zara clothing business plan

In the 1980s Zara disrupts the fashion industry by radically reconfiguring the supply chain and creating the fast-fashion category. It is able to almost instantly react to fashion trends by vertically integrating its supply chain.

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Zara is a global fashion retailer whose success stems from its ability to reduce lead times and react to trends almost instantaneously. Zara is owned by Inditex, the world’s biggest fashion group.

The company was not afraid to go against conventional wisdom, vertically integrate its supply chain, and move its production to Europe (near-shoring), while many players  in the fashion industry chose to outsource production to lower-cost factories in Asia.

Zara disrupted the fashion industry by shortening the time to market to less than three weeks from inspiration to retail. Zara created a new category of affordable fast fashion. This model allowed the company to become a heavyweight in the highly competitive fashion industry: as of 2018, Zara was active online and in 96 countries, managed 2,238 physical stores and €18.9 billion annual revenue.

Radically Reconfigure Activities for Speed

Zara decides to produce more than half its fashion items locally and in its own facilities to achieve speed. At the time, most large fashion players rely on outsourcing production to Asia for cost reasons. This activity differentiation allows Zara to effectively react with lightning speed to fashion trends.

Develop Time-Critical Value Proposition

Zara’s value proposition focuses on keeping up with fast-changing fashion trends. Its activity configuration allows it to spot trends and launch new pieces in less than three weeks. Competitors show two collections per year and take over nine months to get items to stores. Zara ships only a few items in each style to its stores, so inventory is always scarce. This leads to constantly changing collections and customers tend to “buy it when they see it,” because the clothes won’t be around for long.

Embrace a New Cost Structure

Higher labor cost was the price to pay for flexibility, full control, and the required speed in its design and production processes. Zara reserves 85% of its factory capacity for in-season adjustments and over 50% of its clothes are designed and manufactured mid-season.

Trends, Data, and Communication

Zara trains its retail employees to relay customers’ preferences and real-time sales data to designers through effective communication systems. The latest designs and production forecasts are adjusted accordingly. Because Zara manufactures only a limited supply of items, it doesn’t have to deal with excess inventory or constant markdowns.

Pricing Power

Each store has a limited inventory of items in each style that are replenished based on demand. New styles based on latest trends arrive constantly. As a consequence Zara rarely discounts clothes, contrary to most fashion houses.

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Zara business model.

Zara is by all means a household name in the world of fashion. The company attracts polarized views within the fashion industry, with some calling the Zara business model revolutionary and others seeing it as exploitative and unauthentic. Despite this, the company is certainly successful, with the company being branded with a value of nearly $13 billion in 2022 . 

Let’s take a look at the Zara business model , the history of the company, and most importantly, how it makes money.

A brief history of Zara

Year, name change, type of company, business model, number of stores, employees, valuation, number of products sold, famous for little advertising, criticisms, effects on the industry

The company known as Zara was started in 1975 by Amancio Ortega and Rosalía Mera. It was initially named Zorba, but the name was quickly changed since it shared the same name with a local bar. The first store was opened in Galicia, an autonomous community located in the northern part of Spain. They specialized in the sale of cheap imitations of popular, high-end fashion trends.

The company opened several more stores throughout Spain in the 1980s, but did not achieve truly massive growth after Amancio Ortega developed the concept of “fast fashion”. He then changed the design, manufacturing, and distribution procedure to reflect this new business model and achieved a significant reduction in the production process, and responded to changes in a high-end fashion more quickly.

These changes were mostly centered on the core tenets of the fast fashion philosophy. These included:

• Rapid trend replication through the use of primary information technology;
• Significant increases in productivity through the practice of groups of designers working on products instead of individual designers;
• They use cheap materials for their products;
• Competitive pricing by taking advantage of low-quality materials and cheap labor, usually outsourced offshore to certain countries because of their more cost-effective (cheaper) wage structure.

Who Owns Zara

Zara is owned by Industria de Diseño Textil, S.A. (Inditex), a Spanish multinational clothing company that has its headquarters in Arteixo, Galicia, in Spain. Inditex is the largest fast-fashion group in the world, with a market capitalization of $73.7 billion in 2020 . Zara makes up its largest subsidiary with 2,007 stores in 96 countries, which contribute about 70% of the total sales volume of the Inditex Group. 

Zara’s Mission Statement

Zara’s mission statement is simply to “ give customers what they want, and get it to them faster than anyone else. ”

This perfectly represents the key value propositions of; being able to provide cheap, near-replicas of high-end fashion trends and deliver them quickly, with a 15-day lead time between the initiation and completion of the entire production process of a single item.

How Zara makes money

Let’s take a look at how Zara makes money.

Revenue from Retail Sales

Zara is said to sell over 450 million products a year, and a significant portion of these sales come from its retail stores. The company has thousands of retail outlets in nearly 100 countries. These physical locations provide male, female, and children’s clothing and accessories, as well as a range of other products such as beauty products, shoes, and perfumes.

Revenue from Online Sales

Online sales also make a significant contribution to the total sales volume of Zara. E-commerce sales for the year 2022 were said to have contributed $8.6 billion to the total sales revenues. This represents a continuation of a steady uptrend in its online sales revenue with $6.1 billion generated in 2021, $4.8 billion in 2020, and $2.9 billion in 2019. The company has plans to further increase its online presence and still projects significant room for growth.

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Zara’s Customer Segments

Zara  customer segments consist of:

• Trend-focused, but budget-conscious fashionistas: The Zara business model involves providing pocket-friendly, but trendy clothing and accessories to men, women, and children. Amongst adults, their primary customer segment is younger adults between 18-40 who are fashion-conscious, tech-savvy, and environmentally conscious.

Zara’s Value Propositions

Zara  value propositions consist of:

• The brand can provide cheap, low-quality clothing accessories which mimic current high-fashion trends.

Zara’s Channels

Zara  channels consist of:

• Retail stores
• Online stores
• Advertising
• Clothing and accessories
• Social media platforms like YouTube, Twitter, Facebook, Pinterest, and Instagram
• Newsletters

Zara’s Customer Relationships

Zara  customer relationships consist of:

• Zara has a transactional relationship with its customers since the company does not build long-term, personalized services for its customers but simply supports transactional services;
• Self-service is also one of the Zara customer relationships, since shoppers are allowed to choose through the available retail catalog and purchase items without the need for significant assistance;
• Customer service it’s one of the most important sectors of the business structure and helps customers with any complaints they may have;
• The Zara social media platforms and brand identity offers loyal customers a sense of community when they purchase Zara products.

Zara’s Revenue Streams

Zara  revenue streams consist of:

• Sales from retail outlets and e-commerce stores

Zara’s Key Resources

Zara  key resources consist of:

• Revolutionary fast fashion business model
• Extremely short lead time and ability to quickly copy the latest trend
• Cheaply off-shored labor costs and cost-friendly clothing material
• Intellectual property
• Dedicated staff
• Very low advertising costs of only 0.3% of total revenue.

Zara’s Key Activities

Zara  key activities consist of:

• Product design and development
• Manufacturing
• Product delivery and shipping
• Maintenance of headquarters, retail outlets, and online platform
• Advertising and market
• Product development and design
• Monitoring the newest and most popular fashion trends through the use of information technology like social media

Zara’s Key Partners

Zara  key partners consist of:

• Manufacturers

Zara’s Cost Structure

Zara cost structure consists of:

• Physical and e-commerce store maintenance costs;
• Operating expenses, such as facility maintenance, employee wages, legal fees, IT costs, etc.;
• Marketing and advertising costs;
• Research and Development.

Zara’s Competitors

Here are some of the top competitors to the Zara business model.

