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Revision as of 10:09, 5 January 2009
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| Company type | Public |
|---|---|
| Industry | Fashion |
| Founded |  A Coruña, Spain (1975) |
| Headquarters | La Coruña, Spain |
Key people | Amancio Ortega, Owner |
| Products | Clothing |
| Revenue |  6.264 billion € (2007) |
| Website | www.zara.com |
Zara is the flagship chain store of Inditex Group owned by Spanish tycoon Amancio Ortega, who also owns brands such as Massimo Dutti, Pull and Bear, Oysho, Uterqüe, Stradivarius and Bershka. The group is headquartered in A Coruña, Spain, where the first Zara store opened in 1975. It is claimed that Zara needs just two weeks [1] to develop a new product and get it to stores, compared with a six-month industry average, and launches around 10,000 new designs each year. Zara has resisted the industry-wide trend towards transferring fast fashion production to low-cost countries. Perhaps its most unusual strategy was its policy of zero advertising; the company preferred to invest a percentage of revenues in opening new stores instead.
Zara was described by Louis Vuitton fashion director Daniel Piette as "possibly the most innovative and devastating retailer in the world". Zara has also been described as a "Spanish success story" by CNN.[2]
Company history
The founder of Zara, Amancio Ortega, opened the first Zara store in 1975.[3] The first Zara store was located on a central street in A Coruña.[4] Upon the success of Zara format, the firm started to expand and opened further stores.
Its first store featured low-priced lookalike products of popular, higher-end clothing fashions.[5] The store proved to be a success, and Ortega started opening more Zara stores in Spain. By the early 1980s, Ortega had begun formulating a new type of design and distribution model. The clothing industry followed design and production processes that required long lead times, often up to six months, between the initial design of a garment and its delivery to retailers. This model effectively limited manufacturers and distributors to just two or three collections per year. Predicting consumer tastes ahead of time presented inherent difficulties, and producers and distributors faced the constant risk of becoming saddled with unsold inventory.
Ortega sought a means of breaking the model by creating what he called "instant fashions" that allowed him to respond quickly to shifts in consumer tastes and to newly emerging trends. Ortega's dream remained unfulfilled, however, until he met up with José Maria Castellano. A computer expert, Castellano had worked in Aegon Espana's information technology department before becoming chief financial officer for a Spanish subsidiary of ConAgra. Castellano joined Ortega in 1984 and set to work developing a distribution model that revolutionized the global clothing industry.
Under Castellano's computerized system, the company reduced its design to distribution process to just 10 to 15 days. Rather than placing the design burden on a single designer, the company developed its own in-house team of designers—more than 200 by the turn of the 21st century—who began developing clothes based on popular fashions, while at the same time producing the company's own designs. In this way, the team was able to respond almost immediately to emerging consumer trends as well as to the demands of the company's own customers—for instance, by adding new colors or patterns to existing designs. State-of-the-art production and warehousing procedures, as well as the installation of computerized inventory systems linking stores to the company's growing number of factories, enabled the company to avoid taking on the risk and capital outlay of developing and maintaining a large back inventory.
The leaner, more responsive company—which adopted the name of Industria de Diseño Textil S.A., or Inditex, in 1985—captured the attention of Spanish shoppers. By the end of the decade, the company had opened more than 80 Zara stores in Spain. The company's instant fashion model, which completely rotated its retail stock every two weeks, also encouraged customers to return often to its stores, with delivery day becoming known as "Z-day" in some markets. The knowledge that clothing items would not be available for very long also encouraged shoppers to make their purchases more quickly.
The success of the Zara model in Spain led Inditex to the international market at the end of the 1980s. In 1988, the company opened its first foreign store in Oporto, Portugal. The following year, Inditex moved into the United States. Success in that market remained elusive, however, and at the beginning of the 2000s, the company had opened just six U.S. stores. A more receptive market for the Zara format existed in France, which Inditex entered in 1990. The company quickly began adding new stores in major city centers throughout the country.
