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How Zara’s strategy made her the queen of fast fashion

Table of contents, here’s what you’ll learn from zara's strategy study:.

  • How to come up with disruptive ideas for your industry.
  • How finding the right people is more important than developing the best strategy.
  • How best to address the sustainability question.

Zara is a privately held multinational clothing retail chain with a focus on fast fashion. It was founded by Amancio Ortega in 1975 and it’s the largest company of the Inditex group.

Amancio Ortega was Inditex’s Chairman until 2011 and Zara’s CEO until 2005. The current CEO of Zara is Óscar García Maceiras and Marta Ortega Pérez, daughter of the founder, is the current Chairwoman of Inditex.

Zara's market share and key statistics:

  • Brand value of $25,4 billion in 2022
  • Net sales of $19,6 billion in 2021
  • 1,939 stores worldwide in 2021
  • Over 4 billion annual visits to its website
  • Inditex employee count of 165,042 in 2021

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Humble beginnings: How did Zara start?

Most people date Zara’s birth to 1975, when Amancio Ortega and Rosalia Mera, his then-wife, opened the first shop. But, it’s impossible to study the company’s first steps, its initial competitive advantage, and strategic approach by starting at that point in time.

When the first Zara shop opened, Amancio Ortega already had 22 years of industry experience, ten years as a clever and hard-working employee, and 12 years as a business owner. Rosalia Mera also had 20 years of industry experience.

As an employee , Ortega worked in the clothing industry, first as a gofer and then as a delivery boy. He quickly demonstrated great talent for recognizing fabrics, understanding and serving customers, and making sound business suggestions. Soon, he decided to use his insights to develop his own business instead of his boss’s.

As a business owner , he started  GOA Confecciones  in 1963, along with his siblings, his wife, and a close friend. They started with a humble workshop making women’s quilted dressing gowns, following a trend at the time Amancio had noticed. Within ten years, that workshop had grown to support a workforce of 500 people.

And then, the couple opened the first Zara shop.

Zara’s competitive positioning strategy in its first year

The opening of the first Zara shop in 1975 wasn’t just a new store to sell clothes. It was the final big move of a carefully planned vertical integration strategy.

To understand how the  strategy was formulated , we need to understand Amancio’s first steps. His first business, GOA Confecciones, was a manufacturing business. He was supplying small stores and businesses with his products, and he wasn’t in contact with the end customer.

That brought two challenges:

  • A lack of insight into market trends and no direct consumer feedback about preferences.
  • Very low-profit margins compared to the 70-80% profit margin of retailers.

Amancio developed several ideas to improve distribution and get a direct relationship with the final purchaser. And he was always updating his factories with the latest technological advancements to offer the highest quality of products at the lowest possible price. But he was missing one essential part to reap the benefits of his distribution practices:  a store .

So, in 1972 he opened one under the brand name  Sprint . An experiment that quickly proved unsuccessful and, seven years later, was shut down. Although it’s unknown the extent to which Amancio put his ideas to the test, Sprint was a private masterclass in the retail world that gave Amancio insights that would later turn Zara into a global success.

Despite Sprint’s failure, Amancio didn’t abandon the idea of opening his own store mainly because he believed that his advanced production model was vulnerable and the rise of a competitor who could replicate and improve his system was imminent.

Adding a store to his vertical integration strategy would have a twofold effect:

  • The store would operate as a direct feedback source. The company would be able to test design ideas before going into mass production while simultaneously getting an accurate pulse of the needs, tastes, and fancies of the customers. The store would simultaneously reduce risk and increase opportunity spotting.
  • The company would have reduced operating costs as a retailer. Since the group would control all aspects of the process (from manufacturing to distribution to selling), it would solve key retail challenges with stocking. The savings would then be passed on to the customer. The store would have an operational competitive advantage and become a potential cash cow for the company.

The idea was to claim his spot in prime commercial areas (a core and persistent strategic move for Zara) and target the rising middle class. The market conditions were tough, though, with many family-owned businesses losing their customer base, giant players owning a huge market share, and Benetton’s franchising shops stealing great shop locations and competent potential managers.

So the first Zara store had these defining characteristics that made it the successful final piece of Amancio’s strategy:

  • It was located near the factory = delivery of products was optimized
  • It was in the city’s commercial heart = more expensive, but with access to affluence
  • It was located in the city where Ortegas had the most customer experience = knowing thy customer
  • It was visibly attractive = expensive, but a great marketing trick

Amancio’s team lacked experience and expertise in one key factor:  display window designing . The display window was a massive differentiator and had to be bold and attractive. So, Amancio hired Jordi Bernadó, a designer with innovative ideas whose work transformed display windows and the sales process.

The Zara shop was a success, laying the foundations for the international expansion of the Inditex group.

Key Takeaway #1: Challenge your industry’s conventional wisdom to create a disruptive strategy

Disrupting an industry isn’t an easy task nor a frequent occurrence.

To do it successfully, you need to:

  • Understand the prominent business mode of your industry and the forces that contributed to its development.
  • Challenge the assumptions behind it and design a radically different business model.
  • Develop ample space for experimentation and failures.

The odds of instantly conquering the industry might be low (otherwise, someone would have already done it), but you’ll end up with out-of-the-box ideas and a higher sensitivity to potential disruptors in your competitive arena.

Recommended reading:   How To Write A Strategic Plan + Example

How Zara’s supply chain strategy is at the core of its business strategy

According to many analysts, the Zara supply chain strategy is its most important innovative component.

Amancio Ortega and other senior members of the group disagree. Nevertheless, the Inditex  logistics strategy  is extraordinarily efficient and plays a crucial role in sustaining its competitive advantage. Most companies in the clothing retail industry take an average of 4-8 weeks between inception and putting the product on the shelf. The group achieves the same in an average of two weeks. That’s nothing short of extraordinary.

Let’s see how Zara developed its logistics and business strategy.

Innovative logistics: how Zara’s supply chain evolved

The logistics methods developed by companies are highly dependent on external factors.

Take, for example, infrastructure. In the early days of Zara, when it was expanding through Spain, the company considered using trains as a transportation system. However, the schedule couldn’t keep up with Zara’s needs, which had the goal of distributing products twice a week to its shops. So transportation by road was the only way.

However, when efficiency is a high priority, it shapes logistics processes more than anything else.

And for Zara, efficient logistics was – and still is – of the highest priority.

Initially, leadership tried outsourcing logistics, but the experiment failed and the company assigned a member of the house with a thorough knowledge of the company's operating philosophy to take charge of the project. The tactic of entrusting important big projects to employees imbued with the company’s philosophy became a defining characteristic.

So, one of Zara’s early strategic decisions was that each shop would make orders twice a week. Since the first store was opened, the company has had the shortest stock rotation times in the industry. That’s what drove the development of its logistics methods. The whole strategy behind Zara relied on quick production and distribution. And the proximity of manufacturing and distribution was essential for the model to work. So Zara had these two centers in the same place.

Even when the brand was expanding around the world, its logistics center remained in Arteixo, Spain, despite being a less-than-ideal location for international distribution. At some point, the growth of the brand, and Inditex as a whole, outpaced Arteixo’s capacity, and the decentralization question came up.

The debate was tough among leadership, but the arguments were strong. Decentralization was necessary because of:

  • Safety and security.  If there was a fire or any other crippling disaster there (especially on a distribution day), then the company would face serious troubles on multiple fronts.
  • Arteixo’s limitations.  The company’s center in Arteixo was reaching its capacity limits.

So the company decided to decentralize the manufacturing and distribution of its brands.

Initially, the group made the decision to place differentiated logistics centers where the management of its chain of stores was based, i.e. Bershka would have a different logistics center than Pull&Bear, although they were both part of the Inditex Group. That idea emerged after Massimo Dutti and Stradivarius became part of Inditex. Those brands already had that geographical structure, and since the group integrated them successfully into its strategy and logistics model, it made sense to follow the same pattern with its other brands.

Besides, the proximity of the distribution centers to the headquarters of each brand allowed them to consolidate them based on the growth strategy and purpose of each brand (more on this later).

But just a few years after that, the group decided to build another production center for Zara that forced specialization between the two Zara centers. The specialization was based on location, i.e. each center would manufacture products that would stock the shelves of stores in specific locations.

Zara’s  supply chain strategy  is so successful because it’s constantly evolving as the group adapts to external circumstances and its internal needs. And just like its iconic fashion, the company always stays ahead of the logistics curve.

File:HK CH 中環 Central 國際金融中心商場 IFC mall shop ZARA Clothing store April 2022 Px3 04.jpg

Zara’s business strategy transcends its logistics innovations

Zara’s business strategy relies on four key pillars:

  • Flexibility of supply
  • Instant absorption of market demand
  • Response speed
  • Technological innovation

Zara is the only brand in the Inditex group that is concerned with manufacturing. It’s the first brand in the clothing sector with a complete vertical organization. And the production model requires the adoption or development of the latest technological innovations.

This requirement is counterintuitive in the clothing sector.

Most people believe that making big investments in a market as mature as clothing is a bad idea. But the Zara production model is very capital and labor intensive. The technological edge derived from that investment gave the company, in the early days, the capability to manufacture over 50% of its own products while maintaining an extremely high stock rotation frequency.

Zara might be one of the best logistics companies in the world, but that particular excellence is a supporting factor, or at least a highly contributing factor, to its successful business strategy.

File:Barcelona (Passeig de Gràcia - Gran Via de les Corts Catalanes). Zara Building, formerly “Banco Rural y Mediterráneo”. 1953. Agustí Borrell Sensat, architect (25905793406).jpg

Zara’s business strategy is so much more than its supply chain strategy.

The company created the “fast fashion” term and industry. When other companies were manufacturing their collections once per season, Zara was adapting its collection to suit what people asked for on a weekly basis. The idea was to offer fashionable items at a fair price and faster than everybody else.

Part of its cost-cutting strategic priority was its marketing strategy. Zara didn’t – and still doesn’t – advertise like the rest of the clothing industry. Its marketing strategy starts with choosing the location of the stores and ends with advertising that the sales period has started. In the early years of the brand’s expansion, Amancio would visit potential store locations himself and choose the site to build the Zara shop.

The price was never an issue. If the location was in a commercial center, Zara would build its store there no matter how high the cost was because the company expected to recoup it quickly with increased sales.

Zara’s marketing is its own stores.

The strategy of Zara and her Inditex sisters

Despite Zara’s success (or because of it), Amancio Ortega created – or bought – multiple other brands that he included in the Inditex group, each one with a specific purpose.

  • Zara  was targeting middle-class women. ‍
  • Pull&Bear  was targeting young people under twenty-five years old with casual clothing. ‍
  • Bershka  was targeting rebel teens, especially girls, with hip-hop-style clothing. ‍
  • Massimo Dutti  was targeting both sexes with more affluence. ‍
  • Stradivarius  was competing with Bershka, giving Inditex two major brands in the teenage market. ‍
  • Oysho  was concentrating on women's lingerie. ‍
  • Zara Home manufactures home textiles and decor.

Pull&Bear  was initially targeting young males between the ages of 14 and 28. Later it extended to young females of the same age and focused on selling leisure and sports clothing. It has the slowest stock turnaround time in the group.

Bershka’s  target group was girls between 13 and 23 years of age with highly individualized tastes. Prices were low, but the quality average. Almost a fiasco in the beginning, it underwent a successful strategic turnaround becoming today one of the biggest growth opportunities for the group. And out of all the Inditex chains, Bershka has the most creative designs.

Massimo Dutti  was the first retail brand Amancio bought and didn’t create himself. Its strategy is very different from Zara, producing high-quality products and selling them at a high price. It’s an extension of the group’s offer to the higher end of the price spectrum in the fashion industry. It’s also the only Inditex chain brand that advertises regularly.

