ZARA: IT for Fast Fashion

Submitted To:
Prof. Divya Sharma

Submitted By:
Abhishek Sanghai– 19PGDM141
Nishtha Seth– 19PGDM168
Rishabh Kumar Agarwal– 19PGDM176
Sheetal Goel– 19PGDM187
Surbhi Jain– 19PGDM202
Vishant Chopra – 19PGDM207
Q1) What is Zara's business model? How is different from the business model of other large
clothing retailers?

Ans: Zara started in Spain in 1975. Textile giant Inditex owns the company and is its flagship
brand. The ownership of Zara's supply chain steps allows for faster product turnover; Zara can
design a product, and have it sold a month later in stores. It offers Men, Women, and Children
a great choice of new style clothes, along with moderate prices every time. The women's
clothing comprises 60 per cent of Zara's revenue.

By following trends and styles, Zara has developed the business model to sell the garments,
with virtually no advertising and trusting the decision of a group of employees called as
"commercials” on what clothes should be in stores. Zara's strategy requires a significant amount
of product variety to be produced throughout the year. Zara views the products as a starting
point rather than viewing them as the culmination of its efforts in design and procurement
(McAfee, 2004). Zara competes with a strategy in the market where a vertically integrated
supply chain is dedicated to client responsiveness.

By focused differentiation strategy, Zara has differentiated itself from its competitors, where it
focuses on young, fashion-conscious city dwellers. Their dedication to this aim and the
capabilities they also developed to achieve it have provided Zara with significant competitive
edge, particularly in the areas of product development, strategic partnerships, production costs,
advertising and marketing, and infrastructure for information technology.

ZARA Other Clothing Retailers

IT Budget 0.5% of total revenue 2-5% of total revenue
Marketing Only for announcing new Traditional marketing for
store launches and yearly publicizing the product
sales
Marketing Budget 0.3% of total revenue Substantially higher than
Zara
Decentralization Store managers took the Decision taking restricted to
decision higher managers
New Product Launch Within a month No intense pressure to
reduce the time (typically 6
months)
Supply Chain Vertically Integrated Outsourcing of production
Applications Developed in house Purchased from software
agency
Q2) What information does Zara need to operate its business model?

Ans: Zara needed to know the tastes and preferences of its consumers in terms of clothing and
preferences for fashion goods to forecast and be able to respond quickly to the demands of
target customers. Following the achievement of its objective of adapting quickly and accurately
to changing consumer demands, Zara identified the following necessary information:

 The store managers determined both the replenishment of existing items and the initial
request for newly available apparel after Zara had set deadlines.
 Fulfilment or shipping clothes manage information such as orders from all shops and
total inventory delivery at the Distribution Center (DC) typically one or two days after
each order has been placed.
 Finally, a year-round use of trend information to design new collections. As a result,
Zara ensured that this information and its requirements were distributed through its
specialized facilities, which quickly produced and delivered the required goods in time.
Thus, Zara responded to its target customers ' rapidly changing and unpredictable tastes.

Therefore, the original business idea was very simple, according to Jose Maria Castellano Rios.
Link customer demand to production and connect manufacturing to distribution. That's the idea
we're still living through.