Zara has successfully built a worldwide famous brand thanks to its premium locations as well as a unique management system of design, production and supply chain. Unlike other fashion brands, it takes Zara only 10 to 14 days from the time it designs new clothing until it arrives in stores.The case describes the implementation of the fast-fashion concept by Zara and analyzes the components of its flexible integrated business model . Furthermore it reports on the international expansion of Zara, identifying phases and modalities of expansion.
Dr. Simona Gentile-Lüdecke developed this case for the undergraduate course “Topics in International Management and Governance” at the University of Bremen.
Zarais the leading brand of the Spanish retail group Inditex (Industria de Diseño Textil SA), one of the biggest fashion retailers in the world. Incorporated in 1985, Inditexorigins as a fashion distribution group started ten years earlierwhen Zara opened its first store in A Coruña (Spain). Today, the InditexGroup has eight retail formats (Zara, Massimo Dutti, Pull & Bear, Bershka, Stradivarius, Oysho, Zara Home, Uterqüe ) that share the same vision of the fashionbusiness, characterized by strong customer orientation. Inditex has been listed on the stock market since 2001; whenthe Group offered a 23 percent stake to the public in 2001, the issue was over-subscribed 26 times raising Euro 2.1 billion for the company . Appendix 1 shows the number of stores per each retail form: in 2011 Inditex had 5,527 stores in 82 countries . With its 1.723 stores Zara counts for 64.6% of the total sales of the Group.
The fast fashion concept
“This business is all about reducing response time. In fashion , stock is like food. It goes bas quickly” (Jose Maria Castellano, Chief Executive Inditex)
Together with other few European specialty retailers, Zara is adopting a business model that has come to be known as “fast-fashion”. The companies are able to recognize andrespond to fashion trends very quickly, create products that mirrors the trends, and get those products on the shelves faster and more frequently than the industry norm. Among these retailers (which include H&M, Mango, Top Shop, Mexx) Zara is the leading company on virtually every level. Unlike other fashion brands, it takes Zara only 10 to 14 days from the time they design new clothing until it arrives in stores (Appendix 2). This gives Zara the advantage of virtually copying fashion 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 . In addition to that, Zara differentiates itself from other retailers for the high number of new styles it produces every year. In a typical year Zara launches roughly 12,000 new styles, compared to the 2,000-4,000 items introduced by both H&M and Gap. Thus, even if a style sells out very quickly, there are new styles already waiting to take up the space. Moreover, Zara also produces items in small batches. By reducing the quantity manufactured in each style, Zara not only reduces its exposure to any single product but also creates an artificial scarcity. When items sell out, they are not restocked with another shipment . Instead the next shipment contains something new, something different. Zara has an informal policy of moving unsold items after two or three weeks. This can be an expensive practice for a typical store, but since Zara stores receive small shipments and carry little inventory, the risks are small; unsold items account for less than 10 percent of stock, compared with the industry average of 17 percent to 20 percent.Zara doesn’t end up selling a larger proportion of its products at a discount and reaps the benefits of prices that average much closer to the list price.
Furthermore, new merchandise displayed in limited quantities and the short window of opportunity for purchasing items motivate...