Through the 1990s, Inditex added a steady stream of new markets. The company entered Mexico in 1992, Greece in 1993, Belgium and Sweden in 1994, Malta in 1995, and Cyprus in 1996. In the late 1990s, Inditex stepped up the pace of its international expansion, adding Israel, Norway, Turkey, and Japan (the latter in a joint-venture with a local partner) in 1997, then, in 1998, moved into Argentina, the United Kingdom, and Venezuela. While the bulk of the group's stores remained company owned, in certain markets, such as the Middle East, starting in 1998, Inditex's expansion took place through franchise agreements with local distributors. By 2000, Inditex had added another dozen or so countries to its range of operations, including Germany, the Netherlands, and Eastern European markets including Poland.
Zara's products
Zara Stores has 7 basic product lines: men's clothing and women's clothing.[6] As of 2007, each of these lines consist of 5 sub-sections. These sub-sections are Lower Garment, Upper Garment, Shoes, Cosmetics and Complements. Zara's catalogue also includes a line for children's clothing. Currently their sizing on women's clothing goes to a US size 12 or a UK size 16 or extra large.
An article in Businessworld magazine describes Zara's fashion strategy as follows: "Zara was a fashion imitator. It focused its attention on understanding the fashion items that its customers wanted and then delivering them, rather than on promoting predicted season's trends via fashion shows and similar channels of influence, which the fashion industry traditionally used."[7]
It of its production before the season began, 50-60% at the start of the season, and the remainder was manufactured in-season. Percentage of Zara sales consisting of markdowns was 15-20%. In some cases, stores ran out of stock[8]. Zara offers considerably more products than similar companies. It produces about 11,000 distinct items annually compared with 2,000 to 4,000 items for its key competitors. The company can design a new product and have finished goods in its stores in four to five weeks; it can modify existing items in as little as two weeks. Shortening the product life cycle means greater success in meeting consumer preferences[9]. If a design doesn't sell well within a week, it is withdrawn from shops, further orders are cancelled and a new design is pursued. No design stays on the shop floor for more than four weeks, which encourages Zara fans to make repeat visits. An average high-street store in Spain expects customers to visit three times a year. That goes up to 17 times for Zara[10].
Zara's production facilities
Zara is a vertically integrated retailer. It designs, produces, and distributes itself[11]. Unlike similar apparel retailers in the same market, Zara controls most of the steps on the supply-chain. 50% of the products Zara sells are manufactured in Spain, 26% in the rest of Europe, and 24% in Asian countries and the rest of the world. [12] So while competitors outsource production to Asia, Zara makes its most fashionable items -- half of all its merchandise -- at a dozen company-owned factories in Spain and Portugal, particularly in Galician and northern Portugal where labour is cheaper than most of Western Europe. Clothes with a longer shelf life, such as basic T-shirts, are outsourced to low-cost suppliers, mainly in Asia and Turkey.[13]
Stores
As of December 2008[update], there are more than 1,500 Zara stores around the World, distributed as listed below[14]:
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Controversy
Zara was involved in a controversy when one of the bags which they distributed to their stores was embroidered with a swastika design. They pulled it shortly thereafter. Just weeks after this event in September 2007 Zara put a T-shirt on sale in its UK stores with a Teletubby printed in the front which incurred the company legal fees to the BBC in the UK.[15].
External links
References
- ^ Zara: Taking the Lead in Fast-Fashion, BusinessWeek, 4 April 2006
- ^ Zara, a Spanish success story, CNN, 15 June 2001
- ^ Spaniards for the 21st century
- ^ Zara Timeline, Inditex Group, 2007
- ^ Industria de Diseño Textil S.A.
- ^ "¨¨¨···· I N D I T E X ······:
- ^ [http://www.businessworld.in == /content/view/898/953/ Businessworld : Number one Indian business portal with incisive analysis and surveys - Spanish season]
- ^ Zara: Spanish Season, Businessworld
- ^ EMIL - Executive Masters in International Logistics at Georgia Tech :: Benefits of Corporate Sponsorship
- ^ The Reign of Spain, The Guardian, 28 October 2003
- ^ CNN.com - Zara, a Spanish success story - June 15 2001
- ^ JTATM - North Carolina State University
- ^ Fashion Conquistador
- ^ INDITEX stores around the world
- ^ [1], BBC News, 2007
References
- Ferdows, K., M.A. Lewis, J.A.D. Machuca. 2004. "Rapid-fire fulfillment". Harvard Business Review, 82(11)