Zara has resisted the industry-wide trend towards transferring fast fashion production to low-cost countries. Perhaps its most unusual strategy was its policy of zero advertising; the company preferred to invest a percentage of revenues in opening new stores instead.
Introduction of business This business is all about reducing response time. In fashion, stock is like food. It goes bad quick. In highly perishable goods such as fashion products that are susceptible to seasons, gross margin is meaningless if the product does not sell as planned.
Business Model "fast fashion" system In Zara stores, customers can always find new productsbut they're in limited supply. There is a sense of tantalizing exclusivity, since only a few items are on display even though stores are spacious (the average size is around 1,000 square meters). A customer thinks, "This green shirt fits me, and there is one on the rack. If I don't buy it now, I'll lose my chance."
"fast fashion" system A constant exchange of information throughout every part of Zara's supply chain No layers of bureaucracy, its organization, operational procedures, performance measures, and even its office layouts are all designed to make information transfer easy.
Operational Organization single, centralized design and production center Three Spacious Halls women's clothing lines men's clothing lines children's clothing lines
three parallel, but operationally distinct, product families separate design, sales, and procurement and production-planning staffs are dedicated to each clothing line stores factori -es men's clothing lines women's clothing lines children's clothing lines Operation of the three channels
Key success factors Key success factors Key success factors Lead time=More fashionable clothes Scarcity=Lower quantities Variety=More choice, and more chances of hitting it right
Key success factors Lead time Inditex Chief Executive José Maria Castellano ''This business is all about reducing response time. In fashion, stock is like food. It goes bad quick.'' can move from identifying a trend to having clothes in its stores within 30 days. In comparison, most retailers of comparable size or even smaller, work on timelines that stretch into 4-12 months. accelerate the inventory turnover and reduce inventory cost Zara's machinery can react to the report immediately and produce a response in terms of a new style or a modification within 2-4 weeks.
Key success factors Scarcity As with all things fashionable, the less its availability, the more desirable the object becomes. not only reduce the cost, but also increase the revenue The styles were changed every week, and the style liked by the customer would very likely not be available later. The added benefit of lower quantities is that if a style does not work well, there is not much to be disposed when the season-end sale does happen Zara discounts only about 18 per cent of its products, roughly half the levels of competitors.
Key success factors Variety roughly 12,000 styles a year There are new styles already waiting to take up the space can offer more choices in more current fashions than many of its competitors It delivers merchandise to its stores twice a week, and since re-orders are rare the stores look fresh every 3-4 days. Create the customers preferences and loyalty
Key Enablers Communication and IT Proximity and Control Market Research
Key Enablers Market Research React Rather Than Predict Identify the innovators and follow the trend quickly Combine speed and scale perfectly
Key Enablers Proximity & Control Location various business functions in close proximity Early investment in raw materials, and direct or indirect ownership of processing and production capabilities Allows the various functions to coordinate and take joint-decisions very quickly Provide the capability to respond quickly to the market
Key Enablers Comm & IT Manage the constant interface of various functions Management of the huge variety of production information
The Conclusion of Key Factors Key Success Factors Lead Time Scarcity Variety Market Research Proximity and Control Communication and IT ENABLE Key Enablers
Close watch on trends & buying behavior Market research on university campuses, discos & other venues Feedback from the stores Sales report Qualitative comments Quick decisions A HQ regional managers collect and analyze the feedback. Commercial team sits with designers to use the information to create new lines and tweak existing ones-deciding with the commercial team on the fabric, cut, and price points of a new garment Inventory Control Fabrics from stock Distribution Line in Stores Fleet to stores Four critical information-related areas that give Zara its speed include: Dyeing/Finishing (if required) Production
Information Technology Keeps It Boiling Keeping Costs Down
Management Higher team productivity Reduced overheads Synchronies processes Higher Topline Innovative products Customer focus Lower lost-sales-sales Lower ex-factory costs Reduced development costs Reduced quality rejections Lower Product Cost Lower Financial Lower inventory and WIP Performance-P based decision support Value-Chain Profitability =