ZARA: FAST FASHION

AGENDA

Industry Overview

Zara Overview
Zara Supply Chain Zara Challenges

Recommendations

INDUSTRY OVERVIEW

High Demand Uncertainty Push vs. Pull Method 30% of world production exported from developing countries Geographic Differences Per capita spending and preferences different in any given market

INDUSTRY OVERVIEW: COMPETITION

Gap, Inc. H&M Benetton Zara

Production
Production Lead Times Net Margins

Outsourced

Outsourced

In-House

40% In-House 60% Outsourced

High

High

High

Low

-.06%

9.6%

7.05%

10.47%

INDUSTRY OVERVIEW: POSITIONING

Price +
Benetton Gap

Fashion ZARA H&M

Fashion +

Price -

ZARA OVERVIEW

Owned by Inditex (Industria de Diseno Textil) Largest of 6 Inditex Chains

Sales ('000,000's)

Zara vs. 5 other Inditex Chains (2001 exchange rate: 1.15 Euro=$1)

$2,500 $2,153 $2,000 $1,500 $1,000 $782 $500 $0 Zara

500 stores in 30 countries

For women, men, and youth From infants to age 45 Zara starts with Z

Massimo Dutti + Bershka + Pull and Bear + Stradivarius + Oysho

The yoo-goo-goo-lizer you know, the guy that speaks at funerals!

ZARA OVERVIEW: ADVANTAGES

Vertical Integration Quick Response to Demand (Pull System) Small Batch Production High Product Turnover

Central Distribution Center / Strong IT System

ZARA OVERVIEW: SUPPLY CHAIN

ASIA (20%)

Manufacturing

System is designed for short production cycles, quick response (QR) to demand, and reduced number of markdowns Distribution
DISTRIBUTION CENTER

Design
INDITEX MANAGEMENT / DESIGNERS
Determine apparel designs and manufacturing locations

Low QR Low Cost

Sale
STORES
Decentralized store management supplements QR Managers determine products to sell and return

IN-HOUSE (40%)
High QR High Cost

Increased shipment frequency increases QR

Small batch production lowers cost of demand uncertainty

EUROPE / N. AFRICA (40%)

High QR High cost

Returns from stores either rerouted or disposed of in local stores near dist. center

IT SYSTEMS
Provides accurate demand information to determine manufacturing locations and production levels

ZARA CHALLENGES

Aggressive growth strategy needed

76% of equity value based on future growth expectations

Need to maintain competitive advantages in new geographic markets

Data collection, Quick response, High product turnover, Strong IT System

RECOMMENDATIONS

Short-Term Solution: Expand in Europe

Focus on Italy (63 Billion Euro Market) Implement Oil Stain expansion method

Long-Term Solution: Expand Outside of Europe

Establish operations in North America North American Distribution Center (Mexico) Initially focus on coastal cities Implement Oil Stain expansion method

Culturally Diverse Management Team

Q&A