• Shein: It’s a Chinese fast fashion retailer which focuses on the sale of affordable apparel sourced from the wholesale market and enjoys a significant online presence. It is valued at $220 billion, making it the most valuable fashion retailer in the world in 2022;
• H&M: It’s a Swedish multinational clothing company that was founded in 2008 and is second to only Intidex in terms of size. The company currently has over 4,800 stores open worldwide;
• Gucci: This is a high-fashion luxury brand that offers a wide range of high-end clothing and accessories such as bags, shoes, home decorations, and so on. According to data from 2019, it generated $9.6 billion in sales from its 487 stores;
• Forever 21: It’s a multinational fast fashion retailer which Sells clothing to men, women, and children as well as other accessories such as bags, shoes, cosmetics, perfumes, and so on. It is headquartered in Los Angeles, California, and operates 540 locations worldwide;
• Uniqlo: This is a Japanese clothing company that specializes in the design, manufacture, and distribution of casual wear. It was founded in 1973 and has over 30,000 employees.

Zara’s SWOT Analysis

Let’s take a look at swot analysis of Zara business model.

Zara’s Strengths

• The brand takes advantage of the cost-effective wage structure of some of the countries to which it off-shores its manufacturing process such as Bangladesh, Armenia, Spain, Morocco, Turkey, and Portugal;
• Zara can source lower quality materials than standard would be expected in high-fashion clothing, allowing them to save significant costs;
• The company spends significantly less than its main competitors on marketing and advertising. This has two beneficial effects. First of all, it gives the company the impression of being a high-fashion brand by creating an artificial sense of exclusivity and scarcity;
• The Zara retail outlets are one of its strongest assets and are located in prime locations all over the world;
• The fast fashion business model which the company operates allows them to quickly copy high-fashion trends and create near replicas that can quickly be sold at cheaper prices while the fashion style is still popular;
• The ability of the company to leverage its significant understanding of fashion trends on social media to quickly detect and copy these trends, allowing them to produce over 11,000 distinct items a year ;
• The company can sell 85% of its clothing and accessories at full price, which is much better than the industry standard of 60%;
• Zara produces most of its clothes seasonally, with only 15% to 25% of its clothing articles being produced in advance. This allows the company to respond to rapid changes in trends during particular seasons and avoid having leftover unsold inventory, which also helps create artificial scarcity and drive up clothing prices.

Zara’s Weaknesses

• The company invests very little in marketing, a strategy which may backfire eventually since its competitors invest at least 10x as much as Zara in terms of advertising;
• The centralized distribution system (known as the Cube) puts the production process at risk of significant disruption and even catastrophic failure due to having a single vital weak point.

Zara’s Opportunities

• The brand should improve its online presence and carve out a strip of the fashion e-commerce sector;
• Zara should strive to attain more global relevance to survive increased competition from both local and global competitors.

Zara’s Threats

• Since a significant portion of Zara’s sales are made in Europe, this leaves it open to increased competition from the growing popularity of some of its competitors on the continent;
• The inability of Zara to gain a significant share of the market outside of Europe and China has left it open to an increasing pool of global competitors;
• Zara has been accused of committing various labor violations such as exploitative labor, unsafe working conditions, and even child labor;
• The fast fashion business model which involves copying recent high-fashion trends from other designers has been seen as inauthentic and a blatant infringement of trademark rights. This has embroiled the company in various lawsuits over alleged trademark violations, as well as copycat fashion scandals;
• Rapid increases in the cost of raw materials, as well as labor costs, could prove detrimental to Zara’s business model and render it unsustainable;
• Its relatively poor online presence in terms of e-commerce sales could mean that the company may fail to attain a significant online retail market share.

Fast fashion was one of the most significant revolutions in the fashion industry in the last century. Zara has been at the very forefront of this movement for almost five decades and has shown strong growth as well as the potential for further development. Though the company enjoys a large market share in Europe, it still has room to compete for a wider global customer base, as well as utilize the ever-expanding opportunities offered by E-commerce.

Daniel Pereira

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There are 2007 Zara stores in 96 countries.

The  Business model of Zara  consists of vertical integration and logistics trade-offs. These two strategies play a significant role in the success and global recognition that Zara receives. Vertical integrations help the company to control all of its verticals like design, manufacture, shipment, distribution, etc.

In spite of being a fast-fashion brand, it holds a position of superiority over its contemporaries due to the efficiency  of the business model of Zara. This unparalleled and unprecedented business model is one of the primary reasons for the success rate of Zara.

Revenue Model of Zara

The Spanish fast-fashion store Zara generated online net sales of around US$2 billion in 2018. For 2019, revenue of up to US$2.5 billion is projected. Zara revenue generation is based upon its selling of more than 450 million products per year, i.e, it works on economy of scale. Zara has 1700 stores in more than 86 countries around the world

Zara Business Model

In recent years, the concept of fast fashion has emerged as an important trend. Fast fashion ensures that the clothes being manufactured follow the ongoing trends and follow the customer’s demands. Zara is a Spanish company that retails in clothing and accessories. Zara specializes in fast fashion, and products constituting clothing, accessories, shoes, swimwear, beauty, and perfumes.

The Spanish fast-fashion store Zara generated online net sales of around US$2 billion in 2018. For 2019, revenue of up to US$2.5 billion is projected. Zara revenue generation is based upon its selling of more than 450 million products per year, i.e, it works on economy of scale. Zara has 1700 stores in more than 86 countries around the world.

Total sales of the company are around the US $13 billion that makes it one of the top 3 largest fast fashion brands in the world. Key strategies that help the company generate good revenues are-

• In-time production and distribution- Makes are the production and distribution are at the right time.
• Trendsetter- becoming a trendsetter at the right time
• Effective distribution management- by reducing the delivery time
• No costs on the advertising and marketing

Early History

Founded by  Amancio Ortega  in 1975, Zara is a flagship clothing chain store that is part of Inditex group, the world’s largest apparel retailer. Amancio Ortega opened the first Zara store in 1975 in central A Coruña, Galicia, Spain where the company is still based. Ortega initially named the store  Zorba  after the classic 1964 film  Zorba the Greek , but after learning there was a bar with the same name two blocks away, the letters were remolded for the sign to say “Zara”. It is believed the extra  a came from an additional set of letters that had been made for the company.  The first store featured low-priced lookalike products of popular, higher-end clothing fashions. Ortega opened additional stores throughout Spain. During the 1980s, Ortega changed the design, manufacturing, and distribution process to reduce lead times and react to new trends in a quicker way, which he called “instant fashions”. The improvements included the use of information technology and groups of designers instead of individuals.

SWOT Analysis

Zara is mainly based on a concept called fast fashion. It is similar to the idea of FMCG i.e., Fast moving Consumer Goods. Fast fashion is used to target an audience which majorly comprises young adults and middle-aged people. The cycle of fast fashion ends early as the fabric of the cloth withers. Various brands like Forever 21, H&M have incorporated this idea into their business model.

Strengths in the SWOT Analysis of Zara

• Spacious stores : Zara have more than 2000 stores all over the world. Part of one of the most biggest Spanish retailers in the world

2. Global reach : Zara have a well established brand name worldwide

3. Their supply chain management is extremely low cost as well as most of their processes like operations, manufacturing are all vertically integrated

4. Brand valuation : Strong online presence through their own website and other ecommerce platforms makes Zara a popular brand name

5. Affordable prices : Clothes are produced at a competitive price with the most innovative and fashionable designs.

6. Fashionable clothing : Zara offers extremely trendy, well designed and fast delivery of new products. Apart from clothes, Zara also offers handbags, shows etc.

Weaknesses in the SWOT Analysis of Zara

• Limited advertising : Limited marketing and advertising as compared to some other brands

2. High competition for Zara means limited market share and high brand switching

3. Zara is perceived to be an expensive brand

4. Insufficient product information : Zara is not very active in the online space though it is available through online channels with partners.

Opportunities in the SWOT Analysis of Zara

• Wide global market : There are more global markets which Zara can explore.

