ZARA: FAST FASHION
When Amancio Ortega, a former Spanish bathrobe maker, opened his first Zara clothing store, his business model was simple: sell high-fashion look-alikes to price-conscious Europeans. After succeeding in this, he decided to tackle the outdated clothing industry in which it took six months from a garment’s design to consumers being able to purchase it in a store. What Ortega envisioned was “fast fashion”—getting designs to customers quickly. And that’s exactly what Zara has done!
The company has been described as having more style than Gap, faster growth than Target, and logistical expertise rivaling Wal-Mart. Zara, which is owned by the Spanish fashion retail group Inditex SA, recognizes that success in the fashion world is based on a simple rule—get products to market quickly. Accomplishing this, however, isn’t so simple. It involves a clear and focused understanding of fashion, technology, and their market, and the ability to adapt quickly to trends.
Inditex, the world’s largest fashion retailer y sales worldwide, has seven chains: Zara (including Zara Kids and Zara Home), Pull and Bear, Massimo Dutti, Stradivarius, Bershka, OYsho, and Uterque. The company has over 5, 618 stores in 84 countries, although Zara pulls in over 60 percent of the company’s revenues. Despite its global presence, Zara is not yet a household name in the United States, with just over 50 stores open, including a flagship store in New York City.
What is Zara’s secret to excelling at fast fashion? It takes approximately two weeks to get a new design from drawing board to store floor. And stores are stocked with new designs twice a week as clothes are shipped directly to the stores from the factory. Thus, each aspect of Zara’s business contributes to the fast turnaround. Sales managers at “the Cube” –what employees call their futuristic-looking headquarters—sit at a long row of computers and scrutinize sales at every store. They see the hits and the misses almost instantaneously. They ask the in-house designers, who work in teams, sketching out new styles and deciding which fabrics will provide the best combination of style and price, for new designs. Once a design is drawn, it’s sent electronically to Zara’s factory across the street, where a clothing sample is made. To minimize waste, computer programs arrange and rearrange clothing patters on the massive fabric rolls before a laser-guided machine does the cutting. Zara produces most of its designs close to home—in Morocco, Portugal, Spain, and Turkey. Finished garments are returned to the factory within a week. Finishing touches (buttons, trim, detailing, etc.) are added, and each garment goes through a quality check. Garments that don’t pass are discarded while those that do pass are individually pressed. Then, garment labels (including to which country garments will be shipped) and security tags are added. The bundled garments proceed along a moving carousel of hanging rails via a maze of tunnels to the warehouse, a four-story, 5 million square foot building (about the size of 90 football fields). As the merchandise bundles move along the rails, electronic bar code tags are read by equipment that send them to the right “staging area,” where specific merchandise is first sorted by country and then by individual store, ensuring that each store gets exactly the shipment it’s supposed to. From there, merchandise for European stores is sent to a loading dock and packed on a truck with other shipments in order of delivery. Deliveries to other locations go by plane. Some 60,000 items each hour—more than 2.6 million items per week—move through this ultra-sophisticated distribution center. And this takes place with only a handful of workers who monitor the entire process. The company’s just-in-time production (an idea borrowed from the auto industry) gives it a competitive edge in terms of speed and flexibility.
Despite Zara’s success at fast fashion, its competitors are working to be faster. But CEO Pablo Isla isn’t standing still. To maintain Zara’s leading advantage, he’s introducing new methods that enable store managers to order and display merchandise faster and is adding new cargo routes for shipping goods. And the company has finally made the jump into online retailing. One analyst forecasts that the company could quadruple sales in the United States by 2014, with a majority of that coming from online sales.
Assignment
After reading this case study, please answer the following questions: 1. How is strategic management illustrated by this case story? 2. How might SWOT analysis (strengths, weaknesses, opportunities, threats) be helpful to Inditex executives? To Zara store managers? 3. What competitive advantage do you think Zara is pursuing? How does it exploit that competitive advantage? 4. Do you think Zara’s success is due to external or internal factors or both? Explain. 5. What strategic implications does Zara’s move into online retailing have? (Hint: think in terms of resources and capabilities).
This case study is due on Sunday February 21, 2016 using the link provided under the work for Week 6 and will count 25 points toward your final grade in the course.