Stradivarius  was the second acquired brand, with the purchase being a defensive move. The chain shares the same target group with Bershka, making it, to this day, a direct competitor.

Oysho  started as an underwear and lingerie company. Its product lines evolved to include comfortable night and homewear along with swimwear and a very young children’s line. The brand’s strategy was aggressive from its conception, opening 286 stores in its first six years of existence.

Zara Home  is the youngest brand in the Group and the only one outside the clothing sector, though still in the fashion industry. It was launched with the least confidence and with immense prior research. An experiment to extend the Zara brand beyond clothing, it was based on the conservative view that Zara could extend its product categories only to textile items for the home. But it turned out that customers were more accepting of Zara Home selling a wide variety of domestic items. So the brand made a successful strategic pivot.

File:Zara Home Nagoya - China.png

Key Takeaway #2: The right people are more important than the best strategy

It might not be obvious in the story, but a key reason for Zara's and Inditex’s success has been the people behind them.

For example, a vast number of people in various positions from inside the group claim that Inditex cannot be understood without Amancio Ortega. Additionally, major projects like the development of Zara’s logistics systems and the group's international expansion had such a success precisely because of the people in charge of them.

Zara’s radically different model was a breakthrough because:

  • Its leadership had a clear vision and a real strategy to execute it.
  • People with a deep understanding of the company’s philosophy led Its largest projects.

Sustainability: Zara’s strategy to make fast fashion sustainable

Building a sustainable business in the fast fashion industry is a tough nut to crack.

To achieve it, Inditex has made sustainability a cornerstone of its business model. Its strategy revolves around the values of  collaboration ,  transparency,  and  innovation . The group’s ambition is to make a positive impact with a vision of prosperity for the planet and its people by transforming its value chain and industry.

Inditex’s sustainability commitments and strategy to achieve them

Inditex has developed a sustainability roadmap that extends up to 2040 with ambitious goals. Specifically, it has committed to

  • 100% consumption of renewable energy in all of its facilities by 2022 (report pending).
  • 100% of its cotton to originate from more sustainable sources by 2023.
  • 100% of its man-made cellulosic fibers to originate from more sustainable sources by 2023.
  • Zero waste from its facilities by 2023.
  • 100% elimination of single-use plastic for customers by 2023.
  • 100% collection of packaging material for recycling or reuse by 2023.
  • 100% of its polyester to originate from more sustainable sources by 2025.
  • 100% of its linen to originate from sustainable sources by 2025.
  • 25% reduction of water consumption in its supply chain by 2025.
  • Net zero emissions by 2040.

The group’s commitments extend beyond environmental issues to how its  manufacturing and supplying partners conduct their business . To bring its strategy to fruition, it has set up a new governance and management structure.

The Board of Directors is responsible for approving Inditex’s sustainability strategy. The  Sustainability Committee  oversees and controls all the proposals around the social, environmental, health, and safety impact of the group’s products, while the  Ethics Committee  makes sure operations are compliant with the rules of conduct. There is also a  Social Advisory Board  that includes external independent experts that advises Inditex on sustainability issues.

Finally, Javier Losada, previously the group’s Chief Sustainability Officer and now promoted to Chief Operations Officer, will be leading the sustainability transformation of the group. Javier Losada first joined Inditex back in 1993 and ascended its rank to reach the C-suite.

Inditex is dedicated to its commitment to reducing its environmental impact and seems to be headed in the right direction. The only question is whether it’s fast enough.

Key Takeaway #3: Integrating sustainability with business strategy is a present-day necessity

Governments and international bodies around the world are implementing more stringent environmental regulations, forcing companies to commit to ambitious goals and developing a realistic strategy to achieve them.

The companies that are impacted the least are those that always had sustainability as a  high priority .

From the companies that require significant changes in their operations to comply with the new regulations, only those who  integrate  sustainability into their business strategy and model will succeed.

Why is Zara so successful?

File:Zara Storefront (48155639387).jpg

Zara is the biggest Spanish clothing retailer in the world based on sales value. Its success is due to its fast fashion strategy that is based on a strong supply chain and quick market feedback loops.

Zara's customer-centric approach places a strong emphasis on understanding and responding to customer needs and preferences. This is reflected in the company's product design, marketing, and customer service strategies.

Zara made fashionable clothes accessible to the middle class.

Zara’s vision guides its future

Zara's vision, as part of the Inditex Group, is to create a sustainable fashion industry by promoting responsible consumption and production, respecting the environment and people, and contributing to the communities in which it operates.

The company aims to offer the latest fashion trends to its customers at accessible prices while continuously innovating and improving its operations and processes.

Growth by numbers (Inditex)

The Strategy Story

How Zara became the undisputed king of fast fashion?

Zara is one of the biggest international apparel brands. Zara invites customers from around 93 markets to its organization of 2000+ stores in upscale markets on the planet’s biggest urban communities. With these stores, Zara generates 18 billion Euros annually.

The brand has been fruitful in keeping up its central goal to give quick and reasonable designs in the world of fashion. Zara’s way to deal with configuration is firmly connected to its clients. This story is about how Zara became the undisputed king of Fast fashion.

Fashion is the imitation of a given example and satisfies the demand for social adaptation. . . . The more an article becomes subject to rapid changes of fashion, the greater the demand for cheap products of its kind. — Georg Simmel, “Fashion” (1904)

History of Zara: The Long Story Cut Short

Amancio Ortega launched the first Zara store in 1975 in Central Street in downtown A Coruna, Galicia, Spain. The main Store included low-value look-a-like designs of famous and better-quality dress styles. The store ended up being a triumph and Ortega Began opening more Zara stores throughout Spain.

During the 1980s, Ortega began changing the plan, assembling and dissemination cycle to diminish lead times and respond to new patterns in a snappier manner in what they called “Moment Fashions”.

In 1980 the company started its international expansion through Porto, Portugal in the 1990s, with Mexico in 1992. Since then Ortega has continued to grow and create brands such as Pull & Bear, Bershka , and Oysho . It has acquired groups like Massimo Dutti and Stradivarius . Even though these brands have been contributors to their parent group Inditex’s success, Zara is still the principal growth driver.

Zara’s Customer-driven Value Chain

Product line-up:.

Unlike other Inditex chains, Zara has focused on manufacturing fashion-sensitive products internally. The latest designs were continuously in production as per changing customer’s preferences. Many competitors were producing just a few thousand SKUs whereas Zara was producing several hundred of thousands of SKUs in a year. These SKUs varied as per color, size, and fabric.

Zara’s designs are not dependent on design maestros. Instead, its designers carefully observe the catwalk trends and try to implement them for the mass market. The design team continuously creates variations in a particular season. Thereafter expanding on successful designs.

Fast Supply Chain:

Zara’s flexible supply chain allows it to dispatch new ranges to shops two times per week from its central distribution center that is an approximately 400,000-square-meter facility located in Arteixo, Spain. This kind of business system called vertical integration eliminated the need for local warehouses. The strategy here was to reduce the “bullwhip effect”. Let’s see what the bullwhip effect is:

The bullwhip effect is a distribution channel phenomenon in which demand forecasts yield supply chain inefficiencies. It refers to increasing swings in inventory in response to shifts in consumer demand as one moves further up the supply chain. Wikipedia

Bullwhip effect

It was a matter of a few weeks and a new design was on the shelf for the customers. Isn’t cool? These designs of clothes and accessories were quickly moved to fancy stores in prime locations but at a cheap price. This strategy has attracted a lot of fashion yet money conscious customers.

We want our customers to understand that if they like something, they must buy it now because it won’t be in the shops the following week. It is all about creating a climate of scarcity and opportunity. Luis Blanc, one of the former Inditex’s international directors

Zara’s Retailing Strategy

Zara instead of focusing on improving its manufacturing efficiency focused on improving its retail strategy. This retailing strategy was about following fashion trends quickly even it means there is an unmet demand. As was previously discussed, this also helped Zara in creating a FOMO for its products. The two components of its retailing strategy were dependent on its upstream operations: Merchandizing and Stores.

Read: The Torchbearers of Sustainable Fashion

Merchandising.

Merchandising is the promotion of goods and/or services that are available for retail sale. It includes the determination of quantities, setting prices for goods and services, creating display designs, developing marketing strategies, and establishing discounts or coupons. Investopedia
  • Zara placed emphasis on the freshness of its designs. It wanted to create a sense of exclusivity. It never focused on creating bulk items of one design. Zara had confidence in its fast supply chain of twice a week shipment to the store with the latest designs. Thre quarter of its merchandise gets replaced in just a month. How about that?
The success of your business is based in principle on the idea of offering the latest fashions at low prices, in turn creating a formula for cutting costs: an integrated business in which it is manufactured, distributed, and sold. Amancio Ortega

Fun Fact : An average customer visits a Zara store 17 times in a year where the number is 3-4 times for its competitors.

  • Zara understood the importance of store locations very well. Zara prices are not expensive but its store location and design made its products look expensive. The brand wanted its customers to have a premium feel at a reasonable price.
We invest in prime locations. We place great care in the presentation of our storefronts. That is how we project our image. We want our clients to enter a beautiful store, where they are offered the latest fashions. Luis Blanc, one of the former Inditex’s international directors

Store Operations

Zara has stores in most upscale markets and shopping centers in the world. You name it and they have a store there. Champs Elysées in Paris, Regent Street in London, and Fifth Avenue in New York to name a few. As per its latest annual report the value of these properties is valued at almost 8 billion Euros. But the way these stores are managed is a strategy to learn for all retailers.

  • We all love grand stores with a lot of variety. Zara has emphasized on creating a grand image of its stores. Imagine a big store at a posh location. How much impressed you would be. The average size of Zara stores has continuously increased over the years. In 2001 the average store size was 910 sq.m whereas in 2018 the size has more than doubled.
Zara’s average store size has increased by 50%: from 1,452m2 in 2012 to 2,184m2 in 2018. That growth has been driven by new store openings – larger flagship stores – as well as the fact that many of the new openings have entailed the absorption of one or more older, smaller units in the same catchment area. Inditex Annual Report

  • Zara has tried to standardize the in-store experience with its store window displays and interior presentations. As the season progresses, Zara consistently evolves its interior themes, color schemes, and product placements. All these ideas come from the central team in Spain and regional teams implement with necessary region-based adaptations. So much so that the uniforms of the staff were selected twice in a season by a store manager from the latest collection.

red and black motor scooter parked beside brown brick wall

Anti-Marketing Approach of Zara

Zara has able to maintain profitability ~13% whereas its major competitor like H&M is at 6% . This has been possible not only because of its efficient supply chain we discussed above but also because of its no advertising or limited advertising policy.

This is what makes Zara really one of a kind. The organization just spends about 0.3% of deals on promoting and does not have a lot of advertising to discuss. The usual trend in the industry is to spend 3.5% on advertising. Zara never shows its clothes at expensive fashion shows also. It first shows its designs at stores directly. But why does not Zara believe in advertising? There are primarily two reasons:

  • First, as we discussed it saves Zara a lot of money. So much so that it has now one of the highest profitability.
  • Second, it brings exclusivity and prevents overexposure of a design. Customers feel like if they purchase a shirt at Zara, five others won’t have that equivalent shirt at work or school.

Read: Viral Marketing over the Long-Haul ft. Burger King

Zara is a perfect case study to learn the perfect operations strategy, perfect marketing strategy, perfect pricing strategy, and whatnot. It’s all strategies are so perfect. It is also a perfect example to understand how a traditional brand is evolving itself with time to stay relevant.

As per its annual report , In 2018, Zara launched its global online store, marking a milestone in its commitment to having all of its brands available online worldwide by 2020. Zara continued to earn global accolades for its collections and initiatives, its integrated shopping experience, and its commitment to sustainability, with over 90 million garments put on sale under the Join Life label.

