ZARA: FAST FASHION

ZARA: Fast Fashion



ZARA: Fast Fashion

Introduction

Inditex is a global specialty retailer that designs, manufactures, and sells apparel, footwear, and accessories for women, men and children through its chains around the world.  Zara is the largest and most internationalized of the six retailers that Inditex owns:  (Zara, Massimo Dutti, Pull & Bear, Bershka, Stradivarius, and Oysho).  By the end of 2001, Zara operated 507 stores around the world, including Spain. Of Inditex's total employees, over 80% of them are part of the retail sales force and 8.5% are in manufacturing, design, logistics, and distribution. The remaining 11.5% are part of the corporate headquarters of Inditex, which is located in the region of Spain called Galicia. 

The role of the corporate center at Inditex's headquarters is that of a “strategic controller” only, and is involved in setting the corporate strategy, approving the business strategies of the individual chains, and controlling their overall performance rather than as an “operator” functionally involved in running the chains.  This gives Zara autonomy to operate independently and be responsible for its own strategy, product design, sourcing & manufacturing, distribution, image, personnel and financial results.

With this freedom, Zara was able to make major investments in manufacturing, logistics, and IT, including establishment of a just-in-time manufacturing system and a 130,000 square meter warehouse close to its corporate headquarters.  Zara manufactured its most fashion-sensitive products internally and its designers continuously tracked customer preferences and placed orders with internal and external suppliers based on this information.  Due to its unique needs, Zara chose to internally develop its business systems.  Zara is now able to originate a design and have finished goods in stores within weeks for entirely new designs and take even less time for modifications of existing products. 

Analysis of the external environment

Macro Environment Analysis

The major problem facing Zara is an unrealistic international growth strategy. Inditex's plans for 2002 included an addition of 55 to 65 Zara stores, 80% of them outside of Spain . Zara accounted for two-thirds of the total sales across all its chains in 2001; decisions about Zara's expansion would have important group-level implications. Zara's ability to offer new products quickly is strength in Spain and Western Europe; however, it can also be a weakness. While Zara's market share in Europe is very strong, its market share in the U.S. is minimal with approximately 25 stores. Its biggest competitor, Sweden's H&M, has one hundred stores in the U.S. and is better known. Both H&M and Zara are entering the emerging Asian markets. Zara's prices are very low for European consumers, due to its integrated supply chain and “onshore” production facilities throughout Spain. However, in the U.S. and Asia this low price is significantly higher because of tariffs and other related costs (retail prices in the U.S. were approximately 60% higher than prices in Spain).

Symptoms

Visible signs that everything is not right The visible signs that everything is not right are that Zara holds around 86% of Inditex's total international sales ...