2. They can also enter into segments and expand those areas where they haven’t.

3. Online channels : Online marketing and ecommerce is gaining importance which can be tapped by Zara.

Threats in the SWOT Analysis of Zara

• Fast fashion competition : The high end fashion merchandisers can be a major threat to them. There is a large amount of consumer switching taking place

2. COVID-19 pandemic : Economic downturn can also be a threat to their target segment

3. Imitations : Fake imitations can decline the sale of Zara products and hurt business

Zara prides itself on remaining on top of the latest trends and radiating an upscale vibe, but its production process is the real show-stealer. These industry-leading procedures elevate it from a mere clothing store to a market leader in fast fashion executed well. Zara excels at guaranteeing that everything goes as planned, as it has more control over its production and business network than most of its competitors.

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Business Planning Assignment ZARA

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This initial statement is a plan to disclose the intention of beginning a Zara Store in within a new market. Zara is an international retail company that deals in clothing and accessories. The company is based in Spain and was founded in 1975. Currently it has several stores in different parts of the world especially Europe and the Middle East where majority of its stores are located. Zara being a successful company within the area of clothing and accessories, it can easily develop a new product and make impressive sales in short time. There are number of brands and the company sales in its stores including the famous pull and bear, and Massimo Dutti . Each year, the company launches new designs of cloths to keep up with the trend in the fashion industry and to deliver the needs and wants of its customers. The designs are based on both local and worldwide fashion trends. Because the company has established a well known brand in the fashion industry worldwide, opening another store in any new market will not be a big issue for the company. It is for this reason that the company should open a new store in Melbourne Australia to expand its market. Currently, the customers within this particular target market are offered with a variety of attire to choose from, many local and international brands are already available in the market. Considering the fact that Melbourne is such a diverse place, it would be nice to give the dwellers a taste of indigenous fashion and clothing material from other parts of the world .