Zara is just not a brand of fast fashion. Its much more than that now. And that’s why it’s actually the true king of fast fashion.

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The Secret of Zara’s Success: A Culture of Customer Co-creation

The Secret of Zara’s Success A Culture of Customer Co-creation - Martin Roll

Zara is one of the world’s most successful fashion retail brands – if not the most successful one. With its dramatic introduction of the concept of “fast fashion” retail since it was founded in 1975 in Spain, Zara aspires to create responsible passion for fashion amongst a broad spectrum of consumers, spread across different cultures and age groups. There are many factors that have contributed to the success of Zara but one of its key strengths, which has played a strong role in it becoming a global fashion powerhouse as it is today, is its ability to put customers first. Zara is obsessed with its customers, and they have defined the company and the brand’s culture right from the very beginning.

The Zara brand offers men and women’s clothing, children’s clothing (Zara Kids), shoes and accessories. The sub-brand Zara TRF offers trendier and sometimes edgier items to younger women and teenagers.

The Zara brand story

Zara was founded by Amancio Ortega and Rosalía Mera in 1975 as a family business in downtown Galicia in the northern part of Spain. Its first store featured low-priced lookalike products of popular, higher-end clothing and fashion. Amancio Ortega named Zara as such because his preferred name Zorba was already taken. In the next 8 years, Zara’s approach towards fashion and its business model gradually generated traction with the Spanish consumer. This led to the opening of 9 new stores in the biggest cities of Spain.

In 1985, Inditex was incorporated as a holding company, which laid the foundations for a distribution system capable of reacting to shifting market trends extremely quickly. Ortega created a new design, manufacturing, and distribution process that could reduce lead times and react to new trends in a quicker way, which he called “instant fashion”. This was driven by heavy investments in information technology and utilising groups instead of individual designers for the critical “design” element.

In the next decade, Zara began aggressively expanding into global markets, which included Portugal, New York (USA), Paris (France), Mexico, Greece, Belgium, Sweden, Malta, Cyprus, Norway and Israel. Today, there is hardly a developed country without a Zara store. Zara now has 2,264 stores strategically located in leading cities across 96 countries. It is no surprise that Zara, which started off as a small store in Spain, is now the world’s largest fast fashion retailer and is the flagship brand of Inditex. Its founder, Amancio Ortega, is the sixth richest man in the world according to Forbes magazine.

Today, Inditex is the world’s largest fashion group with more than 174,000 employees operating more than 7,400 stores in 202 markets worldwide including 49 online markets. The revenues of Inditex was USD 23.4 billion in 2019. The other fashion brands in the Inditex portfolio are:

Zara Home: Home goods and decoration objects founded in 2003. Operating in 183 markets, 70 of them with stores.

Pull & Bear: Casual laid-back clothing and accessories for the young founded in 1991. Operates in 185 markets, 75 of them with stores.

Massimo Dutti: High end clothing and accessories for cosmopolitan men and women acquired in 1995. Operates 186 markets, 74 of them with stores.

Bershka: Blends urban styles and modern fashion for young women and men founded in 1998. Operates in 185 markets, 74 of them with stores.

Stradivarius: Casual and feminine clothes for young women acquired in 1999. Operates 180 markets, 67 of them with stores.

Oysho: Lingerie, casual outerwear, lounge wear and original accessories founded in 2001. Operating in 176 markets, 58 of them with stores.

Uterqüe: High-quality fashion accessories at attractive prices founded in 2008. Operating in 158 markets, 17 of them with stores.

Apart from fashion brands, Amancio Ortega has also set up a global real estate investment fund, Pontegadea Inversiones, which manages corporate offices across 9 countries including United States (Seattle), Britain (London), France (Paris), Canada, Italy, South Korea. These corporate properties house large companies including Facebook, Amazon and Apple, and prestigious luxury and retail brands.

The Zara brand strategy

In 2019, Zara was ranked 29th on global brand consultancy Interbrand’s list of best global brands. Its core values are found in four simple terms: beauty, clarity, functionality and sustainability.

The secret to Zara’s success has largely being driven by its ability to keep up with rapidly changing fashion trends and showcase it in its collections with very little delay. From the very beginning, Zara found a significant gap in the market that few clothing brands had effectively addressed. This was to keep pace with latest fashion trends, but offer clothing collections that are a combination of high quality and yet, are affordable. The brand keeps a close watch on how fashion is changing and evolving every day across the world. Based on latest styles and trends, it creates new designs and puts them into stores in a week or two. In stark comparison, most other fashion brands would take close to six months to get new designs and collections into the market.

It is through this strategic ability of introducing new collections based on latest trends in a rapid manner that enabled Zara to beat other competitors. It quickly became the people’s favourite brand, especially with those who want to keep up with fashion trends. Founder Amancio Ortega is famously known for his views on clothes as a perishable commodity. According to him, people should love to use and wear clothes for a short while and then they should throw them away, just like yogurt, bread or fish, rather than store them in cupboards.

The media often quotes that the brand produces “freshly baked clothes”, which survive fashion trends for less than a month or two. Zara concentrates on three areas to effectively “bake” its fresh fashions:

Shorter lead times (and more fashionable clothes): Shorter lead times allow Zara to ensure that its stores stock clothes that customers want at that time (e.g. specific spring/ summer or autumn/ winter collections, recent trend that is catching up, sudden popularity of an item worn by a celebrity/ socialite/ actor/ actress, latest collection of a top designer etc.). While many retailers try to forecast what customers might buy months in the future, Zara moves in step with its customers and offers them what they want to buy at a given point in time.

Lower quantities (through scarce supply): By reducing the quantity manufactured for a particular style, Zara not only reduces its exposure to any single product but also creates artificial scarcity. Similar to the principle that applies to all fashion items (and more specifically luxury), the lesser the availability, the more desirable an object becomes. Another benefit of producing lower quantities is that if a style does not generate traction and suffers from poor sales, there is not a high volume to be disposed of. Zara only has two time-bound sales a year rather than constant markdowns, and it discounts a very small proportion of its products, approximately half compared to its competitors, which is a very impressive feat.

More styles: Rather than producing more quantities per style, Zara produces more styles, roughly 12,000 a year. Even if a style sells out very quickly, there are new styles waiting to take up the space. This means more choices and higher chance of getting it right with the consumer.

Zara only allows its designs to remain on the shop floor for three to four weeks. This practice pushes consumers to keep visiting the brand’s stores because if they were just a week late, all the clothes of a particular style or trend would be gone and replaced with a new trend. At the same time, this constant refreshing of the lines and styles carried by its stores also entices customers to visit its shops more frequently.

In the following sections, the key components of Zara’s winning formula in the fashion retailing industry are illustrated.

Customer co-creation: Zara’s principal designer is the customer

Zara’s unrelenting focus on the customer is at the core of the brand’s success and the heights it has achieved today. There was a fascinating story around how Zara co-creates its products leveraging its customers’ input. In 2015, a lady named Miko walked into a Zara store in Tokyo and asked the store assistant for a pink scarf, but the store did not have any pink scarves. The same happened almost simultaneously for Michelle in Toronto, Elaine in San Francisco, and Giselle in Frankfurt, who all walked into Zara stores and asked for pink scarves. They all left the stores without any scarves – an experience many other Zara fans encountered globally in different Zara stores over the next few days.

7 days later, more than 2,000 Zara stores globally started selling pink scarves. 500,000 pink scarves were dispatched – to be exact. They sold out in 3 days. How did such lightning fast stocking of pink scarves happen?

Customer insights are the holy grail of modern business, and the more companies know about their customers, the better they can innovate and compete. But it can prove challenging to have the right insights, at the right time, and have access to them consistently over time. One of the secrets to Zara’s success includes using Radio Frequency Identification Technology (RFID) in its stores. The brand uses cutting-edge systems to track the location of garments instantly and makes those most in demand rapidly available to customers. Additionally, it helps to reduce inventory costs, provides greater flexibility to launch new designs, and allows fulfillment of online orders with stock from stores nearest to the delivery location thereby reducing delivery costs.

Another secret of Zara’s success is that the brand trains and empowers its store employees and managers to be particularly sensitive to customer needs and wants, and how customers enact them on the shop floors. Zara empowers its sales associates and store managers to be at the forefront of customer research – they intently listen and note down customer comments, ideas for cuts, fabrics or a new line, and keenly observe new styles that its customers are wearing that have the potential to be converted into unique Zara styles. In comparison, traditional daily sales reports can hardly provide such a dynamic updated picture of the market. The Zara empire is built on two basic rules: “to give customers what they want”, and “get it to them faster than anyone else”.

Due to Zara’s competitive customer research capabilities, its product offerings across its stores globally reflect unique customer needs and wants in terms of physical, climate or cultural differences. It offers smaller sizes in Japan, special women’s clothes in Arab countries, and clothes of different seasonality in South America. These differences in product offerings across countries are greatly facilitated by the frequent interactions between Zara’s local store managers and its creative team.

In the fashion world, a trend starts small, but develops fast. Zara employees are trained to listen, watch and be attentive to even the smallest seismographic signals from their customers, which can be an initial sign that a new trend is taking shape. Zara knows that the quicker it can respond, the more likely it is to succeed in supplying the right fashion merchandise at the right time across its global retail chain. Zara has set up sophisticated technology driven systems, which enable information to travel quickly from the stores back to its headquarters in Arteixo in Spain, enabling decision makers to act fast and respond effectively to a developing trend. Its design teams regularly visit university campuses; nightclubs and other venues to observe what young fashion leaders are wearing. In its headquarters, the design team uses flat-screen monitors linked by webcam to offices in Shanghai, Tokyo and New York (the leading cities for fashion trends), which act as trend spotters. The ‘Trends’ team never goes to fashion shows but tracks bloggers and listens closely to the brand’s customers.

The fact that Zara’s designers and customers are inextricably linked is a crucial part of the brand strategy. Specialist teams receive constant feedback on the decisions its customers are making at every Zara store, which continuously inspires the Zara creative team.

Zara’s super-efficient supply chain

Zara’s highly responsive, vertically integrated supply chain enables the export of garments 24 hours, 365 days of the year, resulting in the shipping of new products to stores twice a week. After products are designed, they take around 10 to 15 days to reach the stores. All clothing items are processed through the distribution center in Spain, where new items are inspected, sorted, tagged, and loaded into trucks. In most cases, clothing items are delivered to stores within 48 hours. This vertical integration allows Zara to retain control over areas like dyeing and processing and have fabric-processing capacity available on-demand to provide the correct fabrics for new styles according to customer preferences. It also eliminates the need for warehouses and helps reduce the impact of demand fluctuations. Zara produces over 450 million items and launches around 12,000 new designs annually, so the efficiency of the supply chain is critical to ensure that this constant refreshment of store level collections goes off smoothly and efficiently.

Here are some of the characteristics of Zara’s supply chain that highlight the reasons behind its success:

Frequency of customer insights collection: Trend information flows daily into a database at head office, which is used by designers to create new lines and modify existing ones.

Standardization of product information: Zara warehouses have standardised product information with common definitions, allowing quick and accurate preparation of designs with clear manufacturing instructions.

Product information and inventory management: By effectively managing thousands of fabric, trim and design specifications and their physical inventory, Zara is capable of designing a garment with available stock of required raw materials.

Procurement strategy: Around two-thirds of fabrics are undyed and are purchased before designs are finalized so as to obtain savings through demand aggregation.

