Case study : ZARA

Submitted to : Dr Deepti Goel

Submitted by : Sanya Kapoor
Unique Id : MFM/21/165
Course : MFM
Branch : Panchkula
Zara the pioneer and
global leader in fast-
fashion retailing were
founded by Ignacio
Amancio Ortega in
Galicia, Spain in year
1975. Zara is the flagship
business unit of the 8
total chains controlled by
the holding company
called Inditex (acronym
for Industria de
DisenoTextil, S.A.).
 THE GLOBAL EXPANSION

Zara took major place in the market in the late

1990s.
Focusing on Zara introduced the use of Radiofrequency
identification technology(RFID) in its stores
in 2014. The RFID chips work as security
• COMPANY-OWNED STORES. tags, which are extracted from clothing
when it is purchased and can be reused. The
chip allows the company to assess better
• FRANCHISES. about the inventory left. When an item is
sold, the stockroom is immediately
informed, so that a new item can be brought.
• JOINT VENTURES.
An item that is not on the mantelpiece can
quickly be found with the help of RFID tag
 •Zara targets a general industry-wide mass market
rather than a luxurious segment in the industry.
Inditex- Zara’s “fast fashion” puts emphasis on providing
products that contains the latest and most trendy
Zara’s Fast fashionable design concepts manufactured in
distinctive types of styles, materials, colors, and
Fashion silhouettes with reasonable physical quality rapidly
and at very attractive prices. Such products are
Market and categorized as fashion products.

Product •New styles can emerge all of a sudden (based for

Offering example, on what a celebrity put on during a

televised television program), its demand surge in
popularity and then quickly fade away before the
end of a particular season which apparently makes
“fashion misses” a common phenomenon.
•This makes demand for fashion apparel product to be
highly unpredictable and thus suggesting lower forecast
accuracy. Additionally, since fashion product category has
a rapid pace of changing styles, it results in short product
life cycle of 1 month or less.

• High demand unpredictability and short lifecycle makes

fashion category apparel products extremely time
sensitive but not so price sensitive (Fisher, 1997).

•Zara compares the fashion apparel business to selling

fish. When it’s fresh, it sells quickly and at a high price;
the older it becomes, the harder it is to sell and often
requires discounting (The Economist, 2012). capitalizes on
this problem by rapid responsiveness to the emerging
new styles.
This product Observing and Design and Distribute and Sell to the
cycle consists recognizing manufacture redistribute customer and
of the patterns, repeat
following newest styles,
step- customer dem
and, weather,
etc
•Through consistent introduction of new
fashionable items, Zara has developed brand image
for being cutting edge, trendy, and highly
fashionable retailer noted that Zara attires are not
produced to be “classics” (i.e. attires that would
always be in trend) but rather to have reasonably
shorter life cycle, both within retail store product
offerings and inside clientele’s wardrobes. Zara
clothes are not designed and manufactured to be
long lasting as they are made with less expensive
fabric and are characterized as “clothes to be worn
10 times”.
Pricing Strategy

•Zara avoids the industry standard

cost-plus margin pricing policy
and instead first identifies the
prices customers are willing to
pay and also the price of similar
products offered in competitors’
stores. Then, the company
establishes target prices for each
of its specific items, often 15%
below those of competitors .
 Consumer
Behaviour
•Since Zara can offer a huge variety of the latest designs
rapidly in affordable prices and supplies to stores in
limited quantities it can successfully counter “strategic
consumer behavior” where customers delay purchasing
of products until products are marked down and
encourage consumers to buy the products at full price.

•Merchandises are sent to stores in small shipments,

display shelves are sparsely stocked, individual items to
be sold are on display for no longer than a month and
assortment of products in stores are frequently rotated .
 Strong supply chain

•Produce in small lot: small lot is the unique characteristics of 

lean manufacturing which is not the case here. The logic behind this is
that small lot creates the sense of exclusivity. Customer need to make
a quick decision otherwise the next day the products they want will
be gone. So customer visits Zara’s stores to see new products more
often and this creates the huge amount of traffic and revenue.
•Centralize design and product development : the norm
in the apparel (and some other) industries is to develop new products
 by both in-house staffs and through merchandisers. In the latter case,
suppliers need to send samples (through merchandisers) to buyers
many many times. Elimination of this back-and-forth communication
reduces the time to market drastically.
•Utilize work cell organization: each new product
development team has its own designers, sales, procurement and
production planners the same way as in a cellular manufacturing. This
help Zara to streamline the internal communication a lot.
• Control scheduling strictly: at Zara, store managers can place order 2 times a week, shipments
are prepared and delivered within 24 hours (in Europe) and products will be on displayed at
stores the same day they arrived. Since everything runs in a stead pace, they can reduce a
waiting time at every step of the way.
• Keep production in-house: Zara tries to stay away from low-cost country sourcing and make an
investment in the in-house manufacturing as much as possible. The reason is that they believe
the in-house production help them to increase the overall flexibility.
• Automate production and warehouse facilities: since Zara believes in time based competition,
automation is the key to help them to increase the speed and the accuracy of the operations.
• Adhere to all rules: implementing any one of these rules alone is not quite effective. Then, they
have to stick to all rules so the whole supply chain is running like the well-oiled machine.
SUCCESS FACTORS OF INTERNATIONAL ZARA
FASHION RETAILER

Target foreign market selection international 29 countries

Enter marketing strategy Direct entry by opening mainly company managed stores.

Timing entry into the new market Start with a small number of stores to explore the possibilities of a
specific country

Recognition of the company and brands By opening new international stores with specific sales format

Analyse local markets and competitor Monitoring the actions of their local competitors

Marketing support in a global market ‘word-of-mouth’. Each format is carried out through chains of stores
managed directly by companies

The location selection In the centers of cities and next to luxurious stores.
Diversity of selling assortment Close attention paid to continuous data on
customer needs and wants, and these are
answered with clear market segmentation and
product differentiation.

Employee Local sales staff

Price policy Zara uses a market oriented target pricing system
in all markets.
Sales promotion Sales promotion, offer discounts
Organization and control business activity Corporate management is based at Inditex head
office in La Coruńa. Spain
Lead times 15 days
Production 15 days low volumes short lifecycle articles. Mostly
inhouse production and outsourcing in
neighbouring areas.

Volume 1000 designs a month

 Total sales of the In-time Trendsetter- Effective No costs on the
company are production and becoming a distribution advertising and
around the US $13 distribution- trendsetter at the management- by marketing
billion that makes Makes are the right time reducing the
it one of the top 3 production and delivery time
largest fast fashion distribution are at
brands in the the right time.
world. Key
strategies that
help the company
generate good
revenues are-
•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.
Thank you