Zara, Fast Fashion

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The global apparel market is a buyer-driven market. Along with the globalization and technology development, consumers are easier to access to fashion. As a result, the customers are changing and the companies are evolving to deliver customers satisfaction. Zara, the most profitable brand of Spain clothing retail group Inditex, has leveraged its unique strategy to achieve success and will be expected to maintain a sustainable growth in the fashion industry. Zara’s core competencies can be divided into four areas: process development, distribution, marketing and integrated business structure (referred to Appendix 1). Zara’s unique process development allowed Zara to produce in a shorter cycle time and more quickly response to the customer’s needs than other competitors. When the fashion season started, Zara’s designers attended trade fairs and ready-to-wear fashion shows to translate the latest trend of fashion into their design. Zara’s product development staff, at the meanwhile, researched the market through different retail stores and university campuses to understand customer’s preferences. Zara’s IT system, on the other hand, played a key role on the internal communications. This helped Zara’s managers constantly track the sales data and therefore capture the customer’s desire. Moreover, Zara’s centralized distribution facility gave the chain efficiency. Both internal and external products passed through the distribution center, and were inspected and shipped immediately. Then, to increase the delivery speed, Zara scheduled shipments by time zone. Products were shipped by truck or air and were usually delivered to worldwide stores within 24-48 hours. In contrast to other companies’ outsourcing activities, Zara’s in-house manufacturing created a rapid product turnover since its products were limited and the inventories were strictly controlled. This rapid turnover created an opportunity to Zara’s retail stores and a sense of scarcity that “buy now because you won’t see this item later”. This increased the frequency of the customer visit and also allowed Zara to sell more products at full price. Zara’s business structure was very imperative to help the company develop its business strategy successfully. Each business function under this structure could be narrowly defined and management teams could frequently communicate across the functional departments. In addition to provide training, Zara enhanced Managers’ performance on store operations by the use of standardized reporting systems. This allowed Zara to work horizontally in an open communication environment. Moreover, Zara’s country managers were almost selected from locals. They transferred the information between top management at headquarters and store managers and thus making Zara adjust to the market quickly. This, in turn, would deliver customer’s satisfaction and boost the sales. Vertical integration, Zara’s distinctive business system, provided Zara with the competitive edge in the fashion industry. Zara manufactured its most fashion-sensitive products internally. About 11,000 distinct items were produced during the year, variations in color, fabric and sizes. This allowed the company to supply a broader product line into the market and to align with its business strategy. Furthermore, this vertical integration helped the company reduce the “bullwhip effect” in the chain. Products took place in small batches, flowed into the central distribution center and were shipped directly from the central distribution center. This helped the company not only keep low inventories but also avoid the potential amplification of the final demand. More importantly, Zara’s vertical integration shortened its cycle time of entire design to four to five weeks and two weeks for modifications, compared with traditional companies’ up to six months and three months, respectively. Such integration system provided Zara with the flexibility to constantly update its design and also...
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