Manufacturing approach: Zara uses a “make and buy” approach – it produces the more fashionable and riskier items (which need testing and piloting) in Spain, and outsources production of more standard designs with more predictable demand to Morocco, Turkey and Asia to reduce production cost. The more fashionable and riskier items (which are around half of its merchandise) are manufactured at a dozen company-owned factories in Spain (Galicia), northern Portugal and Turkey. Clothes with longer shelf life (i.e. the one with more predictable demand patterns), such as basic T-shirts, are outsourced to low cost suppliers, mainly in Asia. Even when manufacturing in Europe, Zara manages to keep its costs down by outsourcing the assembly workshops and leveraging the informal economy of mothers and grandmothers.

Distribution management: Zara’s state-of-the-art distribution facility functions with minimal human intervention. Optical reading devices sort out and distribute more than 60,000 items of clothing an hour.

In addition to these supply chain efficiencies, Zara can also modify existing items in as little as two weeks. Shortening the product life cycle means greater success in meeting consumer preferences. If a design does not sell well within a week, it is withdrawn from shops, further orders are canceled and a new design is pursued. Zara closely monitors changes in customer preferences towards fashion. It has a range of basic designs that are carried over from year to year, but some in-vogue, high fashion, inspired by latest trends items can stay on the shelves for less than four weeks, which encourages Zara fans to make repeat visits. An average high-street store in Spain expects customers to visit thrice a year, but for Zara, the expectation is that customers should visit around 17 times in a year.

This expectation for such a high frequency of repeat visits is evidence of Zara’s confidence that it is keeping on top of changing consumer needs and preferences and is helping them shape their ideas, opinions and taste for fashion. In reality, Zara is also helping in giving birth to new trends through its stores or even helping in extending the longevity of some seasonal styles by offering affordable lines.

Sustainability at the core of Zara’s operations

Sustainability has been a hot topic in business for the last decade and is now quickly becoming a must-have hygiene factor for companies that want to resonate with and win the loyalty of its global customers. For Inditex, this means having a commitment to people and the environment.

Commitment to people: Inditex ensures that its employees have a shared vision of value built on sustainability through professional development, equality and diversity and volunteering. It also ensures that its suppliers have fundamental rights at work and by initiating continuous improvement programs for them. Inditex also spends over USD 50 million annually on social and community programmes and initiatives. For example, its “for&from” programme which started in 2002 has enabled the social integration of people with physical and mental disabilities, by providing over 200 stable employment opportunities across 15 stores.

Commitment to environment: Being in a business where it taps on natural resources to create its products, Inditex makes efforts to ensure that the environmental impact of its business complies with UNSDGs (United Nations Sustainable Developmental Goals). Inditex has pledged to only sell sustainable clothes by 2025 and that all cotton, linen and polyester sold will be organic, sustainable or recycled. The company also runs Join Life, a scheme which helps consumers identify clothes made with more environmentally friendly materials like organic cotton and recycled polyester.

Additionally, Inditex takes wide-ranging measures to protect biodiversity, reduce its consumption of water, energy and other resources, avoid waste, and combat climate change. For example, it has outlined a Global Water Management Strategy, specifically committing to zero discharge of hazardous chemicals. It has also been expanding its waste reduction programme through which customers can drop off their used clothing, footwear and accessories at collection points in 2,299 stores in 46 markets today.

Zara’s culture: The word “impossible” does not exist

Zara has a very entrepreneurial culture, and employs lots of young talent who quickly climb through the ranks of the company. Zara promotes approximately two-thirds of its store managers from within and generally experiences low turnover. The brand has no fear in giving responsibility to young people and the culture encourages risk-taking (as long as learning happens) and fast implementation (the mantra of fashion).

Top management gives its store managers full liberty and control over their store’s operations and performance with clearly set cost, profit and growth targets with a fixed and variable compensation scheme. The variable component amounts to up to half of the total compensation – making store level employees heavily incentive-driven.

In addition, once an employee is selected for promotion, his or her store develops a comprehensive training program for that individual with the human resources department, which is followed up by periodic supplemental training – reflecting Zara’s commitment to talent development. The organizational structure is also flat with only a few managerial layers.

Customers are the most important source of information for Zara, but like any other fashion brand, Zara also employs trend analysts, customer insights experts, and retains some of the best talents in the fashion world. The creative team of Zara comprises of over 200 professionals. They all embody and enact the corporate philosophy that the word “impossible” does not exist in Zara.

For example, while many companies struggle with long lead times in discussions and decision making, Zara gets around this challenge by getting various business functions to sit together at the headquarters and also by encouraging a culture (through structures and processes) where people continuously talk to each other. The sales and marketing teams who receive trend feedback talk regularly with designers and merchandisers. It is important that there is constant two-way communication so that sales and marketing teams can talk about new lines to customers and designers / merchandisers have a strong visibility of customers’ needs and preferences enacted at a store level. The production scheduling is also closely coordinated so that there is no time wasted on approvals. The design team structure is very flat and focuses on careful interpretation of catwalk trends that are suitable for the mass market – the Zara customer. The design and product development teams, who are based in Spain, work closely to produce 1,000 new styles every month.

Besides being customer centric, another important reason why Zara’s employee strategy is so successful is the fact that it empowers its staff to make decisions based on data. Zara has no chief designer. All its designers are given unparalleled independence in approving products and campaigns, based on daily data feeds indicating which styles are popular.

Due to the unwavering focus on the customer, the entire business model is designed in such a way that the pattern of needs for the finished goods dictate the terms of the production process to follow, instead of having the raw materials determine the nature of the production process – something that is very rare in multinational companies of similar scale.

In sum, the entire brand culture is extremely customer-centric, which has been and continues to be a significant contributor to Zara’s success.

The Zara brand communication strategy

Zara has used almost a zero advertising and endorsement policy throughout its entire existence, preferring to invest a percentage of its revenues in opening new stores instead. It spends a meager 0.3 per cent of sales on advertising compared to an average of 3.5 per cent by competitors. The brand’s founder Amancio has never spoken to the media nor has in any way advertised Zara. This is indeed the mark of a truly successful brand where customers appreciate and desire the brand, which is over and above product level benefits but strongly driven by the brand experience.

Instead of advertising, Zara uses its store location and store displays as key elements of its marketing strategy. By choosing to be in the most prominent locations in a city, Zara ensures very high customer traffic for its stores. Its window displays, which showcase the most outstanding pieces in the collection, are also a powerful communication tool designed by a specialized team. A lot of time and effort is spent designing the window displays to be artistic and attention grabbing. According to Zara’s philosophy of fast fashion, the window displays are constantly changed. This strategy goes down to how the employees dress as well – all Zara employees are required to wear Zara clothes while working in the stores, but these “uniforms” vary across different Zara stores to reflect socio-economic differences in the regions they were located. This effectively communicates Zara’s focus on the mass market, yet another detail that reflects its close attention on the customer.

To tap into the emerging e-commerce trend, Zara launched its online boutique in September 2010. The website was initially available in Spain, the UK, Portugal, Italy, Germany and France, and was extended to Austria, Ireland, the Netherlands, Belgium and Luxembourg. Over the next 3 years, the online store became available in the United States, Russia, Canada, Mexico, Romania, and South Korea. In 2017, Zara’s online store launched in Singapore, Malaysia, Thailand, Vietnam and India. More recently in March 2018, the brand launched online in Australia and New Zealand. Today, its online store is available in 66 countries. As of 2019, online sales grew to constitute 14% of Zara’s total global sales.

As a fast fashion retailer, Zara is definitely aware of the power of e-commerce and has built up a successful online presence and high-quality customer experience.

Zara’s future brand and business challenges

Charting a new digital strategy in the COVID-19 crisis: With its primarily offline shopping experience, Zara has been hard hit by global store closures amid the COVID-19 crisis in 2020, with sales falling 44% year-on-year in Q1 2020 and the company reporting a net loss of USD 482 million. Inditex has announced that it will be closing between 1,000 to 1,200 stores worldwide, focusing on smaller ones in Asia and Europe. While online sales have been encouraging – Zara’s online sales for Q1 2020 grew 50% – it is not enough to mitigate the damage.

Amancio Ortega plans to spend USD 1.1 billion scaling up its digital strategy and online capabilities by 2022 and a further USD 2 billion in stores to improve integration between online and offline for faster deliveries and real-time tracking of products. Its goal is for online sales to constitute at least 25% of total sales. To achieve this goal, Zara will need to think of new ways to engage its customers digitally, not just through its online store, but through online communities and social media.

Mobile commerce: Zara woke up late to the potential of mobile commerce and needs to catch up fast with competitors. Different forms of market analysis strongly point towards a scenario wherein spends on mobile commerce will overtake desktop based ecommerce by 2021. On an average, most brands currently get about 15-20% of their website traffic via mobile devices and this is growing rapidly. With the deluge of investments planned in the mobile commerce space and Zara’s competitors already having an advantage on the mobile front, Zara needs to quickly make mobile shopping not only an effortless experience but also a delightful one.

Price is not an advantage anymore: Offering the latest fashion lines at affordable prices continues to be a strategic advantage for Zara, but cannot continue to be the only one. Across the world, and closer to home in Europe, competitors are cutting prices and refining their business models to cut the competitive advantage that Zara has. Swedish fast fashion retailer H&M, which is placed #30 just behind Zara on Interbrand’s list, launched an online store in Spain in 2014 to take own Zara in its home turf. Again in its home market, it now faces increasing competition from brands like Mango, which cut prices and started focusing on fashion segments in which Zara enjoyed popularity. In addition to H&M and Mango, other competitors like Gap and Topshop are all fighting for a share of the fast fashion retail market pie. Also with the rise of e- and m-commerce, the number of indirect competitors has mushroomed. We now have online fashion aggregators that bring in multiple brands under one single online platform and cut through borders and price segments. Some examples of such aggregators who are doing well include Lyst, Farfetch, Spring and Yoox Net-a-Porter.

For Zara to effectively compete and maintain its strategic advantage, the focus needs to shift away from price but towards quality. Even today the Zara brand enjoys high levels of appeal, which is evident by the serpentine queues outside its stores when it launches in new markets. There is a need for Zara to start investing in building a strong brand positioning and aggressively communicate it. Additionally, Zara needs to adopt, imbibe and leverage social media and digital platforms in its advertising and communication strategies deeper going forward.

Need for marketing strategy to evolve: As discussed above, Zara does not engage in advertising and instead uses its store locations as a marketing strategy. However, brand communication is crucial in attracting new customers to the brand to support its growth. Without advertisements, Zara relies heavily on word of mouth or social media. This causes the perception of potential customers towards Zara to be heavily shaped by family and friends, which may not be accurate. In addition, Zara’s social media platforms such as Facebook and YouTube exists merely as a feed for updates rather than a platform that consumers can interact with. Its videos on YouTube are also seeing very low viewership in comparison with its follower count, which is not ideal as videos are a powerful medium for brands in the fashion industry. This is a gap that Zara needs to plug immediately as the reach and impact of social media marketing gets stronger. As Zara’s target customer segments start using more social and digital platforms for communication and for sharing their lives, it is important for Zara to have a strong presence on such platforms.

Family business planning and succession: With various technological and business disruptions in the past decade, leadership in the 21st century will be influenced by constant change, geopolitical volatility, and economic and political uncertainty. For Zara’s first 36 years in business, the brand has been controlled by its founder Amancio Ortega, who is currently 85 years old. In 2011, Ortega passed the chairman title on to Pablo Isla, Zara’s Deputy CEO since 2005.

Succession is currently taking place at Inditex and generational transfer will empower the next generation in one of the wealthiest business families in the world. Pablo Isla, chairman of Inditex since 2011, steps down in April 2022, and 37-year-old Marta Ortega will take over as chair in the company that her father Amancio Ortega started with his ex-wife Rosalia in 1975 in Galicia, Spain. Marta Ortega is the youngest of Amancio Ortega’s three children.

