Company Case 19 Zara – the fast and furious giant of fashion One global retailer is expanding at a dizzying pace. It is on track for what appears to be world domination of its industry. Having built its own state-of-the-art distribution network, the company is leaving the competition in the dust in terms of sales and profits, not to mention speed of inventory management and turnover. Wal-Mart, you might think? No! Tesco, possibly? No! The company is Zara, the flagship specialty chain of Spain based clothing conglomerate, Inditex. Forget football stars, the Costa del Sol and Real Madrid, they are nothing compared with Zara as Spain’s most successful international export. And it has other retailers reeling as Zara’s low-cost, fast fashion takes global markets by storm. This dynamic retailer is known for selling stylish designs that resemble those of big-name fashion houses but at moderate prices. ‘We sell the latest trends at low prices, but our clients value our design, quality and constant innovation,’ a company spokesman said. ‘That gives us the advantage even in highly competitive, developed markets, including Britain.’ More interesting is the way that Zara achieves its mission.
Fast fashion – the newest wave
A handful of European speciality clothing retailers are taking the fashion world by storm with a business model that has come to be known as ‘fast-fashion’. In short, these companies can recognise and respond to fashion trends very quickly, create products that mirror the trends, and get these products onto shelves much faster and more frequently than the industry norm. Fast-fashion retailers include Sweden’s Hennes & Mauritz (HM), Britain’s Top Shop, Spain’s Mango and the Netherland’s Mexx. Although all of these companies are successfully employing the fast-fashion concept, Zara leads the pack in virtually every way. For example, ‘fast’ at Zara means that it can take a product from concept through design, manufacturing and store shelf placement in as little as two weeks, much quicker than any of its fastfashion competitors. For more mainstream clothing chains such as Gap and Next, the process takes months. This gives Zara the advantage of virtually copying fashions from the pages of Vogue and having them on the streets in dozens of countries before the next issue of the magazine even hits the newsstands! When Spain’s Crown Prince Felipe and Letizia Ortiz Rocasolano announced their engagement in 2003, the bride-to-be wore a stylish white trouser suit. This raised some eyebrows, given that it violated royal protocol. But women loved it and within a few weeks, hundreds of them were wearing a nearly identical outfit they had purchased from Zara. 1
Kotler P. et al, (2008), Principles of Marketing, 5th European edition, Harlow, Pearson Education Ltd. But Zara is more than just fast. It’s also prolific. In a typical year, Zara launches about 11,000 new items. Compare that to the 2,000 to 4,000 items introduced by both H&M and Gap. In the fashion world, this difference is huge. Zara stores receive new merchandise two to three times each week, whereas most clothing retailers get large shipments on a seasonal basis, four to six times a year. By introducing new products with frequency and in higher numbers, Zara produces smaller batches of items. Thus, it assumes less risk if an item doesn’t sell well. But smaller batches also mean exclusivity, a unique benefit from a mass-market retailer that draws young fashionistas through Zara’s doors like a magnet. When items sell out, they are not restocked with another shipment. Instead, the next Zara shipment contains something new, something different. Popular items can appear and disappear within a week. Consumers know that if they like something they must buy it or miss out. Customers are enticed to check out store stock more often, leading to very high levels of repeat...