Strategy at Zara

© Clegg, Schweitzer, Whittle & Pitelis 2017

Zara introduced the idea of fast fashion some two decades ago, developing a highly
centralised design, manufacturing and distribution system for a fashion empire built on
the idea that speed and responsiveness to the latest fashion trends from London,
Milan or Paris are as important as cost. As Berfield and Bagiorri (2013) explain, Zara
delivers new clothes to stores quickly and in small batches. Twice weekly, at precise
times, store managers order clothes and new garments arrive on schedule. Zara is able
to do this because it controls more of its manufacturing than most retailers: its supply
chain provides its competitive advantage, with many of the clothes being made in
Spain or nearby countries. Zara’s head office, known as The Cube, is situated in
Arteixo, a small town on north-western Spain’s Atlantic coast.

Just outside the Cube is the company’s 5 million-square-foot main

distribution centre. The company produces about 450 million items a
year for its 1,770 stores in 86 countries. Some 150 million garments
pass through the centre to be inspected and sorted, according to Zara
… Whether a shirt is made in Portugal or Morocco, in China or
Bangladesh, it still goes to Spain before being shipped to a store.
Beyond the distribution centre are the 11 Zara-owned factories.
Every shirt, sweater, and dress made in them is sent directly to the
distribution centre via an automated underground monorail. There
are 124 miles of track. Across the surrounding Galicia region are
subcontractors, some of which have worked for the company since
Amancio Ortega founded it in 1975 (Berfield and Bagiorri 2013).

Production of clothes for Zara follows a simple model. The more fashion-conscious
clothes – designs that ‘interpret’ prêt-à-porter collections – are mostly produced in
1
Spain or nearby countries. The ‘basics’ – T-shirts, sweatshirts and jeans – are produced
in larger batches with longer lead times in China and other cheap manufacturing East
Asian countries, such as Bangladesh. These goods are very price responsive to the cost
of raw materials: for instance, as cotton prices increased up to 2014, production
switched to cheaper fabrics. From 2014 on, because the higher prices had attracted
more primary production of cotton, the prices slumped to a five-year low and Zara
switched back to manufacturing in cotton.

1 What is Zara’s value proposition to its customers?

2 How does it differ from that of more traditional retailer such as Marks & Spencer?