Marta Ortega will become a non-executive chair, and will head the Inditex group, the portfolio of companies including supervision of strategic operations. She has been with Inditex for over 15 years, starting out working in a Zara store at King’s Road in London, and as an assistant at the portfolio brand Bershka. In recent years, Marta Ortega has been involved in strategy, brand building and fashion proposals for the Inditex portfolio of brands.

Marta Ortega will not be involved in daily management of the financial performance to shield her and the family from too much public exposure. Amancio Ortega has always been known for appearing less in public and avoiding any media exposure. His photo did not appear in the Inditex annual report until 2000. Marta Ortega seems to be more open to media interviews and public appearance, and granted her first interview with Wall Street Journal in August 2021.

Óscar García Maceiras will be appointed CEO of Inditex in April 2022 and will run the daily business. He joined Inditex in March 2021 and is currently general secretary of Inditex and secretary of the board.

The sharing of executive powers between the chair and the CEO to enhance corporate governance has historically been less common in the corporate world in Spain but is often seen in Europe and elsewhere. Inditex will therefore return to dual leadership in April 2022 with Marta Ortega as chair and García Maceiras as CEO, the very same structure that ran for six years with Amancio Ortega as chairman and Pablo Isla as CEO until 2011.

Despite working at Inditex for over 15 years, Marta Ortega Pérez does not hold an office. Her father, Amancio Ortega, never had an office either and always preferred to work in an open space in the fashion design department to be close to teams around him.

To effectively manage the above changes, Zara’s next generation leadership needs to step up to the succession planning challenge by being resilient in staying true to the brand promise to consistently produce “freshly baked clothes” for its fashion-forward consumers, and by balancing both short-term (profitability) and long-term goals (growing the business and reaching more consumers).

More importantly, despite Zara’s global reach and consequent product standardization, it needs to constantly find new ways to serve local fashion needs and preferences of its consumers across the globe. This will be a challenge for the brand’s leadership in the next decade.

Conclusion: Take Zara’s cue and listen to your customers

The Zara brand was born with a keen eye on its customer – its ability to understand, predict and deliver on its customers’ preferences for trendy fashion at affordable prices. In addition to its effective supply chain, the brand’s ability to have its customers co-create designs is unique and provides it with a competitive advantage. Most fashion trends often start unexpectedly, originate from uncommon places and grow out of nowhere. With reference to the pink scarf trend mentioned above, it could have been that Hollywood actress Scarlett Johansson had worn a pink scarf to a charity gala the evening before in Los Angeles, or golf star Michelle Wie had showcased a pink scarf at a celebrity tournament in Asia. The fact that Zara was able to quickly jump on to this trend and provide hundreds of customers with the pink scarves they desperately wanted to buy.

In a world swamped with Big Data, and yet more collected at an even more rapid pace than before, brands still need to be careful and observant. Big Data does not provide answers to all business challenges, and it may be too hyped to be considered as the Holy Grail.

One of the secrets behind Zara’s global success is the culture and the respect for the fact that no one is a better, authentic trendsetter than the customer himself or herself – and this philosophy needs to be continually reflected in all its business strategies going forward.

So, why not consult your customers for a start? Zara always does.

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Home » Management Case Studies » Case Study of Zara: A Better Fashion Business Model

Case Study of Zara: A Better Fashion Business Model

Zara is one of the most well known brands in the world and is also one of the largest international fashion companies. They are the third largest brand in the garment industry and are a unit of Inditex . It their flagship range of chain stores and are headquartered in Spain. Zara opened its first outlet in Spain in 1975. The headquarters of the company is based in Galicia. There are more than 2600 stores across 73 countries in the world. The Zara clothing line accounts for a huge bulk of its parent group’s revenues. There are other clothing brands owned by Inditex such as Kiddy ´s Class (children’s fashion), Pull and Bear (youth casual clothes), Massimo Dutti (quality and conventional fashion), Bershka (avant-garde clothing), Stradivarius (trendy garments for young woman), Oysho (undergarment chain) and Zara Home (household textiles). Inditex owns all Zara outlets except for places where they are not allowed ownership of stores (that’s where Franchises step in).

Zara's Business Model

Zara is renowned for coming up with products on a short timescale instead of taking forever. They are known for taking around 2 weeks to develop products and have been known to come up with around 10,000 new designs every year (which is an industry record). They have bucked the trend by making productions in Europe instead of shifting their entire production to Third World or Developing countries. However some of their clothes are manufactured in parts of Asia due to the fact that they have a longer shelf life. They make most of their own products inside Spain or other European Countries as they own a large number of factories in both Spain and Portugal. They also don’t have to depend on anyone else as they can get everything done by themselves.

Zara is unique in the way that it does not spend money on marketing and instead concentrates on opening new stores instead. Their brave experiments have led them to be labeled as one of the most innovative retailers in the world.

Zara started out with low priced products which were pale imitations of high end fashion products. This move led to Zara being a smashing success and allowed them to expand by opening more stores in Spain. The company management also managed to reduce the time it took to create new designs and came up with the term “instant fashions” which allowed them to capitalize on new trends really fast. Zara is known to use teams of designers instead of individuals.

Zara has to face a lot of competition from H&M, Gap and Benetton internationally. Fortunately Zara is considered to be more fashionable than the rest of the brands despite the fact that its price is less than Benetton and Gap. H&M is still cheaper than Zara but is equally fashionable as Zara. Gap and Benetton are less fashionable and more pricy.

Zara’s ‘Fast Fashion’ Business Model

Zara’s business model is basically based on the principle that it can sell “medium quality fashion clothing at affordable prices”. Basically vertical integration and the ability to come up with a quick-response is a key factor to Zara’s successful business model otherwise they would be no where without it. The process for Zara has been designed in such a way that it has the various functions within the business system such as designing, sourcing and manufacturing, distribution and retailing. They do all of these themselves and that is one reason why their growth is at a good rate. However what goes up must come down and Zara is not immune to the problems in the world. The way they operate can also prove to be their undoing due to the model they are currently utilizing. The fact that they have their own distribution center and manufacturing unit is a very weak point. This can be discussed further in this document.

The management at Zara have come up four fundamental success factors: short cycle time for creation of product, small quantity per product (and not too much of the same stock), extensive variety of product every season (so that users can choose easily) as well as a huge investment in information and communication technology to allow them to stay on track .

Zara knows what its customers want by tracking their preferences on a year round basis. They have their own team of designers who have been recruited fresh out of fashion school. It is not a tough job to tell them what they want based on the input they receive. They make around a limited quantity of clothes based on the 11000 various items designed by its in-house staff. Zara does not make any losses as they only order a limited quantity of each item which they believe is stylish and will be more restricted season wise. For example if they have miniskirts in design they will only be available for a short time due to the short summer period in Europe. Other clothes which can work the year around and for which the trend does not change are outsourced to Asia as the cost won’t be so high. The outsourcing operation is very handy mainly because these clothes have a longer shelf life. It does not take a long time for the clothes to be prepared as it merely takes around 4 weeks total for the whole process: from design to the finished product in the stores.

The fact that Zara knows what sort of trends are there in the market and are quick enough to change their strategy to match the trends in the fashion industry gives them a huge advantage. They are able to modify their timetable easily to adjust for a change in the trends in the market. Normally it takes around 8 to 12 months for any normal retailer to forecast trends and come up with a style and send it for production. They are unable to match what Zara does and they end up losing big time. Even if a style fails to sell much, Zara can easily sell the clothes on a discount. The fact that they quantity of clothes manufactured was so low that they lose much. Their low volume strategy has helped them have a very low number of discount sales every year as compared to a high rate for the rest of the industry.

However this leads to higher costs which is a disadvantage but then they don’t have to worry about having higher inventories. This method allows for a low inventory and high profit margins. They don’t save any money here with costs but then they get the maximum out of their clothing line. A problem they face is the fact that since Zara controls everything it is not easy for them to expand or relocate as they have to stay put in one place or the whole operation will suffer and the goods will cost more to distribute.

Zara’s business model is wonderful in the sense that it has a very fashion forward line as they know which trends to cash in on. They seem to have the midas touch of turning everything into gold. Their policy is to have a mostly young and fashion conscious staff so that they will also be able to double as trend setters. If for instance a certain item in a store sells well then the management decides to sell the same item in other locations as well. The key is that most of the items are in short supply and people presume that there is a shortage of items which ends up making consumers want to buy more.

A key factor in Zara’s success is the fact that it has sourced its products from the right places. They have based their procurement offices in a couple of fashionable cities in the world. This allows them to witness the trends first hand and then to quickly come up with a solution of their own. They don’t buy all the raw products on their own as they use one of their parent group’s procurement units to do all it’s purchasing. One clever move on their part is that they buy most of their fabric in grey so that there is greater flexibility. It doesn’t take long for the fabric to be prepared.

The main distribution artery is in Spain where they have their biggest distribution center. They also have some smaller distribution centers in countries such as Argentina, Brazil and Mexico. The problem with the distribution center is that it is purely based in Spain and does not have the capacity for a heavy load. It is a huge distribution center and occupies around 500,000 square feet in total. They only have the capability of processing around 60,000 folded garments in an hour. They need to find a new distribution center or increase their operations so that they can save more time. However the biggest advantage for them is the fact that they have vertical integration which allows them to manufacture and distribute their own stuff without having to be at the mercy of any supplier. It is not tough to move any of their products as they have their own railway network which allows them to move goods easily to its distribution center. Once the goods are ready they are shipped out immediately though the shipping schedule is only twice a week. European stores get their goods early (around 24-36 hours) while other destinations get them within 2 days. This system has allowed them to achieve a very high level of accuracy in its shipments. The other good thing is that the outlets don’t take long to display the new outfits once they reach their destination and this allows them to show new stock to their customers. The clothes are also coded according to their color so that the staff knows where to place them. This makes it easier for the customers to go around color matching the items they want to buy.

Problems with Zara’s Business Model

Zara is facing a large number of issues which can cause them a number of problems in the future. Despite the fact that Zara has a consistent business system which gives them a competitive advantage it is always in the danger of tanking badly. Zara’s biggest advantage is the fact that its economies of scale are really good and that they have been able to ramp up their distribution system. The continued growth is good for them in every way. They have been helped a lot by their expansion in the international market . However their growth in the international market will be curtailed due to the reason that Zara has a very centralized logistics model. It is understandable that Zara has to expand its distribution centers and to increase its capacity. Zara has its main distribution center in Spain and it won’t be easy going trying to expand when their base is only in Spain.

This will affect their plans to go international and to target more regions. They can’t simply survive with a European presence alone. It is true that they do have a presence in other countries but then it is not as much as it should be. They have a huge presence in Spain but quite limited when it comes to other countries. They can easily target the North American region where they don’t have much of a presence compared to the huge size of the region. The problem is that there are a lot of outlets there and a lot of competition coupled with the need for plus sized clothing, high cost of operations and a very mature market. Zara needs to come up with a strategy so they can compete very aggressively over there. They can also target South America but the problem is that it is not a very stable region and any geopolitical problems can lead to profits being low. A good market would be the ever reliable Middle East where Zara already has a small presence. However with talks of revolution in the air and other geo political problems it can be a risky bet. There are a few countries in the region which will lead it to be profitable but then the market is small compared to other regions. They can easily opt for countries such as the South East Asian markets and South Asia which have a lot of potential.

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2 thoughts on “ Case Study of Zara: A Better Fashion Business Model ”

Dear Abey, Many thanks for your continuing efforts to help learners. I’ve just come across your website and really amazed at the wealth and variety of topics which are covered in your business cases. Very helpful, indeed. God bless you for all the kind things you are doing. Alex

Thank you for this valuable insight. Quite informative. Helped me a lot.