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• 1. 1 Assignment Studio Business Planning Assignment ZARA
• 2. 2 Contents Introduction:...................................................................................................................................5 Internationalization.......................................................................................................................6 Global Marketing for ZARA.........................................................................................................6 Definition of Marketing:............................................................................................................8 Value: .........................................................................................................................................8 INNOVATION................................................................................................................................9 One need a lot of ideas from a lot of different places.....................................................9 Move rapidly from design to market. .................................................................................9 Innovate all aspects of the business ...............................................................................10 Prototype and model quickly ............................................................................................10 Get fast feedback ...............................................................................................................10 Flatten the structure ...........................................................................................................10 Strategic goals ............................................................................................................................10 Operational Plan:........................................................................................................................11 Financial Plan .............................................................................................................................12 Forecast Revenue stream.....................................................................................................12 MARKETING STRATEGIES ....................................................................................................14 MARKETING PROGRAM .........................................................................................................14 Marketing Objectives:...............................................................................................................14
• 3. 3 Short term:.............................................................................................................................14 Long term: ...........................................................................................................................15 Strategy........................................................................................................................................15 Diversification......................................................................................................................15 PENETRATION STRATEGIES............................................................................................15 Product:................................................................................................................................16 Quality: .................................................................................................................................16 PRICING......................................................................................................................................16 PLACE..........................................................................................................................................16 PROMOTIONAL STRATEGY ..................................................................................................17 They aim to:.........................................................................................................................17 Loyalty Program .....................................................................................................................17 Objectives:...........................................................................................................................17 IMPLEMENTATION PLAN .......................................................................................................18 Supply chain and Logistic management.................................................................................19 Conclusion...................................................................................................................................21 Appendix......................................................................................................................................22 Reference List.............................................................................................................................25
• 4. 4 Executive Summary:
• 5. 5 Introduction: This initial statement is a plan to disclose the intention of beginning a Zara Store in within a new market (Bhatia, 2000). Zara is an international retail company that deals in clothing and accessories. The company is based in Spain and was founded in 1975. Currently it has several stores in different parts of the world especially Europe and the Middle East where majority of its stores are located. Zara being a successful company within the area of clothing and accessories, it can easily develop a new product and make impressive sales in short time. There are number of brands and the company sales in its stores including the famous pull and bear, and Massimo Dutti (reference required). Each year, the company launches new designs of cloths to keep up with the trend in the fashion industry and to deliver the needs and wants of its customers. The designs are based on both local and worldwide fashion trends. Because the company has established a well known brand in the fashion industry worldwide, opening another store in any new market will not be a big issue for the company. It is for this reason that the company should open a new store in Melbourne Australia to expand its market. Currently, the customers within this particular target market are offered with a variety of attire to choose from, many local and international brands are already available in the market. Considering the fact that Melbourne is such a diverse place, it would be nice to give the dwellers a taste of indigenous fashion and clothing material from other parts of the world (reference required).
• 6. 6 Internationalization Businesses either small or large are rapidly being globalized because of various reasons, extending a business internationally has now become very much desirable and feasible in today’s rapidly changing business environment (Mead, R (1994)). To make such thing happen successful technology has played a major part in it. Businesses at present need more than just well-made products and well designed services to succeed in the global market. In order to compete and succeed internationally there are number of factors to consider and look in to, most important decisions to make are market selection and complete understanding of the economic, cultural and political environment of these markets. Business managers, Owners, Stake holders and leaders who are associate with Zara needs to be well aware of the challenges they might face if they are willing to enter in to a completely new market, for this purpose top level managers needs to have complete skills of managing functional areas such as marketing and finance, promotions, interdependence of international markets, norms that are part of other cultures and other risks associated to it (Mead, R (1994)). Global Marketing for ZARA Terminologies or phrases like global village and world economy turn out to be popular. Marketing has become a complete subject and marketing has been developed into a systematic plan since the global business existence. Even by companies like Zara it requires proper planning and deep analysis of all the process that is going into operation (FAO 1997)
• 7. 7 To make a business globalize requires planning, together with careful consideration to global cultural and economical factors as well as likeness in products, price, marketing, promotion, and other internal and external factors. Markets like Melbourne which is culturally very much diversified, people of all backgrounds and cultures are present, the company needs to be very innovative and creative to meet the needs of such customers. There are some external and internal factors that play very crucial role in global marketing and can be a reason of success or downfall of an industry whether developing or established. At first place there is need to comprehend the aspects that could grow into internationalism and globalization (Crawford 1997). Here we are going to demonstrate different factors that are part of external and internal nature and have influence over marketing strategy when going global. There is a hell of difference between national and international business strategies and advertising and marketing plan. A very interesting example to better understand the factor that hinders the global marketing is the language difference, cultural norms and values. This is very common when a European company like Zara launches its project offshore to the Western areas (Crawford 1997). Industry at a Glance: The retail industry of Australia has seen several tough years, with overall cautious consumers spending, lower prices, higher rents and most importantly global financial crises, all playing important roles to driving revenue down by 0.7% (IBIS, 2012) This is where Zara can take advantage, as it’s a well known brand for around the world with exceptional supply chain in practice and selling products at comparatively cheap prices.
• 8. 8 Industry revenue is forecast to grow by 1.2% per annum to reach $12.9 billion in 2016- 17 (IBIS, 2012), which can be considered as a good positive sign for brands like Zara. Definition of Marketing: The procedure of building enduring interactions through planning, undertaking, and handling the comprehension, price, marketing, and promoting and consortium of ideas, products or services to create reasonable return that match specific and company demands and goals (Carter n.d.) Marketing has a particular environment that is comprises of various factors and has affect on the company’s assessment and verdicts. These factors are internal as well as external and require keen observation and consideration while making any policy to carry on a project. Internal (5M) External Money Micro Macro (Pestel) Management Customers Political Manpower Competitors Environmental Machinery Suppliers Socio-cultural Material (raw) Public Technological Ecological Legal Value: The value of the store will be based on its clients, associates and ideologies. The clients are the most important value for the Melbourne Zara store. It is the clients who will
• 9. 9 ensure that a culture of buying cloths and clothing materials from the store and all its future franchises is built (Graebner, 2005). This will be achieved by ensuring that the services offered by Zara must be of high quality. Zara Clothing Store is going to be a large retail store, which is designed to provide middle class income earners with fashion styled merchandise from Spain. The store will carry designer and quality clothes, which will give access and convenience to men to wear modern and fashionable clothes. Zara Clothing Store will be located in the Chadstone shopping centre, one of the most busiest malls in Melbourne Australia. The mission of the project is to provide customers with high quality and fashionable clothing and offering superior customer service throughout and always remembering each customer may be a source of referral business to the company. INNOVATION One need a lot of ideas from a lot of different places. The Zara design team based in Europe consists of 350 people and they are charged with generating and delivering 18,000 new product designs a year – in other words, 360 a week, which is by far the most design by any brand. Designers at Zara do get inspire from books, magazines and other sources but their main differentiation is that they take feedback from their customers and follow it, Our customers tell us what they like and don’t like. We attend shows and talks about fashion to get ideas. It is an ongoing process. Move rapidly from design to market. At Zara the initial idea origination to the store shelf takes less than four weeks; they move far faster than their other competitors in the local and international markets. They want to create waves and be ahead of the wave. In addition, they put their products into 5,500 stores from Brisbane to Lisbon at just about the same time. This is one of many areas where Zara is not only creative but at the same time meet the demands of customers in a completely different way.
• 10. 10 Innovate all aspects of the business. Innovation at Zara does not apply only to products but even to the whole process. The company has used creative approaches to streamline and optimize manufacturing, supply chain management, data tracking, inventory management, store layout and staff operations worldwide. Prototype and model quickly. Designs and ideas are tested rapidly, before they introduced in the market, at Zara’s headquarters in Arteixo La Coruna, Spain there are mock shops and 25 full-size shop windows with differing displays and lighting. Get fast feedback. Store staff use wireless communications to relay information every day back to the firm’s Spanish headquarters about sales and inventories, from all around the world. Fast information about what is selling and what is not enables the group to respond to the public mood and to quickly supply more of the most popular designs to where they are needed. Even the customers feedback and suggestions are taken seriously and if needed appropriate actions are taken. But even the top selling fashions are discontinued after four weeks. Zara deliberately kills them in an act of creative destruction. Flatten the structure. Traditional fashion companies have hierarchical management structures with many big egos getting involved in every decision. On the other hand, company like Zara has a flat structure with designers empowered to make fast decisions. Strategic goals
• 11. 11  Creating a highly innovative and unique products and services that will give Zara an edge from its competitors.  Providing good quality of products and services to all clienteles in order to create a customer base and brand the store.  Providing the perfect environment to all our associates in order to retain them and get the best skills out of them.  Controlling the cost of operation to ensure the organization meets its target profit margin. The elements of operation that will be emphasized in order to meet this goal include: accounts receivable and accounts payable, order taking, receiving, purchase, and storage.  The average target sales for this first fiscal year is $800,000; achieved by keeping the labor within small range of the total sales and which would translate to a higher gross margin Operational Plan: General operating hours and personnel Days Timings Monday 9:00 am – 5:30 pm Tuesday 9:00 am – 5:30 pm Wednesday 9:00 am – 5:30 pm Thursday 9:00 am – 9:00 pm Friday 9:00 am – 9:00 pm Saturday 9:00 am – 5:00 pm
• 12. 12 Sunday 10:00 am – 5:00 pm The starting work force will consist of Store manager, two assistant managers (one for each floor), Mentors (who will help assistant managers) sales personnel, supervisor, account officers, IT personnel and the top management. Selection for appointment of the each member of staff will follow through evaluation criteria in order to select the most qualified candidates (Wheelright & Clark, 1992). The lower rank employees will work in shifts in order to observe the requirements of the labor laws. Financial Plan Validation of Key Assumption: The financial forecast of the company will be modeled using CAPM (Capital Asset Price Modelling) which consist of the real operating cost in both Australia and its base market. The key variables have been validated through research and the experience gained by the founders in establishing the business so far around the world. ForecastRevenuestream The overall business package provided by Zara will be based on following streams: The following method will be used to set up promotion budget. Since Zara will be new in market; therefore, methods used must be innovative and going to use price skimming strategy. Therefore, this is how the budget has to be divided:
• 13. 13  Personal media that requires space over the internet and a website. It requires a negligible cost.  Non personal media requires most of the cost. The budget can be divided in following way:  50% of the money has to be invested on advertising and broadcasting expenses. The commercials can be of medium budget, where the company can show the difference between before and after effects of using our product or personal character execution strategy  25% of the expenses are for designing and publishing advertisements on Sunday newspapers and other magazines  5% will be used for Social Media, which has become a very powerful media nowadays  The rest of the amount will be spent on direct selling. The right people with the right set of skills will be hired according to the remaining budget This means that the major cost will be used on media and publications. The costs for the rest of the communication mediums are very minor. Advertising 80% Direct Selling 15% Sales Promotions 5%
