Clothes industry - Zara

Introduction

ZARA, “possibly the most innovative and devastating retailer in the world” as is describe by a Louis Vuitton spokesperson, first opened in 1975 in Spanish and began expansion since then. By 1989, the number of stores reached 82, 1,200 were operated in 33 countries by 2001. Now, ZARA has over 1,900 stores in 82 countries (6,009 stores if Pull & Bear, Bershka and other brands are included), keeps the speed of opening 110 stores per year and introduces minimum two newly-designed items per week – which means more than 10,000 new items in a year. And only a 15–20% of Zara’s total production is pre-made while 80-85% is produced according to the market reaction.

Despite this fashion company does not focuses too much in advertising is characterized for being all the time on word of mouth. Instead concentrates heavily on their product, place and pricing. And it is even more interesting to note that Zara never places their brand or logo on their products neither need to focus on personal selling, as other retailer companies.

ZARA's logistics distribution system is very developed, about 20 kilometers of underground conveyor will ship ZARA products distribution center located in La Coruna, which has a very mature automation management software system. In order to ensure that each order arrives its destination on time, ZARA use optical tools for product inspection, the tool can pick and sort more than 60000 pieces of clothing per hour. Trucks, based on fixed departure schedules, constantly ship to all over Europe. ZARA has two air base, stores in Europe could receive the goods within 24 hours usually, stores in the United States need up to 48 hours, Japan between 48-72 hours. Under the intervention of informationization means, ZARA’s delivery accuracy is as high as 98.9%, and the error rate less than 0.5%.

Strategies that make Zara successful

1. Quick response to Demand (Somaiya, 2012)– Zara follows a pull model and creates more than 1000 designs per month based on sales and trends. They evaluate and understand what types of designs are being consumed to make changes on their next designs.
2. Distribution capacity (Asef-Vaziri, 2011) - Has two big and central warehouses in Spain. The DCs has access to highway, railroads and is close to airport, which facilitate fast handling of international cargo.
3. Central location facilities (Wiggin, 2013) - Practice JIT production. Zara makes their own fabric and has its production facilities in a central location of Spain, which saves time and money.
4. Transportation network (Asef-Vaziri, 2011)- The type of transportation (truck, RR, or air) depend on the destination and time-sensitivity. Facilities makes frequent deliveries with short lead times.
5. Small Batch Productions (Wiggin, 2013) - Zara produce small batches for each item. The advantages of this are that they can identify the successful designs, explore new designs, reduces the risk of have to many unlike merchandise. They produce different designs but use the same material in different ways.
6. Technology is the key for tracking, inventory and cost controls (Pearson, 2008) - Zara has very strong IT systems. Send reports of daily sales and also use PDA’s that captures sold out items, not moving items, popularity, among other aspects.
7. Customers are central to clothing design strategy (Wiggin, 2013) - Customers are directly asked for what they want and with a hand-held PDA device captures daily/hourly feedback for new clothing ideas. Their business strategy is basic: “customer needs and interests have to be central if you are either a service or product company”.
8. Creativity (Wiggin, 2013) - Zara creates creative teams rather than groups of designers, which develops the design collections. Creative teams consist of designers, sourcing specialists and product development personnel.
9. Employer feels part of the company (Pearson, 2008) - Zara hires young designers and trains them to make quick decisions. Designers are trained to limit the number of reviews and changes, speeding up the development process and minimizing the number of samples made.
10. Updated trends (Cha, 2013) - 80% of Zara’s designers concentrate on runway designer collections and the rest 20% on analyzing up-to-the-minute street and celebrity fashions. Also consumers’ responses are share every week. It takes Zara merely three weeks to pick out a trend and move onto production.
11. Visual Merchandising Display (VMD) (Cha, 2013) - This factor contributes to Zara’s success through its store presentation. Each store is identical to the others regardless of location. This uniformity is achieved through distribution of instruction manuals every two weeks and strict enforcement in each store.

References

Asef-Vaziri. (2011, Janaruay). Zara’s Operation Strategy. Retrieved from http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&sqi=2&ved=0CC4QFjAA&url=http%3A%2F%2Fwww.csun.edu%2F~aa2035%2FCourseBase%2FStrategy%2FZaraStrategy.pptx&ei=XtoGU5LLCcjWkQfu-4DgAw&usg=AFQjCNF9VD9HOIPOmXHUkB0qdaNIrhdNCw&sig2=WiuVSIVDFs

Cha, Y. (2013, September 6). The Big 3: Fast Fashion (SPA) Brands and Strategies. Retrieved from Finance One: http://finone.com/ComparisonofTheGloba%20BigThreeFastFashionBrands.pdf

Fast Retailing Co., Ltd. (2011, February 7). UNIQLO Business Strategy. Retrieved from Fast Retailing: http://www.fastretailing.com/eng/ir/direction/tactics.html

Hiratani, K., Ikeguchi, T., Serngadichaivit, B., & Vongpivat, P. (2001, December 3). Analysis of The Gap, Inc. Retrieved from Massachusetts Institute of Technology: http://web.mit.edu/wysockip/www/535/MIT2001/Gap3.pdf

Kelly, S. (2010). International Supply Chain Management H&M Case Study. Retrieved from Staffordshire University: http://www.staffs.ac.uk/schools/business/resits/postgrad/InternationalSupplyChainMgmtHandMCaseStudy.pdf

Koch, H. (2010, December 7). Mango: a High Fashion Trendy Brand with Intensive Communication. Retrieved from Harmonie's Look on Fashion: http://harmonieslookonfashion.wordpress.com/2010/12/07/mango-a-high-fashion-trendy-brand-with-intensive-communication/

Pearson, A. (2008, July 11). The Story of Zara – The Speeding Bullet. Retrieved from Centre for Strategic Excellence: http://www.uniquebusinessstrategies.co.uk/pdfs/case%20studies/zarathespeedingbullet.pdf

Petro, G. (2012, October 16). Uniqlo vs. Zara vs. H&M - Three Alternative Models for the Future of Fashion Retailing. Retrieved from First Insight: http://www.firstinsight.com/blog/bid/234031/Uniqlo-vs-Zara-vs-H-M-Three-Alternative-Models-for-the-Future-of-Fashion-Retailing

Somaiya, M. (2012, September 18). Fashion Forward – Zara’s Supply Chain Strategies. Retrieved from Supply Chain Management: http://cmuscm.blogspot.com/2012/09/fashion-forward-zaras-supply-chain.html

The Wharton School. (2008, June 11). Mango’s Fast Growth Fueled by Supply Chain and Focus. Retrieved from Knowledge @ Wharton: https://knowledge.wharton.upenn.edu/article/mangos-fast-growth-fueled-by-supply-chain-and-focus/

Traxler, D. (2013, June 21). Multichannel Case Study: Gap Inc. Retrieved from Practical Ecommerce: http://www.practicalecommerce.com/articles/4074-Multichannel-Case-Study-Gap-Inc-

Wiggin, P. (2013, April 12). Three Business Strategies Make Zara a Story of Success. Retrieved from Giftsandhands.com: http://giftsandhands.com/marketing/1109/ 

ISyE 6338 case study report by group 8