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ZARA: Achieving the “Fast” in Fast Fashion through Analytics

zara branding case study

How does fast fashion make any business sense? Zara uses intensive data and analytics to manage a tight supply chain and give customers exactly what they want.

Introduction

Zara’s parent company Inditex has managed to thrive in the last decade while several other fashion retailers have faced declining sales or stagnant growth. Inditex has grown over 220% in annual revenue since 2004, more than its key competitors like H&M, Gap, or Banana Republic (1).

zara branding case study

The value of a fast fashion brand is to bring the latest designs and “trendiest trends” into the market as quickly as possible, preferably as soon as they became hot on the catwalk, and to provide these at a reasonable price. The traditional fashion industry is not well equipped to provide such value as it operates on a bi-annual or seasonal basis, with long production lead times due to outsourced manufacturing to low cost-centers. Zara has turned the industry on its head by using data and analytics to track demand on a real-time, localized basis and push new inventory in response to customer pull. This enables them to manage one of the most efficient supply chains in the fashion industry, and to create the fast fashion category as a market leader.

Pathways to a Just Digital Future

How Zara Uses Data

Inditex is a mammoth retailer, producing over 840 million garments in a year, the majority of which are sold by Zara (2). Every item of clothing is tagged with an RFID microchip before it leaves a centralized warehouse, which enables them to track that piece of inventory until it is sold to a customer (3). The data about the sale of each SKU, inventory levels in each store, and the speed at which a particular SKU moves from the shelf to the POS is sent on a real time basis to Inditex’s central data processing center (see picture below). This center is open 24 hours a day and collects information from all 6000+ Inditex stores across 80+ countries and is used by teams for inventory management, distribution, design and customer service improvements (4).

zara branding case study

Zara’s Data Processing Center receives real-time data from around the world (4).

When the apparel arrives in store, RFID enables the stockist to determine which items need replenishing and where they are located, which has made their inventory and stock takes 80% faster than before (3). If a customer needs a particular SKU, salespeople are able to serve them better by locating it immediately in store or at a nearby location. Moreover, every Zara location receives inventory replenishments twice a week, which is tailored to that stores real-time updates on SKU-level inventory data.

The sales tracking data is critical in enabling Zara to serve its customers with trends that they actually want, and eliminate designs that don’t have customer pull. Zara’s design team is an egalitarian team of over 350 designers that use inspiration from the catwalk to design apparel on daily basis. Every morning, they dive through the sales data from stores across the world to determine what items are selling and accordingly tailor their designs that day. They also receive qualitative feedback from empowered sales employees that send in feedback and customer sentiment on a daily basis to the central HQ e.g., “customers don’t like the zipper” or “she wishes it was longer” (1).

At the start of the planning process, Zara orders very small batches of any given design from their manufacturers (even just 4-6 of a shirt per store). The majority of Zara’s factories are located proximally in Europe and North Africa, enabling them to manufacture new designs close to home and ship them to their stores within 2-3 weeks. They then test these designs in store, and if the data suggests the designs take off, Zara can quickly order more inventory in the right sizes, in the locations that demanded it. Such store-level data allows Zara to be hyper-local in serving their customer’s needs – as tastes can vary on a neighborhood level. As Inditex’s communication director told the New York Times,

“ Neighborhoods share trends more than countries do. For example, the store on Fifth Avenue in Midtown New York is more similar to the store in Ginza, Tokyo, which is an elegant area that’s also touristic. And SoHo is closer to Shibuya, which is very trendy and young.” (5)

Unlike other retailers that may order inventory based on their hypotheses about tastes at a regional level, Zara is tailors its collections based on the exact zip code and demographic that a given location serves (5).

Zara’s Results vs. Competitors

Zara sells over 11,000 distinct items per year versus its competitors that carry 2,000 to 4,000. However Zara also boasts the lowest year-end inventory levels in the fashion industry. This lean working capital management offsets their higher production costs and enables them to boast rapid sales turnover rates.

At Zara, only 15% to 25% of a line is designed ahead of the season, and over 50% of items are designed and manufactured in the middle of a season based on what becomes popular (2). This is in direct contrast to a close competitor like H&M where 80% of designs are made ahead of the season, and 20% is done in real-time during the season (6). Most other retailers commit 100% of their designs ahead of a season, and are often left with excess inventory that they then have to discount heavily at season-end. Instead, Zara’s quick replenishment cycles create a sense of scarcity which might actually generate more demand:

“With Zara, you know that if you don’t buy it, right then and there, within 11 days the entire stock will change. You buy it now or never.” (5)
  • https://www.bloomberg.com/news/articles/2016-11-23/zara-s-recipe-for-success-more-data-fewer-bosses
  • http://www.digitalistmag.com/digital-supply-networks/2016/03/30/zaras-agile-supply-chain-is-source-of-competitive-advantage-04083335
  • http://static.inditex.com/annual_report_2015/en/our-priorities/innovation-in-customer-services.php
  • http://www.refinery29.com/2016/02/102423/zara-facts?utm_campaign=160322-zara-secrets&utm_content=everywhere&utm_medium=editorial&utm_source=email#slide-11
  • http://www.nytimes.com/2012/11/11/magazine/how-zara-grew-into-the-worlds-largest-fashion-retailer.html?pagewanted=all
  • https://erply.com/in-the-success-stories-of-hm-zara-ikea-and-walmart-luck-is-not-a-key-factor/

Student comments on ZARA: Achieving the “Fast” in Fast Fashion through Analytics

Great post Ravneet – I had never read about Zara’s extremely quick supply chain or hyper-local testing. I have a question for you about fast fashion in general, but especially for Zara since it produces and sells more distinct items than its competitors: it seems that many designers are not fond of the “runway-inspired” fashions sold at these stores and some have even sued stores for copying their designs. Do you think Zara and other brands like it are doing anything wrong, and if not, what recourse do designers have for “imitations” of their work?

Thanks for the post Ravneet. Zara and H&M are beacons of hope for a mostly distressed industry. Do you think Zara’s advantage could be sustained in the event of a full-on assault by the Amazons of the world?

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Zara – History, Success Factors And Marketing Strategies

Zara marketing | The Brand Hopper

Zara – History, Success Factors And Marketing Strategies 14 min read

In the dynamic world of fashion, where trends come and go in the blink of an eye, there is one brand that has captured the attention of fashion-conscious individuals around the globe with its unique approach. Enter Zara , a Spanish clothing and accessories retailer that has redefined the industry with its revolutionary concept of fast fashion. Since its inception in 1974 , Zara has become a household name, known for its ability to swiftly translate runway trends into affordable, on-trend pieces available to the masses.

What sets Zara apart from its competitors is its unparalleled speed-to-market strategy . While traditional fashion brands typically take months to design, produce, and distribute their collections, Zara’s agile business model allows it to create new designs and have them on the shelves in a matter of weeks. This rapid production cycle enables Zara to stay ahead of the fashion curve, constantly refreshing its inventory with the latest styles and ensuring that customers have access to the hottest trends of the season.

Another key aspect of Zara’s success lies in its vertically integrated supply chain . Unlike many other fashion retailers, Zara controls every stage of the production process, from design and manufacturing to distribution. This vertical integration gives the company greater control and flexibility, allowing it to respond swiftly to changing market demands and quickly replenish popular items.

Zara’s approach to fashion goes beyond speed . The brand is celebrated for its distinctive aesthetic, characterized by clean lines, contemporary silhouettes, and a touch of sophistication. With a keen eye for detail and an unwavering commitment to quality, Zara delivers stylish, well-crafted garments that cater to a diverse range of tastes and preferences.

Moreover, Zara has mastered the art of capturing the pulse of its target audience . By closely monitoring consumer preferences and analyzing data from its vast network of stores, Zara gathers valuable insights that shape its design and production decisions. This customer-centric approach allows the brand to create fashion-forward pieces that resonate with shoppers, fostering a strong sense of brand loyalty.

In this article, we delve deeper into the extraordinary success story of Zara, exploring the key strategies that have propelled the brand to the forefront of the fashion industry. From its innovative supply chain management to its emphasis on customer engagement, we uncover the secrets behind Zara’s ability to disrupt the fashion landscape and set new standards for speed, style, and accessibility. Join us as we embark on a journey through the world of Zara, where fashion meets innovation and where trends are not just followed but created.

Table of Contents

Founding History of Zara: A Story of Innovation and Success

Zara has a founding history rooted in a spirit of innovation and an unwavering commitment to customer satisfaction. The brand’s journey began in 1974 when Amancio Ortega Gaona, a Spanish entrepreneur, opened the first Zara store in La Coruña, a coastal city in northwest Spain . Little did the world know that this humble beginning would mark the inception of a global fashion phenomenon.

Amancio Ortega Gaona - Founder, Zara

Amancio Ortega, a visionary entrepreneur known for his keen business acumen, had a clear vision for Zara from the start. He aimed to offer fashion-forward clothing at affordable prices, challenging the traditional retail model prevalent at the time. Unlike other brands that relied on long production cycles and dictated trends to their customers, Ortega envisioned a different approach: fast-fashion, a concept that would disrupt the industry and set Zara apart.

From the outset, Zara’s business model was built on a foundation of vertical integration and an emphasis on speed . Ortega understood the importance of having complete control over the production process to respond quickly to market demands. To achieve this, Zara decided to design, manufacture, and distribute its clothing in-house, allowing for greater flexibility and agility in bringing new designs to market.

The integration of Zara’s supply chain was a pivotal element of its success. By having all operations under one roof, Zara could streamline communication and decision-making, enabling faster response times. This vertically integrated model also facilitated closer collaboration between designers, pattern makers, and manufacturers, fostering a seamless flow of information and ensuring that new designs could be swiftly translated into production.

One of the key innovations that set Zara apart was its unique approach to inventory management . Traditional retailers would plan their collections months in advance, placing large orders with suppliers based on anticipated demand. Zara, on the other hand, embraced a just-in-time production strategy. Rather than producing garments in large quantities, Zara manufactured small batches and quickly replenished stock based on real-time feedback from customers and sales data. This allowed Zara to respond rapidly to shifts in consumer preferences and to stock its stores with the latest fashion trends as they emerged.

The concept of “fast fashion” quickly gained traction, attracting a loyal customer base that appreciated Zara’s ability to provide trendy and affordable clothing with remarkable speed. As the brand gained momentum, it expanded beyond its domestic market, opening stores in other Spanish cities and gradually venturing into international markets.

Zara’s international expansion was accompanied by its parent company, Inditex Group , which was established in 1985 to oversee the brand’s growth and manage its various subsidiaries. Inditex, with its headquarters in Arteijo, Spain, became a multinational conglomerate, encompassing not only Zara but also other renowned brands such as Pull&Bear, Massimo Dutti, Bershka, and more .

Zara’s global success can be attributed to its relentless focus on understanding and meeting customer needs. The brand adopted a decentralized decision-making structure, empowering store managers and staff to have a direct impact on product selection and inventory management. This approach enabled Zara to cater to local preferences, ensuring that each store’s merchandise was tailored to the specific demands of its customer base.

As Zara continued to expand, its innovative strategies and rapid response to fashion trends earned it a prominent position in the global fashion landscape. The brand’s success served as an inspiration to other retailers, leading to a fundamental shift in the industry’s approach to production and inventory management.

Today, Zara has a vast presence worldwide, with stores in over 90 countries. Its influence extends beyond brick-and-mortar stores, with the brand successfully embracing e-commerce and digital platforms to reach a broader audience. Zara’s commitment to innovation, speed, and customer-centricity remains at the core of its operations, enabling it to stay ahead of the fashion curve and maintain its status as a trendsetter.

The founding history of Zara is a testament to the power of visionary thinking, operational excellence, and a deep understanding of customer desires. Through its relentless pursuit of innovation and dedication to delivering fashion-forward clothing at accessible prices, Zara has forever changed the way we experience and engage with fashion.