• 14. 14 MARKETING STRATEGIES Some of the strategies that will be employed towards marketing include: direct marketing, advertising, promotion, and person to person marketing. A budget for implementing an effective marketing strategy within the first one year is $ 50,000. MARKETING PROGRAM Marketing Objectives: Before the details of a marketing plan can be developed, objectives for the plan must be stated (charles, 2008) The business function of marketing is important to Zara as it is a strategy in which is implemented in order to achieve the business goals and promote the product. Zara consider it as the heart of the success of their business mainly because of the reasons that it include the promotion, product and the price of the good and may also have control over operational areas such as finances and employees. Zara should work on different marketing objectives which can be categorized under short term objectives and long term objectives. Short term:  Attract more customers  More awareness of Zara products in the local Australian market  To be on the top  To deliver the right and positive image of the company  To be the first choice for its customers
• 15. 15 Long term:  To be the market leader  To open more and more branches all around Australia  To associate and partnership with other companies, only if possible  To offer more competitive and high quality products Strategy Diversification Zara is known for its great designs and products that they provide to their customers. Zara will include a variety of products in its store, like perfumes, handbags, and also will target people of all age. PENETRATION STRATEGIES Before entering any country a company like Zara should and must decide on its strategy on how to enter that particular country. According to Doole and Lowe (2001) company objectives and expectations, size and financial resources, existing foreign market involvement, skills, abilities and attitudes of management, the nature and power of the competition, the nature of the product or service itself and the timing of the move relative to competitors should be considered, as this will definitely play a key role in it. Since Zara is a well known brand in the world fashion industry, the company won’t have to work hard to penetrate in the market. Soon after their launch they will get a good response from the market and from the very first year company will start making its profit.
• 16. 16 The Marketing Mix is the combination of marketing strategies employed to achieve the goals of the Marketing Plan (Kalb, 1995) Product: Zara products takes into consideration all of these factors that all come together to increase the appeal of fashion products to its target market. Quality: The quality of Zara products are high that are constantly managed, the raw material used in the product are of good quality. PRICING Zara offers affordable prices for all its products which can easily be afford by all its customers as they all can easily be afforded. Besides the average income of people in Australia is normally high, as result majority of the people can afford to spend $40 to $300 on its products. Zara use the cost plus margin method of calculating the price of their products. This means calculating the total cost of production and adding a percentage (margin) for profit. This includes taking into account rent, wages and prices of supplies. PLACE Places plays a significant role in the marketing of any product or service either locally or internationally. Before opening any outlet it is very important that Zara should and must take into consideration the aspect of the location that they are willing to open in the near future. Some important aspect about location can be termed as: The visibility of the location, Is the location is easily accessible? Is it in some mall or main road?
• 17. 17 PROMOTIONAL STRATEGY Promotional strategies are normally viewed as the way one communicates with their target market (Stephen, 2003) Zara will use a number of promotional strategies in order to inform non-existing customers about their new products, to keep the loyalty of their regular customers and to highlight how great affordable their products are. They aim to: - Build positive relationships in the community with other businesses. - Increase sales - Drive traffic into store - Tailor an offer to local community Loyalty Program Objectives:  Encourage and reward customer loyalty  To increase traffic in stores
• 18. 18 IMPLEMENTATION PLAN Media Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Print Y Y Y Radio Y Y Y Y TV Y Y Y Y Outdoors Y Y Y Y Y Events Y Y Y Y Y Y Y Y PR -------------------------------------------------------------------------------------------------- Online -----------------------------------------------------------------------------------------------
• 19. 19 Supply chain and Logistic management In order to increase its capital base, the company needs to have an IPO after a specific period of operation. An IPO is an equity stocks issue that is offered when a company first initiates public trading of its shares. The valuation process for new private companies occurs in two phases. The first phase is the pricing evaluation. The objective of this phase is to determine the initial offering price for shares in the newly public company. The second phase is the market evaluation. The results of this phase reflect the actual worth of the new company based on the market’s response to the company’s IPO (Lodato, 2008). Supply chain is one of the key strengths at Zara, which must be managed well in order to avoid the bullwhip effect in the supply chain process which occurs as the demand order variability in the supply chain process is magnified as the company moves up the supply chain. This bullwhip effect could cause inefficiencies in the operation process which could create graver consequences to the company. However, this could easily be remedied once its cause/s is/are identified which includes any of the following: demand forecast updating, order batching, price fluctuation, or rationing and shortage gaming. The supply chain management process encounters different problems and issues in its operation. These issues cover the whole process from the strategic to the operational level. Among the issues in the supply chain management process include network planning, inventory control, supply contracts, distribution strategies, supply chain integration, strategic partnering, outsourcing, procurement strategies, and product design (Kotler & Fernando, 2003).
• 20. 20 Other issues concerning the process include network planning, supply chain integration, strategic partnering, IT, Decision Support System, and training. Aside from the internal issues surrounding the SCM process, there are also issues connected to the different practices of SCM in different countries. For examples, the supply chain management practice in Asia is considered to be more fragmented and less competitive than its practice in United States and in Europe. Using value stream mapping, it will study on the challenges and problems encountered by SCM in a global context. This value stream uses all the necessary steps involved in the supply chain process with the use of two streams or flow. These streams are the flow of products and the flow of information. In that study, the three key elements in a supply chain (process, people, and technology) are highlighted. Aside from that, the concepts of logistics, inventory, and the customer’s needs must be given focus in the creation of their corporate goals and programs. The main challenge of supply chain management, is to keep up with the global demands of their customers, competitors, and vendors. They are essential forces now as they gain power to dictate and take control of the operation of a business in contrast to the trend before their suppliers have the ability to dictate the process of shipping and accepting orders. In terms of the demand and supply trends within the industry, Schwarz has listed some of the issues and challenges that companies face pertain to supply chain management. On the demand side, there are the issues of uneven growth, fragmentation, accelerated volatility, and the importance of aftermarket (reference required). These are the issues deal with the customers and the industry in general. This affects their ability and capacity to purchase materials and products. On the supply side, the challenges that
• 21. 21 they are faced with differentiated outsourcing, low-cost country outsourcing, risk management, and transparency/accountability. These issues must be monitored well and solved so that firms would be able to avoid further problems and graver issues in the future. Conclusion Zara is an international retail company that deals in clothing and accessories. The company is based in Spain and was founded in 1975. Currently it has several stores in different parts of the world especially Europe and the Middle East where the bulk of its stores are located. Zara being a successful company within the area of clothing and accessories, it can easily develop a new product and make impressive sales in short time. There a number of brands and the company sales in its stores including the famous pull and bear, and Massimo Dutti. Each year, the company launches new designs of cloths to keep up with the trend in the fashion industry. The designs are based on both local and worldwide fashion trends. It is essential for the company to make accurate forecasts of the demand and supply figures in order to maximize the process. Thus, a company must regularly monitor the supply and demand for their products and make the most out of those products. An automobile company could not possibly manufacture products more than the demand in the market since this could cause some problems in warehousing. Thus, the logistical distribution process of a company must be closely monitored.
• 22. 22 Because the company has built itself a brand well known within the worldwide market, begin a store in a local market that it has not explored would be appropriate. It is for this reason that the company should open a store in New York to expand its production and sales. Currently, the customers within this particular target market are not offered a variety of attire to choose from. Considering the fact that New York is such a diverse place, it would be nice to give the dwellers a taste of indigenous fashion and clothing material from other parts of the world. The total amount of money that shall be needed to start the new store for its first year will be $ 300,000. This amount includes $200,000 for startup capital and $100,000 for operations reserves. In order to locate the target market, the store will be sited in upstate New York which is also close to one of the up market residential areas. This will ensure a 24/7 work flow during working days, weekends and holidays. To be more specific, the store will be located near a business mall in New York with a continuous streaming of shoppers and people in general (Clow and Baack, 2007). This is the clothing store of this kind in this location as most of the clothing stores in New York do sell exotic clothing (Cook, 2000). Appendix The role played by SCM in decreasing the inventories, gaining better services, diminishing costs with inventory turns. Thus, keeping a good SCM must be observed at all times by the firms (reference required). This is considered as one of the biggest advantages of SCM as short term objectives in terms of increasing the firm’s productivity and decreasing inventory and reducing the process’ lead time occur usually.
• 23. 23 Distribution management or transportation management is a decisive part of international logistics and supply chain management. Based on the National Council of Physical Distribution Management (NCPDM), physical distribution is a broad range of activities which pertains to the efficient movement of the finished goods and products from the end of the production line to the consumer. These activities include freight transportation, warehousing, material handling, protective packaging, inventory control, plant and warehouse site selection, order processing, market forecasting, and customer service. Strategic distribution is a competitive advantage that accrues generally from the configuration of a distribution network (who, what, where, when) and, more specifically, from the selection of partners (i.e. middlemen) who intermediate between the company and the customer by performing necessary fulfilment and service activities. Distribution also plays a major role in marketing and selling products to the end customers. This is a major activity which affects the mode in which the consumers receive the products that are manufactured and produced by a firm. The medium in which products are delivered to the consumers are called distribution or marketing channels (reference required). This is a set of interdependent organizations which are involved in the process of making a product or service available for use or consumption by the consumer or business user. The marketing channels are important for a company for two reasons: (1) it affects every other marketing decisions, (2) it often involves long-term commitments to other firms involving business-to-business relations and are not as easy or as flexible to change as other marketing mix decisions (reference required).
• 24. 24 Logistics has been defined in several ways. It may also pertain to different things and can be associated with different aspects such as the military, civil organizations, among others. This process includes the planning and control of material flows and related information in organizations, both public and in private sectors. In simpler terms, it pertains to the process of delivering the right materials at the right time in order to complete the production process. It is the supply chain process that plans, implements, and controls the flow of goods or can also pertain to the management of inventory, in rest or in motion. Among these definitions given to logistics, the most popular is the one which describes logistics as a process consisting of the seven R's: having the (1) right product, in the (2) right quantity and the (3) right condition, at the (4) right place, at the (5) right time, for the (6) right customer, at the (7) right price. The most formal definition given for logistics was provided by the Council of Logistics Management defining logistics as the process of planning, implementing, and controlling the efficient, cost-effective flow, and storage of raw materials, in- process inventory, finished goods, and related information from point of origin to point of consumption for the purpose of conforming to customer requirements.
• 25. 25 Reference List Bhatia, T. K. 2000. Advertising in Rural India: Language, Marketing Communication, and Consumerism. Tokyo: Tokyo Press Clow, K. E., & Baack, D. 2007. Integrated Advertising, Promotion, and Marketing Communications. Boston: Pearson Education. Cook, G. 2000. The Discourse of Advertising. London: Routledge. Graebner, L. 2005. Measuring effectiveness of marketing is complex, vital task. Retrieved 6 24, 2011, from Biz journals: http://www.bizjournals.com/sanjose/stories/2005/04/04/focus2.html Wheelright, S., & Clark, K. (1992). Revolutionizing Product Development . New York: Pearson. Lodato, M. W. (2008). Management of New Product Launches and Other Marketing Projects. Boston: Pearson. Kotler, P., & Fernando, T. d. (2003). Lateral marketing: new techniques for finding breakthrough ideas. Boston : Pearson. Rice, J. (2006, March 16). Maslow and Marketing. Retrieved June 15, 2011, from Marketing interactions: http://marketinginteractions.typepad.com/marketing_interactions/2006/03/maslow_and_ mark.html Russell, D. (2010). Successful Marketing with Maslow. Retrieved June 15, 2011, from ABC articles directory: http://www.abcarticledirectory.com/Article/Successful-Marketing- with-Maslow/125442 US Census Bureau. (2009). Ohio. Retrieved 6 15, 2011, from American fact finder: http://factfinder.census.gov/servlet/ACSSAFFFacts?_event=Search&geo_id=&_geoCon text=&_street=&_county=&_cityTown=&_state=04000US39&_zip=&_lang=en&_sse=on &pctxt=fph&pgsl=010
• 26. 26 Doole, I., and Lowe, R. (2001) International Marketing Strategy. 3rd Edition, Bedford Row, London, Thomson. Mead, R (1994), “International Management: Cross Cultural Dimensions”, Oxford: Blackwell Business, p. 7. Crawford, I.M 1997, ‘Marketing and Agribusiness texts’ , Agriculture and consumer protection, FAO press, Africa FAO Corporate Document Repository 1997, ‘Global agricultural marketing management’, Marketing and Agribusiness texts, Agriculture and consumer protection, Introduction to Global Marketing, 10 November 2011, < http://www.fao.org/docrep/W5973E/w5973e02.htm>. Charles. L, Joseph. H, Carl. M, 2008, 'Essentials of Marketing' - Page 37 Kalb. S, 1995, 'Nuts & Bolts of Marketing', 2nd Edition, Copyright K & A press. Stephen. H, 2003, 'Starting your own Business', Copyright Mc-Graw Hill

