Zara is the main brand of the Spanish retail company Inditex, headquartered in Arteixo, in the northwest part of Spain. Inditex’s sales in 2014 reached $19.7Bn, compared to H&M with $20Bn, or The Gap with $16.4Bn. Zara produces and distributes clothing products for women, men, and kids. Zara has over 2,000 stores in more than 88 markets around the world and it is expanding its online presence.
Zara has disrupted the industry through its “fast fashion” model in the last years. They has been a pioneer in fast fashion, a business model which minimizes the distance between when a fashion trend emerges and when it is made available to consumers at the store. The company has been successful because it has developed a revolutionary operating model which delivers on this value proposition. Zara’s key value proposition is delivering the latest trends at affordable prices.
Zara’s business strategy is built on three main pillars: product development and manufacturing-informed by customer insights and latest fashion trends; frequently and quickly updated collections with around 3,00,000 new different SKUs produced on average every year; affordable pricing with profits sustained by high turnover and margins.
Zara has an internal data center that helps it track what customers want and don’t want, which can be a huge advantage, because it helps outlast others in the current retail environment. Zara meets customer demands by focusing on fashion trends as soon as they appear. Store managers collect hard data, such as orders and sales trends, and soft data, such as customer reactions and “buzz” around a new style. They transfer this information to headquarters, where designers, market specialists, procurement, and production planners sit together and constantly develop new products to meet fashion trends. Working in cross-functional teams increases both the speed and the quality of the design process.
Fast-fashion retailer, Zara, is on a mission to take over the world. It has changed the whole fabric of the industry. Zara’s strategy involves stocking very little and updating collections often. Suzy Hansen reported at the New York Times that Zara re-stocks with new designs twice a week. This is a great strategy which encourages customers to come back to the store often. To improve their business, Zara is trying to build their stores as close as possible to the luxury boutiques like Stella McCartney and Chanel.
Employees of Zara’s store provide real-time feedback about store demands and consumer preferences to the designer team in Arteixo through hand-held computers. It also produces small batches of new designs to test the interest of consumers and decides which designs to mass-produce.
Zara has implemented a RFID system to track inventory along the value chain. This system allows store employees to locate inventory in other stores or on zara.com and thus, it improves customer experience. All in all, Zara has managed to leverage its supply chain to deliver its customer the promise of affordable fast fashion.