Success Factors of Zara – Why is Zara considered so influential in luxury world?

Zara’s exceptional success in the fashion retail industry can be attributed to several key factors. Let’s delve into the details of why Zara has achieved such remarkable triumph:

Fast-fashion business model : Zara’s fast-fashion approach sets it apart from its competitors. Instead of following the traditional seasonal model, Zara operates on a fast and responsive production cycle. The brand quickly captures emerging fashion trends, designs new styles, and brings them to market within weeks. This agility allows Zara to cater to the ever-changing preferences of consumers, ensuring its collections are always on-trend and in high demand.

Vertical integration : Zara’s vertical integration is a cornerstone of its success. Unlike many other retailers that outsource production, Zara controls every aspect of its supply chain. From design and manufacturing to distribution and retail, Zara keeps all operations in-house. This integration enables seamless coordination and communication across the entire process, facilitating faster decision-making and reducing lead times. It also gives Zara greater control over quality, cost, and production capacity.

Efficient inventory management : Zara’s inventory management strategy is a key driver of its success. The brand operates with smaller batch sizes and maintains lower inventory levels compared to traditional retailers. By closely monitoring sales data and customer feedback, Zara can quickly replenish popular items and phase out underperforming ones. This lean approach minimizes the risk of overstocking and markdowns while maintaining a sense of scarcity and urgency, driving consumer demand.

Customer-centric approach : Zara’s customer-centricity is central to its triumph. The brand places a strong emphasis on understanding and meeting customer needs. Zara’s decentralized decision-making structure empowers store managers and employees to have a direct impact on product selection and inventory management. This approach enables Zara to adapt its offerings to local preferences, ensuring a personalized shopping experience that resonates with its diverse customer base.

Affordable luxury positioning : Zara has successfully positioned itself as a provider of affordable luxury. The brand offers high-quality, fashion-forward garments and accessories at relatively affordable prices, making them accessible to a broad range of consumers. By striking a balance between quality, style, and affordability, Zara has effectively democratized fashion, appealing to fashion-conscious individuals who seek value without compromising on design and craftsmanship.

Constant innovation and responsiveness : Zara’s commitment to innovation and responsiveness fuels its success. The brand continuously invests in research and development, keeping a pulse on emerging fashion trends and consumer preferences. Zara’s design team monitors fashion shows, street styles, and customer feedback, enabling them to quickly translate trends into new designs. This constant innovation and responsiveness ensure that Zara stays ahead of the curve and offers customers a fresh and exciting shopping experience.

Strong retail experience : Zara’s retail experience is meticulously curated to create an engaging and immersive environment for customers. Its stores are designed with a sophisticated and trendy aesthetic, featuring regularly updated displays and layouts that reflect the latest collections. Zara’s attentive and knowledgeable staff provide personalized assistance, elevating the overall shopping experience and fostering a loyal customer base.

Embracing technology and e-commerce : Zara has embraced technology and e-commerce to expand its reach and engage with customers in the digital space. Its online platform allows customers to browse and purchase products conveniently. Zara also leverages data analytics to gain insights into customer behavior, enabling personalized recommendations and targeted marketing campaigns.

Commitment to sustainability and ethical practices : Zara’s dedication to sustainability and ethical practices resonates with environmentally and socially conscious consumers. The brand has implemented initiatives to reduce its environmental impact, such as using sustainable materials and promoting recycling. Zara’s responsible approach to fashion aligns with evolving consumer values and positions it as a socially responsible brand.

By combining its fast-fashion business model, vertical integration, efficient inventory management, customer-centric approach, affordable luxury positioning, constant innovation, strong retail experience, embracing technology, and commitment to sustainability, Zara has established itself as a global fashion powerhouse. Its ability to adapt quickly to trends, deliver high-quality products, and provide a personalized shopping experience has propelled Zara to the forefront of the fashion retail industry and made it an iconic brand beloved by millions worldwide.

Marketing Strategies that Set Zara Apart: A Recipe for Success

In the fiercely competitive world of fashion retail, Zara has managed to carve out a unique and enviable position for itself. Behind Zara’s remarkable success lies a set of marketing strategies that have propelled the brand to the forefront of the industry. From its agile approach to trend forecasting to its experiential retail environments, Zara’s marketing tactics have proven to be a winning formula. Let’s explore the strategies that make Zara stand out from the crowd.

Fast-Fashion and Agile Trend Forecasting: Zara’s fast-fashion model is at the heart of its marketing strategy. By closely monitoring fashion shows, street styles, and consumer preferences, Zara’s design team is able to anticipate and respond swiftly to emerging trends. This agility in trend forecasting allows Zara to introduce new styles into its collections in a matter of weeks, ensuring that its offerings are always fresh, on-trend, and in high demand.

Limited Stock and Scarcity Marketing : Zara creates a sense of urgency and exclusivity by employing limited stock and scarcity marketing. By producing smaller quantities of each product and frequently refreshing its inventory, Zara fosters a feeling that its offerings are unique and not easily accessible. This strategy drives customers to make quicker purchasing decisions, knowing that the items they desire may not be available for long.

Vertical Integration and In-House Production : Zara’s vertically integrated supply chain is a crucial element of its marketing strategy. By controlling every aspect of the production process in-house, from design to manufacturing and distribution, Zara can maintain tight control over quality, speed, and cost. This integration also allows for rapid response to market demands, ensuring that popular items are restocked quickly, while minimizing excess inventory and markdowns.

Store as a Marketing Tool : Zara’s physical stores play a vital role in its marketing strategy. The brand meticulously curates its retail environments to create an immersive and engaging experience for customers. Zara’s stores are designed with a sleek and sophisticated aesthetic, featuring regularly updated displays and layouts that reflect the latest collections. The inviting atmosphere and attention to detail draw customers in, encouraging exploration and fostering a strong connection with the brand.

Decentralized Decision-Making and Localized Offerings : Zara’s decentralized decision-making structure empowers store managers and employees to have a direct impact on product selection and inventory management. This approach allows Zara to cater to local preferences and adapt its offerings to specific markets. By offering a tailored assortment of products that resonate with the tastes and preferences of customers in each location, Zara enhances its connection with its target audience and builds a loyal customer base.

Embracing Digital Channels: Zara recognizes the power of digital channels in reaching and engaging with its customers. The brand has embraced e-commerce and leverages technology to provide a seamless online shopping experience. Zara’s website and mobile app allow customers to browse and purchase products with ease, while also providing access to personalized recommendations and exclusive online-only collections. Zara’s digital presence expands its reach and ensures a consistent brand experience across multiple touchpoints.

Social Media and Influencer Collaborations: Zara leverages social media platforms to connect with its audience and amplify its brand message. The brand maintains an active presence on platforms like Instagram, Facebook, and Twitter, showcasing its latest designs, fashion inspiration, and behind-the-scenes content. Zara also collaborates with influencers and celebrities, capitalizing on their influence and reach to generate buzz and promote its products to a wider audience.

Zara’s marketing strategies have undoubtedly played a significant role in its phenomenal success. Its ability to stay ahead of fashion trends, create a sense of urgency, deliver an exceptional in-store experience, embrace digital channels, engage with influencers, and prioritize sustainability has allowed Zara to establish itself as a globally recognized and beloved fashion brand. By continuously evolving and adapting its marketing tactics, Zara remains at the forefront of the industry, setting the bar for innovation and customer engagement in the fast-paced world of fashion retail.

Also Read: Uniqlo – Brand Story, History, Campaigns & Success Factors

Financial Growth of Zara

Zara has experienced significant financial growth in recent years. In 2022, the company’s revenue was €27.7 billion, an increase of 36% from 2021 . Net income was €7.0 billion, an increase of 86% from 2021.

There are a number of factors that have contributed to Zara’s financial growth. One factor is the company’s fast fashion model. Zara is able to design, produce, and distribute new clothing items in a matter of weeks, which allows the company to quickly respond to changing fashion trends.

Another factor that has contributed to Zara’s financial growth is the company’s focus on online sales. In 2022, online sales accounted for 24% of Zara’s total revenue. The company is continuing to invest in its online business, and it expects online sales to continue to grow in the future.

Zara is well-positioned for continued financial growth in the future. The company has a strong brand, a fast fashion model, and a focus on online sales. As a result, Zara is expected to continue to experience strong revenue and earnings growth in the years to come.

Here are some specific examples of Zara’s financial growth in recent years:

  • In 2022, Zara’s revenue grew by 36%.
  • In 2022, Zara’s net income grew by 86%.
  • In 2022, online sales accounted for 24% of Zara’s total revenue.

These results are a testament to Zara’s strong brand, fast fashion model, and focus on online sales. Zara is well-positioned for continued financial growth in the future.

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Source: Yahoo Image

ZARA has become the largest clothing retailer in the world, surpassing all its competitors. The multinational corporation is known for the launching of “fast fashion”, comprising stylish yet affordable outfits. With the introduction of such sustainable strategies, the company has been able to make the brand a go-to name for customers.

The company’s brand value and image have been intact solely because of its strategic implementation of marketing campaigns. The key element of ZARA branding is the committed advertisement to providing highly qualitative fabric-made clothes at reasonable prices. 

These are the reasons that make ZARA stand apart from the business crowd. Being the fastest trendsetter, it has made use of several marketing campaigns to thrive in the industry. Let’s take a look at the marketing campaigns of ZARA.

What is Zara?

ZARA is a Spanish multinational retail chain that sells and manufactures clothing, accessories, footwear, perfumes, and beauty products. Spanning over 96 countries, the brand was founded by Amancio Ortega and Rosalia Mera in 1975. Presently, ZARA has over 2000 stores worldwide under Marta Ortega.

zara

The company has made it to the top of the clothing industry in a very short span of time. The versatility of its fashion products advertising, and women’s wear advertising. The example can be seen in the notion that the company stores keep up with clothing items for all ages, ethnicities, and body sizes. 

ZARA is an enthusiast when it comes to empowering women, which can be seen in its marketing campaigns as well as its collections. All the ZARA advertising takes a strong yet simple initiative in how they chose their models and locations, which leaves a powerful impact on the minds of the viewers.

Why does Zara do marketing?

The reason why ZARA needs marketing is its major target, which is the millennials and the GenZs. Both these generations are highly fashion-conscious and innovative. While they are easy to lure, they are also hard to convince. And that’s when ZARA’s marketing campaigns come into the picture so that the company can understand their needs and express them accordingly to the people

zara marketing

Especially, with ZARA being the largest clothing retailer in the world, it remains in a targeted position as all the other brands make moves to surpass it. Seeing the cutthroat competition in the market and hundreds of choices for people to choose from, marketing campaigns are important for ZARA branding in order to make the large population stick to the brand and not diverge.

Also, ZARA has been witnessed to involve in a number of cause marketing strategies to show its responsibility toward society and the environment. Nowadays, more and more people have become conscious of societal norms, including body shaming, racism, inequality, etc. With a view to standing against these practices, ZARA branding needs the help of marketing campaigns. 

Top Marketing Campaigns of Zara 

Here is a list of the marketing strategies of ZARA, that has made all its achievements possible and ranked the brand at the top of the industry.

This marketing campaign was launched to promote sustainability and show the brand’s corporate actions taken in account of the environment. The brand has shifted its goal from providing fast fashion products that change twice every week to going slower and creating responsible clothing.

join life

ZARA’s marketing campaign features 100% renewable electrical energy in its operators, using reused and recycled fabrics, eliminating the use of plastic, and conscious packaging. Although the brand has been able to use 100% cellulosic fibres and cotton until now, it, however, has set goals to expand it to 100% linen and recycled polyester by 2025.