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Zara - Marketing Plan

Marketing Analysis for Zara

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Zara Business Plan

Zara international case study.

Zara International was a retail shop originated in La Coruna, Spain in 1975. It was clothing and accessories shop and imitated the latest fashion trends and sold them at a lower cost. It became Zara International after entering Portugal in 1988 and then the United States and France in the 1990s. The distributor for this brand is Inditex and is considered the most successful retail chain in the world. Zara has a business strategy that is very different from the retailers nowadays. If a customer orders a product Zara’s distribution centers can have the items in the store within 24 to 48 hours of receiving the order, depending upon the country. The business plan that Zara’s executives made was very innovative and played a great part in the

Zara Fast Fashion: Executive Summary

Quick response of Zara leads it to be successful in the fashion clothing industry. Zara adopts international strategy for its operation. With vertical integration, it benefits Zara in cost aspect, however, it involves some risks. Due to our anaylysis on Zara’s operations, some of the recommendations are made to facilitate its further improvements.

Operations Management : Zara 's Business Model

Zara uses vertical integration, in a vertical integration several stages of production and distribution of a commodity are influenced by a single company.

Supply Chain And Logistics Management Of Fashion Related Retailer Company

Zara was first came into existence and well established in the year 1975 and it is under the control of Spanish owner Amanico Ortega Gaona. Firstly the store which is local based manufacturing company was dealing with Zara products which include outlets especially for orders which are cancelled related to lingerie and women wear. These relationships slowly lead to develop into strong relationship between retailer and producer of the products (Ferdows et al, 2003). The Company Zara was in collaboration with parent company called Inditex, both these companies mainly focused on customer demand and supply products as per needs of customers and able to establish supply chain

Zara: Fast Fashion Essay examples

No business in this type of industry has total control over the market price and there are no barriers to entry and exit. Because of its monopolistically competitive playing grounds, Zara’s conduct is to increase its market power by producing demand for its heterogeneous products. Through differentiation and cost leadership, Zara attempts to increase market demand by offering new items weekly while keeping a low inventory, thus making its products unique and attractive to consumers. Because of its backward vertical integration model, Zara creates a strong synergy throughout its production process. Zara has sustained a competitive advantage globally by expanding into new markets and becoming more efficient. In a monopolistically competitive industry, Zara is expected to make profits in the short run but will break even in the long run because demand will decrease as average total costs increase. This means in the long run, a monopolistically competitive firm, such as Zara, will make zero economic profit (AmosWEB, 2001).

Zara Is A High End Street Store

Zara has been expanding into new territories since its initial expansion into Portugal in the 1989. Throughout its international development, Zara has kept its central distribution center in Arteixo, Spain, where the satellite distribution centers are sourced from the centralized center in Spain. All of Zara’s products go through this distribution center, and this strategy has its costs and benefits. The distribution center in Arteixo allows Zara to manage its inventory all in one place, and “the warehouse [is] a place to move merchandise rather than to store it”. This allows Zara to be efficient and respond quickly to customer demands, given that “none [of the merchandise] ever stayed at the distribution center more than three days”. Through this warehouse, Zara has ease of access of providing for Spain and its neighboring countries; however, when

Zara case study Essay

There vertical integration allows small batches of produce to be distributed and tested out allow them to save more money and cut inventory backlogs. Zara maintains a low cost by avoiding outsourcing (where possible) and producing all its merchandise and produce in home soil in Spain. Also Zara own many fabric dying, cutting and processing equipment that provided Zara added control and flexibility to adopt new trends on demand. Effectively Zara is able to design and manufacture products as well as deliver them in less than two weeks in contrast to competitors such as Benetton and H&M which require at least between five weeks and 4 months lead time to fill orders from its retail operations. One major unique characteristic was that Zara own its in house production which gives Zara the flexibility of quantity, variety, and the frequency of the designs they produce.

Zara Case Write-Up Essay

The business idea of Zara is to link customer demand to manufacturing, and to link manufacturing to distribution. And based on this general idea, Zara has several essential elements for its business model. First, speed and decision making, which means that in the external level, Zara need to respond very quickly to demands of target customers, and always keep in style. While for the inside, Zara treasure intelligence and judgment of common employees who enjoy a great deal of autonomy. Second, its marketing, merchandising and advertising strategy. Zara does not spend on virtually advertising, while it spends heavily on stores, and no selling online because of

The Capital Structure Of The Company

Zara is a brand widely known across the globe for its unique fashionable cloths .It is a part of inditex which is known as one of the world’s largest distribution group in the world and the owner of the company is Spanish businessman named Amancio Ortega .This company was formed in 1963 as a fashion retailer for women clothes but the company became a success after the addition of a new brand named Zara in 1975 .Today Zara is amongst one of the largest international company producing the fashionable clothes. After the success of the inditex as a successful brand (ZARA) maker, inditex was able to expanded itself with more successful brands across the world in different countries at the end of the 1980.from 1976 to 1983 Zara turned out to be a successful retailing brand and introduced itself with nine new outlets to the biggest cities of the Spain with its first headquarter in Goa. Year 1984 turned out to be the witnesses of first logistics headquarter of Zara covering a large area of 10,000 square metres. New York

Zara Supply Chain Analysis

Zara is one of the leading company that introduced the idea of fast fashion within the apparel industry. Within a short span of few decades their key selling points are the speed and responsiveness for which there unmatched design, manufacturing and distribution systems existed. Precision in terms of timely order generation from all its stores and then production to timely delivery back to all stores has become possible ensuring satisfied profitable customers. Thus we can safely say that its competitive edge is its supply chain.

