’s supply chain strategy is being able to react quickly to all fashion trends and supply customers latest fashion outfits as soon as in few weeks’ time. Secondly, Zara never makes its production in big quantities, so if the style does not sell as good as expected, Zara does not lose much as there is not much stock to be discounted. Thirdly, though Zara’s supply chain has higher cost but it allows the advantage of low inventory and higher profit margins. The positive effects associated with the vertically integrated, shortened supply chain are obvious: Zara’s advertising fee is only 0.3% of its revenue whereas the other similar fashion retailers normally spend 3% for advertisements and marketing purposes. The short cycle time requires less working intensive of new merchandise and allows Zara committing to the bulk of production line for a season later than the peers. The high frequent of shifts of displayed merchandise (about three quarters of them are changed every 3 weeks) allows regular customer-visit rates to be maintained. The biggest disadvantage of Zara’s supply chain is that since Zara owned all the channels of supply chain , it becomes difficult to expand to far location as it is very expensive to distribute such products.

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