Love Your Curves

As the name suggests, this ZARA advertising idea and campaign was solely based on promoting body positivity. This campaign is introduced with a line designed for women of various body shapes and sizes. The key element of this campaign was the development of its largest size- XXL. 

A picture poster was released featuring the backs of two women showing their curves. However, the ad was criticized all over the world for not including real fat women in the poster, but people still appreciated the one-step ahead initiative. Along with that, this ZARA advertising spread a message of breaking the stereotype of having a perfect body according to society. 

love your curves

Good American X ZARA

This campaign was introduced with a denim collection in collaboration with the “Good American” brand. Owned by Emma Grede and Khloe Kardashian, Good American is popularly known for full inclusivity in its denim collection. This collaboration was one of the first collections that feature all-size-inclusive denim jeans.

good american x zara

This marketing campaign of ZARA received a lot of positive responses from the public for showing true body positivity and size-inclusiveness since the models featured in the ad were diversified in their body images. Moreover, all the clothing items in this collection were made of recycled and sustainable fibres , as a part of the “Join Life” green campaign.

ZARA Beauty

This ZARA marketing campaign was carried out with the motive of introducing its beauty and makeup brand “ZARA Beauty”. The collection includes makeup products for eyes, lips, face, nails, and related accessories. This beauty and makeup collection was directed under Eva Lopez and developed by the British makeup artist, Diane Kendal.

zara beauty

The most important element of this ZARA advertising was its focus on inclusivity. It was made sure that the launched collection can be used by a diverse population, regardless of race, age, skin type, style, or gender.

ZARA “Origins”

ZARA “Originals” is a collection introduced by ZARA in the form of an ad campaign. The collection is one of its kind as it projects the brand’s efforts into creating a contemporary wardrobe. The collection is built with the highest quality fabrics, finest materials, artistic craftsmanship, and standard manufacturing.

One key element of the line was that it was designed with a combination of progressive and modern concepts with traditional and classic values. Also, the collection shows its versatility in a way that the style of the line changes with every upcoming season. It was considered a classy and premium line of clothing by the experts as well as the customers. 

zara origins

Into The Night

This marketing campaign of ZARA was launched to express the evolving image of the brand and show it as a brand that is more than just affordable fast fashion. The ad campaign featured the high-profile personality, Kate Moss. It was a strategic move to represent the company’s sophisticated, class-oriented, and premium collections.

into the night

This ZARA advertising was focused to grab the attention of famous personalities and high-class audiences, and directing their shopping choices toward ZARA. The star of the campaign, Kate Moss was styled by the French fashion editor Emmanuelle Alt to make it look retro and glamorous.

A Moment In Time

This campaign was strategized to introduce the brand’s Studio Fall Winter 2022 collection. A photo-video advertisement, photographed by Steven Meisel was released on YouTube in relation to the campaign. The fashion products advertising was directed by Fabien Baron, featuring women wearing clothes from the collection and appealing and powerful background music.

a moment in time

The entire collection was based on the idea of exploring the harmony that’s between the Progressive and the Classic, the Feminine and Masculine, and Surface and Depth while keeping the dualities intact. The people and the customers were impressed by this new line, considering it progressive and inclusive.

at home

This was the most creative campaign idea by the ZARA advertising team. Since the world was facing a long lockdown due to COVID-19 and no one was supposed to step outside, the fashion house ZARA came up with the idea of asking the models to photograph themselves at their homes featuring clothing items from the SS20 collection. 

This was a very smart and efficient marketing strategy released by ZARA. The natural essence of the pictures is what really attracted the audience as no professional camera, makeup, hair, or any kind of styling was involved. The models pictured themselves with common smartphones and cameras, posing without any makeup, and with messy hair. 

In final words, it can be deduced that the ZARA marketing campaigns have always been based on advertising basic fast fashion at medium range, yet evolving itself into a more sophisticated and premium brand. There is an essence of creativity and efficiency in how this fashion house does its women-wear advertising. And like other brands, ZARA’s branding strategies are also adapting cause marketing and green campaigning in order to show its concern and responsibility towards society and the environment.

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H&M and Zara Case Study – Comparing the Fast Fashion Giants

  • Written by 440 Industries
  • Case Study , H&M , Zara
  • November 17, 2021

H&M and Zara Case Study - Comparing the Fast Fashion Giants

Introduction

Today, when we discuss fashion, we usually focus on clothes and other accessories. The days when people wore cloth for coverage are long gone. Fashion has taken clothing to a whole different level where it does more than cover our bare bodies. 

Everyone now desires to stand out in what they wear. This is because many of us know what we wear can help us reveal a lot about our personality. This could be our style or affluence. When making outfit choices, several brands come to mind. These could be brands like H&M vs Zara. 

These clothing brands are known for quality and style. Also, they are fast fashion brands , meaning a vast population is drawn to them for their quick offering of new trends, especially at cheaper rates. Therefore, let’s look at the H&M vs Zara case study in this article and compare these two fast fashion giants.

H&M Brand

  • H&M vs Zara Case Study

Key Differences Between H&M vs Zara Brand

Among similar brands like Uniqlo and Zara, “ Hennes and Mauritz ” is the oldest. Sweden was the birthplace of this retail brand. This was as far back as 1947. Hence, it’s amazing how this brand has become such a recognizable giant in fashion. 

Besides Sweden, that’s native to them, this brand also operates in the United States. It was in 1974 that their public trade in Sweden began. Over the years, this brand has grown more prominent as it stretched out across the globe.

The H&M brand has established over 4000 stores in several countries globally; A number that’s way bigger than that of Zara.

This brand has gotten an edge over its competitors as they’ve been more productive in the US market. It’s just amazing how they got into this enormous market and gained so much success. In the US alone, they have up to 559 physical stores.

However, they haven’t stopped yet and are working towards expanding more throughout the globe. They aim to open more stores, about thousands of them, in the years to come.

Meanwhile, the brand made a broader shift to e-commerce sales from physical ones. This happened because they began receiving most of their purchases online. This also resulted in the brand closing down some physical stores.

Interestingly, aside from the H&M brand, the H&M group has seven other brands under them. They are COS, H&M Home Weekday, Monki, ARKET, & other stories and Afound.

H&M also collaborates with known figures, like Versace, in the products they offer their customers. This is one of the sales-boosting strategies that has helped boost their reputation.

The Zara brand is the latest compared to retail giants like H&M and Uniqlo. The year 1975 was when this brand started. The birthplace was Spain, and the founder, Amancio Ortega.

Zara is the largest brand under the Inditex group. It ranks number one in the apparel industry, particularly fast fashion. They deal in a wide range of products, including clothing, shoes, fragrances, and other accessories. 

The brand has also stretched out over the world in about 96 countries, where they have a total of about 2200 stores. Just in the US, the brand has established up to 99 stores. 

However, you’ll find most of their stores in their birth country, Spain, where it’s over 400.

The founder improved the brand’s design, production, and distribution process around the 1980s. This improvement led to a faster reaction to the new fashion that came up. 

In fact, their distribution is remarkable. They can start selling a product a month after they’ve designed it. Their product turnover is impressively quick! 

When they created their first store, they began making similar products as the more high-end fashion brands. As they did this, they offered them at low prices. Interestingly, they then influenced the term “fast fashion” due to this speedy feedback. 

Zara offers a lot more products to their customers. In fact, it’s much bigger than the number that other competitors like H&M offer. 

They can produce more than 10,000 pieces in a year, unlike the 2000-4000 pieces most other retail brands do. This is one of the brand’s exceptional strategies that have attracted customers with different tastes and styles, especially in the US.

H&M vs Zara Case Study 

Looking at the H&M vs Zara fast-fashion business, it’s been very lucrative for them. No matter what these companies focus on, they have one thing in common as a competitive advantage: the customers’ preferences.

As people want what’s trending and at the same time desire to have it quick, these companies have to employ a speedy process. Both H&M and Zara seem to offer low-end market apparels that are alike with high fashion standards. They make these very fast and at a low price. 

It’s common with fast fashion for trends not to stay for long. New designs keep coming up, and many people want to try out what’s new. Therefore, these fast fashion brands have to keep making these products available to meet the customers’ continuous demands. 

Zara, in particular, is at the top of the game when it comes to reducing the time between designing and production. In addition, both brands ensure that their supply chain effectively responds to demands quickly. When supply doesn’t come quick, it can badly affect sales. 

A common one is when the customers lose interest in the apparel they waited so long for because of the new trends that might have come up. Therefore, the cost of the goods, buying cycle, and, more importantly, market timing build up the fast-fashion concept of H&M vs Zara brand. 

Let’s compare these two brands with different marketing categories. This way, we can know what makes them different, especially in their strategies to boost sales.

Pricing System for H&M vs Zara

The H&M brand emphasizes offering their quality products cheaper as a means to keep customers trooping into their shops. They are known to offer huge discounts very often, unlike most of their competitors. 

On the other hand, Zara offers their products at a reasonable price as long as they match the quality. They don’t underprice to keep people trooping in. Similarly, they give discounts but not as much as the H&M brand. Instead, they focus more on the quality of what they offer. 

They create value around their product,s which stirs the feeling that what you’re buying is worth the price. 

Target Market for H&M vs Zara

These two fashion giants create their target market based on psychographics and demographics. Focusing on an individual’s lifestyle, interests, and social status falls under the psychographic segment. However, considering their customers’ gender, age, income, class, etc., is a demographic way of segmenting their market. 

H&M’s brand targets primarily women, particularly those aged between 20-34 years. 

These are the younger, working females that still have so much love for what’s trending. On the other hand, Zara still targets the younger population but expands more demographically. 

They offer clothing and accessories for both genders, particularly about 18-40 years of age. However, this is just their target market, and this brand offers both articles of clothing for younger kids.

Promotion for H&M vs Zara

H&M is always making regular promotions for their products. Their advertising is quite versatile. They reveal a lot about their products through various means including, TV commercials, prints, billboards, banners, social media, and many more. The brand puts a lot of emphasis on promotion. 

A common thing about the Zara brand is that they don’t fancy advertising. You’ll see no banners, no billboards, and no form of promotion. They consider investing in building more stores far more important than advertising their goods. 

However, the company employs the system they call evangelism. So, instead of taking their brand to their consumers as advertisements, they bring their consumers into their brand. They nurture their customers as brand influencers, allowing them to boost operations and, more importantly, do the storytelling.

Product Distribution for H&M vs Zara

Zara gets goods on its shelves much faster than H&M. The brand doesn’t have any factory of its own. Instead, they buy from other distributors. About 60% of H&M products come from places like Cambodia or Bangladesh, which are cheaper. 

However, these places are far from them, so leading times are always longer. This makes this brand have several orders from customers pending. This situation creates problems for the brand, especially in sales. 

This also makes them have more unsold goods in stock, unlike Zara. These goods’ value is more than $4 billion. This could also be why the H&M company focuses more on giving discounts as one of their pricing strategies. Interestingly, the gross profit made by both brands is almost the same, despite H&M making cheaper purchases. So, in essence, they lose the advantage that comes with buying from cheaper places. 

Also, the distribution system has made them famous in the fast- fashion world as they can control the number of goods they produce and the supply. Therefore, they don’t have issues with numerous unsold goods in stock. It takes about a day to distribute to their stores in Europe due to their robust distribution network. Moreover, it will take about 40 hours to deliver to the US branches.  

Both brands, H&M vs Zara, have grown successfully over the years more than other fast fashion brands. The progress of the Zara brand explains why price isn’t everything. Unlike H&M, they tend to focus more on the value they can place on their products. H&M has still suffered many losses despite its underpricing strategies. 

However, in fast fashion, the constant change in trends keeps the demand alive, but what’s more important is that these fast fashion brands make these products available.

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