Zara And Its Major Rivals

The world 's largest clothing retailer has been able to cope with the financial crisis better than most of its rivals, helped in part by the expansion of shops in fast, growing commercial centres and also by offering affordable fashion at a fraction of the cost of designer fashions. This case provides information on Zara and its major rivals in the industry to highlight the challenges and opportunities facing companies who are competing on a global basis. Zara is the biggest player in the clothing retail sector and leads the way in sales and consumer growth whilst being recognised

Zara Corporate Strategy

In comparison to competitors, Zara’s business strategy, in regards to strategic partnerships and cost of production, provide for a strategic competitive advantage. Zara, unlike its competitors such as Gap, Benetton, and H&amp;M, does not use Asian outsourcing. Eighty percent of Zara’s materials are manufactured in Europe, with 50% made in Zara controlled facilities in the Galicia region of Spain near headquarters. Most of Zara’s competitors have 100% outsourcing to cheap Asian countries. Though the cost of production in Spain is 17-20% more expensive than Asia, Zara does have a competitive advantage over its competitors in regards to operations. The local strategic partnerships that Zara maintains with manufacturers in Europe allow for a product throughput time of 3-4 weeks from conception to distribution. To make this happen, the company designs and cuts its fabric in-house and it acquires fabrics in only four colours to keep costs low. The proximity of these suppliers gives Zara great flexibility in adapting their product lines based on up to date market trends and consumer behaviour. It also decreases costs of holding inventory. Zara’s competitors, through outsourcing to Asian countries such as China, sacrifice the benefits of proximity for low labour and production costs.

Fast Fashion Industry: Growth of Zara and Inditex Essay

• 8 Works Cited

An interesting fact is their supply chain for the majority of their product is located close to their distribution centers. Their distribution centers are located in Spain and the designer ware is produced in Morocco, Portugal, and Turkey (“Case 3-4. Continued Growth for Zara and Inditex,” 2013). This ensures that new designs are produced and shipped quickly to their stores. This plan is reasonably different from their competition.

Essay on Zara Fast Fashion Case Study Solution

Inditex’s efficiency is the result of a more profitable investment strategy. By owning all the stores and manufacturing sites it is able to achieve control over all production processes and costs. The high number of stores may be also traced back to the increasing value of the property because Zara only buys stores in strategic areas (shopping malls, shopping arcades, pedestrian districts etc.) where competition boosts rents. Therefore total assets of Zara increase as well.

Until now, every garment that is product in Zara’s factories around the world has to travel back to Spain in order to go through quality controls, and is then send to its distributors. But the continuous flows of goods from all the productions sites to Spain and from Spain to the markets of sell, as well as the relative communication flows necessary to such a business model will inevitably slow down as Zara will have to deal with a constantly growing number of customers. Thus, the highly centralized information system of Zara seems not to be easily applicable in Asia, in addition to being time and money consuming.

Related Topics

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Zara Business Model

In recent years, the concept of fast fashion has emerged as an important trend. Fast fashion ensures that the clothes being manufactured follow the ongoing trends and follow the customer’s demands. Zara is a Spanish company that retails in clothing and accessories. Zara specializes in fast fashion, and products constituting clothing, accessories, shoes, swimwear, beauty, and perfumes.

A Brief History 

Amancio Ortega, a Spanish businessman opened the first Zara store in 1975 in Galicia, Spain. The first store presented low-priced lookalike products of high-end clothing fashion brands. After this, more stores were opened in Spain. During the 1980s, Ortega changed the design and distribution model to reduce lead times and react to new trends in a quicker way, which he called “instant fashions.” He incorporated the use of information technologies and using groups of designers instead of individuals.

Further Growth

Further growth of Zara can be explained below.

• In 1988, the company began its international expansion by entering into Portugal.
•  In 1989, it entered the markets of the United States.
• During the 1990s, Zara spread to Mexico (1992), Greece, Belgium and Sweden.
• In the early 2000s, Zara opened its first stores in Brazil, Japan and Singapore, Russia and Malaysia China, Morocco Estonia, Hungary and Romania (2004) the Philippines Costa Rica and Indonesia South Korea,
• In 2010, it opened its first store in India.
• On September 2010, Zara launched its online boutique. The site began in Spain, Portugal, the UK, Italy, Germany and France. In India, it began in 2017.
• Zara introduced the use of Radiofrequency identification technology(RFID) in its stores in 2014. The RFID chips work as security tags, which are extracted from clothing when it is purchased and can be reused. The chip allows the company to assess better about the inventory left. When an item is sold, the stockroom is immediately informed, so that a new item can be brought. An item that is not on the mantelpiece can quickly be found with the help of RFID tag.
• In 2015, Zara was placed on 30th number, on Interbrand’s list of best global brands.
• In 2019, Zara updated its logo.
• In 2019 the Global Fashion Business Journal declared that while the textile commerce of the world had gone down by 2.38%, in case of Zara it had risen by 2.17%.

Business Model of Zara

A business model is a description of how a company or an organisation makes money. It’s an explanation of how the company delivers value to the customers at an appropriate cost. A business model is an exploration of what costs and expenses involved in making a product. Business models are necessary for both new and already existing businesses. They help budding companies attract investment, recruit talent, and motivate management, and create a niche.

The Business model of Inditex or Zara is perfectly structured, and there isn’t a single business operation that is solely responsible for the success of this brand. The business model of Zara can be seen below:

Zara uses ideas like vertical integration, business strategy, efficient supply chain management, etc. that turn to be instrumental in the development of Zara. Because of its model, Zara has become one of the most successful clothing brands in the world.

Value Proposition

Zara is mainly based on a concept called fast fashion. It is similar to the idea of FMCG i.e., Fast moving Consumer Goods. Fast fashion is used to target an audience which majorly comprises young adults and middle-aged people. The cycle of fast fashion ends early as the fabric of the cloth withers. Various brands like Forever 21, H&M have incorporated this idea into their business model.

The primary objective of Zara is to contribute to the sustainable development of society. It also contributes to the conservation of the environment. It ironically does not mention clothing and instead, incorporates the three principles on which Zara is based. Due to the company’s success in setting-up businesses in countries like the USA and China, it has been quite successful in providing products at a price range which many find acceptable. Zara focuses on integrating fronts like designing, manufacturing, distributing, and supplying adequate raw material. The strategy of Zara can be seen from the chart below.

Vertical Integration

Vertical integration makes the Business model of Zara stand out. Via this, Zara manages the design, production, distribution, management, shipment, promotion, and sales all on its own. After being vertically integrated the brand can hold a lot of control over every aspect of it. This technique makes the design, manufacturing, and transportation efficient.

Tradeoffs in Logistics

Zara manufactures mostly in Europe, which becomes a costly affair. But it also has the benefit of logistical trade off, Zara makes most of its revenue through sales in Europe. According to data, Europe contributes approximately 66%, Asia provides about 20%, and America contributes about 14% of the total sales. Hence, by incurring maximum sales from Europe itself, Zara can circumnavigate the cost of vertical integration. Other companies cannot orchestrate this circumnavigation due to their substantial reliability over cheap labor from Asia.

Close contact between manufacturing and management units

To keep control over the design and manufacturing fronts, Zara keeps these two verticals close to the management centres. It uses only higher-quality clothing, high-quality equipment, and skilled employees

Quick product replacement cycle

Zara can continuously change designs according to the changing trends as all the products are manufactured in Europe. The product replacement strategy of Zara is its master strategy. This replacement cycle helps the brand to stay in touch with the ongoing trends, and in adapting to the demands of the customer. Moreover, this cycle encourages customers to purchase clothes periodically according to the trends.

This product cycle consists of the following step-

• Observing and recognizing patterns, newest styles, customer demand, weather, etc
• Design and manufacture
• Distribute and redistribute
• Sell to the customer and repeat

Less cost on advertisement

Zara does not resort to advertising as one of its strategies. This model works well for the brand as it helps in maintaining the authenticity, luxury, and uniqueness of the brand. The price range of Zara’s products is much lower than that of luxury brands, but the lack of advertisement helps to maintain its luxury impression.

