Zara Company - Fashion Industry Market

Zara is a company that defines what the fashion industry has termed "fast fashion." The flagship specialty chain of Spain-based clothing conglomerate, Inditex, Zara has built an information and distribution system that allows it to put the latest runway fashions in its stores in a matter of weeks at a fraction of what the big-name designers charge.

In addition to fast, Zara is prolific. In a typical year, Zara launches about 11,000 new items. Compare that to the 2,000 to 4,000 items introduced by both H&M and Gap. Zara stores receive new merchandise two to three times each week, compared to four to six times per year for most clothing retailers. More and smaller batches of items translates into fashion exclusivity. This in turn results in fewer mark-downs and higher profits.

Zara controls a true vertical marketing system. A good portion of the channel participants are centralized geographically around its corporate headquarters in a remote corner of Northeast Spain, rather than spread out around the globe. This and its IT system are what allow it to achieve the speed and responsiveness that it does.

Discussion Questions

1. As completely as possible, sketch the supply chain for Zara from raw materials to consumer purchase.

As the case points out, finding the starting point of a product concept is hard to nail down with Zara. But the following is an attempt to do this:

Design: The starting point is a collaborative phase that includes teams of creative professionals who carry out the design process and store managers who spot trends and feed data to corporate.

Materials: Zara makes 40 percent of its own fabric. It is not clear from the case where the other 60 percent comes from, but given the information on the rest of the process, it is likely purchased more on a local basis than on a global basis.

Cutting: Zara produces more than half of its own clothing. It cuts all fabric in-house at its complex in Spain.

Sewing: Cut fabric and designs are sent to one of several hundred local co-operatives.

Ironing: Ironing is performed in-house by workers trained for a specific task (lapels, shoulders, etc.).

Final preparation: Clothing is wrapped in plastic and transported on conveyors to local Zara-owned warehouses. The automated warehouses sort, pack, label, and allocate clothing items to specific regions and stores.

Delivery: Stores within a 24-hour drive receive deliveries by truck. All other stores receive their goods via air parcel.

Sale: All stores are company owned.

2. Discuss