Zara Marketing Plan

Topics: Manufacturing, Batch production, Pricing Pages: 11 (1519 words) Published: October 5, 2010
International Conference on Industrial Logistics

Zara’s mission:

To produce a fashion forward product for the masses

Zara Tidbits
• Amancio Ortega quit his sales job to start the business with just 5,000 pesetas ($83) • Founded in 1963 as a maker of ladies’ lingerie in the Galician town of La Coruña • Today, 70-year-old chairman and majority shareholder, Mr Ortega, is Spain’s richest man.

Zara
• Flagship enterprise of Inditex (2001 IPO) • Sales of 3.2 billion €, EBIT of 476.1 million € in 2003 and EBIT margin of 14.8%. • HQ and central distribution in La Coruña (Galicia – northwestern corner of Spain) • Women’s, men’s and children’s wear • Over 724 stores in 56 countries

Zara and Mango
• Spanish apparel retailers • Both tap into global fashion trends:

– Global appeal of catwalk fashion – International youth and fashion culture – Value proposition in rich countries; aspirational fashion in poorer countries – the unserved tier combining middlemarket pricing with high fashion content and novelty

Zara: Product Position

Production Commitment and Markdown
6-month Pre-season Start of season 80-100% +

In-season
0-20%

Sales% Not at full price

Traditional Industry Model

45-60%

30-40%

Advertisement

Advertisement + Markdowns + 40-50% 15-20%

Zara

15-25%

50-60%

Fresh items

The Zara Model…..
• Design-driven; 11,000 styles per year • Partial vertical integration, with owned factories; owned factory production is reserved 85% for IN-SEASON production • Tight coupling of market data and production decisions in-season; cycle CAN be as short as 2 weeks from design to store delivery of the completed garment

…..The Zara Model….
• Twice-weekly shipments of new product to all stores from central distribution • In-season production in response to demand is limited by fabric on hand • Small batch production creates a scarcity premium and encourages impulse purchase • Customers expect rapid inventory turnover, learn to shop frequently (17 times per year)

……The Zara Model…..
• Store design is uniform and upscale; stores are located on premium shopping streets • Pricing is market-based, not cost-based – premium pricing in higher cost markets • Powerful word of mouth supports store growth without advertising (usually about 3-4% of sales) • Growth has been organic from Spain and EU, outward

Distribution and logistics Individual distribution centers for each concept •

• Enables continuous and speedy deliveries to stores: 2-6 times a week

…but with full flexibility in-season
Stores:
Daily analysis of product sales performance/ customer feedback

Design:
Contact modification of initial collection based on demand

• New, fashion-attuned designs twice a week • Constant replenishment/ refreshment in-season

Sourcing/ Manufacturing:
Small production batches

Sourcing and manufacturing overview
Sourcing/fabrics Manufacturing

In-house fabrics Sourcing-Comditel

40%

In-house manufacturing 50% External Manufacturing 50%

60% External fabrics sourcing

In-house fabrics sourcing-Comditel


• •

100% owned company, based in Barcelona Supplies Inditex with finished fabrics Inditex is sole customer - Zara 89% - Other concepts 11% Key benefits for Inditex - Unique flexibility: ability to change collection in-season - Full quality control - Increased speed and unmatched responsiveness to market Stake in Fibracolor ensures optimum service and flexibility





External fabrics sourcing – key elements

Scale 43 MM metres Purchased in 2000 Speed/Quality 95% of fabrics purchased in Europe

Diversification 260 suppliers, with #1 less than 4% of total Flexibility Over 50% of fabrics are purchased undyed to facilitate quick inseason updates Comditel/Fibracolor +

In-house manufacturing - process
Purchasing of accessories (e.g. buttons)

Receipt of fabrics

Cutting

Finishing (ironing, labeling, quality control)

Receipt of...
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