Various factors contribute significantly to the success of the Business model of Zara. Some of these factors are listed below-

• Being vertically integrated, Zara enjoys control over all its verticals like design, manufacture, distribution, shipment, promotion, etc. It makes it easier for the company to manage and maintain fluid communication between the various stages of the company.
• In spite of there being a clash between the various strategies implemented, Zara tries to synchronize all these strategies to work out a useful Business model of Zara.
• Since it incurs most of its benefits from Europe, it can circumnavigate the cost of vertical integration. Other companies cannot implement this circumnavigation.
• It maintains the high quality of products by keeping its design and manufacturing fronts near management .
• It uses the location strategy to increase sales by a setting-up store near luxurious brands to encourage people to purchase clothing and accessories from Zara.
• Zara also utilizes proprietary software to analyze the various upcoming trends in fashion.
• The workforce utilized by Zara in association with high-quality machines can provide high-quality clothing and accessories.

Key Partners

These are the key partners of Zara:

• Manufactures from different companies
• Shop centres
• Corporate social responsibility organisation

Key Activities

These are the key activities of Zara:

• Manufacturing
• Customer service
• Trends and forecasting

Customer Relationship

Zara works according to the demand of the customer.

If I had to condense the foundations for Zara’s success, I would say it comes down to agility and flexibility,” Neil Saunders CEO of the firm.”

The customer relationship of Zara is:

• Brand awareness
• Free shipping. Free return.
• Customer impulse

Customer Segments

The customer segment of Zara is as follows:

• Young market
• price-conscious customers
• people sensitive to latest trends
• women-60%, men-25%, fast-growing children-15%

Key Resources

The key resources of Zara are:

• Experienced store managers
• RFID technology
• Supply chain excellence
• Effective production and logistics process
• Using high-tech software

Key Channels

Zara produces about 12,000 styles per year (compared to the retail average of 3,000). It means that fresh fashion trends reach the stores immediately. The key channels of Zara are:

Cost-Structure of Zara

The expenditure of Zara goes on:

Competitive strategy of Zara

It maintains a position of superiority over its contemporaries because it gives importance to the management of customer and potential client relationships. Zara also maintains a close relationship with its suppliers.

Marketing strategy of Zara

Zara has raised a loyal customer who visits about six times per year, as compared to other retailers in the contemporary market. Loyal customers for retailers are responsible for 80% of the sales. These brand loyalists are also less price-sensitive.

Revenue Model of Zara

The Spanish fast-fashion store Zara generated online net sales of around US$2 billion in 2018. For 2019, revenue of up to US$2.5 billion is projected. Zara revenue generation is based upon its selling of more than 450 million products per year, i.e, it works on economy of scale. Zara has 1700 stores in more than 86 countries around the world.

Total sales of the company are around the US $13 billion that makes it one of the top 3 largest fast fashion brands in the world. Key strategies that help the company generate good revenues are-

• In-time production and distribution- Makes are the production and distribution are at the right time.
• Trendsetter- becoming a trendsetter at the right time
• Effective distribution management- by reducing the delivery time
• No costs on the advertising and marketing

Zara’s model of Fast fashion has worked well for it. Its model of vertical integration and logistics trade-offs have played a significant role in the success and global recognition of Zara. Zara is able to allow smooth and fluid communication between different verticals. Zara’s other strategies like location specificity of stores, synchronization, and coordination among various policies also help Zara is getting more recognition.

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A Quick Glance At Zara Business Model

Zara is a brand part of the retail empire Inditex. Zara is the leading brand in what has been defined as “fast fashion.” With almost €20 billion in sales in 2021 (comprising Zara Home) and an integrated retail format with quick sales cycles. Zara follows an integrated retail format where customers are free to move from physical to digital experience.

The origin story and business model transformation

Born in a small town in Spain (Villamanín), Amancio started as a delivery boy in A Coruña, a city and the municipality of Galicia, Spain. 

As a delivery boy, he got the chance to learn the fundamentals of the garment retail business .

And over the years, he learned that by better organizing the manufacturing and delivery of garments, he could sell those materials at a more competitive price.  

He first applied this model to its first brand during the mid-70s. 

This retail model would work so well that Amancio would expand all over Spain and internationally. 

As its first brand , Zara expanded exponentially over the years; he consolidated his empire under the umbrella of a holding company, Inditex (it took decades and many failed attempts).

Today Inditex comprises eight core brands following similar retail formats, of which Zara is the largest and most prominent, and Amancio Ortega, its founder, is among the wealthiest men on earth.

With almost €20 billion in revenues in 2021, Zara had undergone a business model transformation process, which started with one thing in mind: giving more options to its customers. 

Indeed, while starting in 2012, Zara consolidated its stores under a flagship model , it also invested massively in integrating the experience of its customers to make them seamlessly jump from physical to digital without any friction.

The flagship retail model consolidates existing physical stores to have a single location in an exclusive city area.

Therefore, on average, in 2018, Zara expanded its retail space by 50%. 

Instead of locking customers’ experience to those physical stores (where Zara had invested billions), the company, in parallel, invested in technologies that enhanced the digital experience.

In short, if today you go to Zara and with your phone can directly scan products to see their availability and order them online in other Zara locations, this is thanks to a deliberate process of transformation of its retail format. 

Customers are not locked in a single experience but are allowed to browse the shop and choose whatever format fits them the most. 

This is the power of business model transformation, starting with a single focus: enhanced customer experience!

Zara is the core asset of the Inditex Fashion Empire

Inditex is among the largest fashion retailers in the world with eight retail formats:

• Zara & Zara Home,
• Pull&Bear,
• Massimo Dutti,
• Stradivarius,

The Zara retail format follows an integrated offline-online store network which generated almost €20 billion in 2021 and accounted for over 70% of the group’s revenues.

The key element that has made Zara’s store successful over the years is its ability to anticipate and react to customer demands.

Zara flagship store retail model

Over the last years, Zara has been implementing an integrated retail format leveraging physical flagship stores located in exclusive central locations worldwide.

As reported on Inditex annual reports, the new flagship store opening, starting in 2018, Zara flagship stores were, on average, 59% larger than the first wave of stores opened in 2012 (from 1,452 m2 in 2012 to 2,184 m2 in 2018).

Primarily driven by new store openings, larger flagship stores, and consolidation of smaller stores within a larger flagship store.

RFID technology and Integrated experiences

RFID  stands for “radio-frequency identification” and is widely used in retail to track customers’ journeys across several physical and digital touchpoints between the customer and the brand .

Starting in 2007, championed by Zara Home and Zara started a process of digitalization to build a stronger relationship with customers to prevent them from being tied to the physical stores.

This process ended with the transition to an integrated store model .

To complete this process, Zara had to undergo several initiatives to create a trackable experience from the supply chain to the retail experience.

Some of the services implemented to enrich the customer experience were:

• Click&Collect (order online and pick up in-store),
• Self-service checkouts,
• Automated online order pick-up points,
• Same-Day Delivery for online orders,
• And Next-Day Delivery.

Key takeaways

The key elements of Zara’s business model are:

• Product expansions and quick sales cycles combined with continuous product variety to anticipate or react to customers’ wants.
• Integrated shopping experience thanks to new technologies: from RFID to integrated stock management or additional services to enhance the retail model (Click&Collect service, Self-service checkouts, Automated online order pick-up points, Same-day / Next-day delivery).
• Upgrading of physical stores gradually transformed into the Flagship store, located in exclusive locations, which were on average 50% larger compared to 2012.
• The expansion of physical stores has also been coupled with the upgrading of the online sales platforms, thus incentivizing customers to a purchasing experience more congenial to their needs.

In short, Zara’s quick delivery, fast inventory , and seamless customer experience, enabling customers to jump to its physical store and shop online, helped it further consolidate throughout the last decade of digital transformation.

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