Marketing and Zara

Topics: Inditex, Uterqüe, Supply chain management Pages: 13 (4217 words) Published: May 4, 2014
1. Background
According to BusinessWeek,
"Zara was a fashion imitator. It focused its attention on understanding the fashion items that its customers wanted and then delivering them, rather than on promoting predicted season's trends via fashion shows and similar channels of influence, which the fashion industry traditionally used." 5 Zara, the fashion retail chain, is a subsidiary of Inditex Group owned and managed by Spanish tycoon Amancio Ortega. Inditex includes several major brands, namely, Zara, Massimo Dutti, Pull and Bear, Oysho, Bershka, and Stradivarius. The group headquarters is located in La Coruna, Spain. It was here where the first Zara store was launched in 1975. Presently, there are about 1,500 Zara stores around the world. Zara employs around 80,000 people. The group recorded revenues of € 9,434.7 million (approximately $13,068.8 million) during FY2008, an increase of 15.1% over 2007. The operating profit increased by 20.1% to € 2,148.8 million in FY2008. The net profit, during FY2008, increased by 24.5% to over FY2007 to€ 1,257.8 million (approximately $1,742.2 million).7 Zara's claim to fame surfaces from the fact that it needs, on an average, two (2) weeks to develop and market a new fashion product compared to the industry average of six (6) month cycle. In addition to this, Zara is committed to showcasing around 10,000 new designs annually, in a fast and scarce manner, which gives it a constant new look and brings back customers to the stores. Owing to its unique supply chain management, use of information technologies and innovative management strategies, which is a must to survive the highly competitive fashion industry it has managed to come out on top year after year. The major competitors include H&M, GAP and Benetton. Some of the efficient strategies adopted by Zara are broadly the policies of zero inventories, Just in Time systems, contract manufacturing for small orders, decentralizing warehouses to deliver products and above all close monitoring of the fashion trends. Above all, they had few unique strategies, mainly, zero advertising, where in Zara chose to open new stores rather than advertise and, the concept of shunning outsourcing to low cost development centers as it would result in dilution of the high quality fashion that Zara represents. Initial success for Zara is mainly attributed to featuring low priced lookalike products of more popular, high end fashion brand. Following this success, they adopted new design and distribution method. Since the fashion industry product has long lead times, to the tune of six months, Zara aimed to reduce this and also minimize the uncertainties associated with fashion retail. Zara developed the concept of “Instant Fashion” that allowed them to respond more quickly to consumer tastes and emerging trends. The strategy helped them to bring in new products to the shelves quickly, in small quantity and produce more if demand occurred. This enabled them to minimize inventory, gauge demand and remove uncertainties. Later on, they brought in information technologies to further revolutionize the distribution processes. These helped Zara to developed fashion lines based on market trends and also, produce its own designs through a team of 200 in house designers. The introduction of information technologies helped them increase the efficiency of state of the art production system and warehousing mechanisms. The stores and warehouses were linked electronically, which facilitated the exchange of real time information thereby allowing them to minimize risk and capital outlays by reducing inventories. This leaner and responsive system helped rotate the stock quickly and also, improved sales as the customers would return to stores every two weeks to check out new designs and purchase as the design would not be available after the time frame.

International expansion of Zara started with Portugal in 1988, and since then they have opened more than 1,000 stores...
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