Business Model for Zara

Business Model:

Customer Value Proposition

Customer Value Proposition Offer high fashion clothes at competitive prices within short period of time (2 weeks) Fashionable clothes used to be the privilege for luxurious brand such as Gucci, Chanel and the like, and customers need to pay for a fortune to get the high fashion clothes. In light of this, Zara intends to make those fashionable clothes affordable to everyone and make it quickly. Fashion trend changes rapidly, and for the fashion follower, it is extremely important for them to catch up the fashion stream. Unlike traditional retailer, Zara only needs 2 weeks to have new styles of clothes available in the store. It broke the routines for time needed from the clothes design to the finished product available in the store. With strategic organizational design, customers would get it quickly. All these contribute Zara to maintain its customer value proposition.  

Key resources and processes for Zara:

As a fashion giant company, Zara composed several resources to make its business model success. It included human resources, tangible resources such as physical store asset, and intangible resources such as brand image. Because of the important resources Zara contains, it has a very effective way to process and allocate these resources. The resources Zara has and the way Zara process create synergy to fulfill customers’ expectation and distinguish itself from its competitors.

As most companies in fashion industry, one of important resources in Zara is human resource. Based on the research, we can divide Zara’s employees into design team, sourcing and manufacturing team business development team, and retailing team. Each team has its own specialty. Zara has three product lines for women, men and children. (Luis, 2006) Zara had phased its design into two collections which are fall/winter and spring/summer sessions, starting in July and January. (Luis, 2006) The designers attended these fashion shows in London, Milan, Paris and New York. And got ideas from these fashion shows and worked with store managers to create the initial the drafts. One of the distinguished characters for Zara’s design team is that instead of being run by maestros, the design team was very flat and focused on careful interpretation of catwalk trends suitable for the mass market. (Luis, 2006) In order to make more selections for customers, there are about 11,000 distinct items were produced compared 2,000-4,000 items for its competitors. (ZARA, n.d.)

After design team had the sketches and selected the materials, the price was determined. Even though Zara has about 11,000 items designed, not all of these items went to production. Business development personnel would step in at this time. They would go through every step to evaluate if the item is going to produce. The business development team would consider time permit, availability about materials, and so on. Sample cloths would be sent to the sourcing and manufacturing team. Sourcing team is responsible for fabric, other inputs, and finished products from external suppliers. (Luis, 2006). Business development team would decide whether to produce internal or outsource it. In order to keep flexibility, half of the purchased products are undyed. The next step is for manufacturing team to make the product available to distribute. For some basic garments especially not time sensitive products, Zara outsourced to other countries especially Asia since the labor is cheaper. For the fashionable items, Zara tried to internally produce at limited volume because it gave Zara the ability to adjust it based on the respond from market. The process of adapting to trends is the key. Store manager and manufacturing team would keep communication and all information goes through sales data. All these information go together to follow trends and differences across market. This manufacturing process and information sharing allowed Zara to keep up with trends and reduce its inventory.