Zara International—Fast Fashion’s Style Maker
In this world of “hot today, gauche tomorrow,” no company does fast fashion better than Zara International. Shoppers in a growing number of countries are fans of Zara’s knack for bringing the latest styles from sketchbook to clothing rack at lightning speed and for reasonable prices.
In Fast Fashion, Moments Matter
Zara’s parent company Inditex is known for year-on-year strong sales gains. Low prices and a rapid response to fashion trends have pushed it into the top ranks of global clothing vendors. The chain specializes in lightning-quick turnarounds of the latest designer trends at prices tailored to the young. Louis Vuitton fashion director Daniel Piette has described Zara as “possibly the most innovative and devastating retailer in the world.”
Inditex shortens the time from order to arrival using a complex system of just-in-time production and inventory management that keeps Zara ahead of the competition. Their distribution centers can have items in European stores within 24 hours of order receipt, and in American and Asian stores in under 48 hours. “They’re a fantastic case study in terms of how they manage to get product to their stores so quick,” said Stacey Cartwright, executive vice president and CFO of Burberry Group PLC. “We are mindful of their techniques.”
The firm carefully controls design, production, distribution, and retail sales to optimize the flow of goods, without having to share profits with wholesalers or intermediary partners. Customers win with access to new fashions while they’re still fresh off the runway. Twice a week, Zara’s finished garments are shipped to physical distribution centers that simultaneously send products to stores worldwide. These small production batches help the company avoid the risk of oversupply.
Because batches always contain new products, Zara’s stores perpetually energize their inventories. Most clothing lines are not replenished. Instead, they are replaced with new designs to create scarcity value—shoppers cannot be sure that designs in stores one day will be available the next day.
Store managers track sales data with handheld devices. They can reorder hot items in less than an hour. Zara always knows what’s selling and what’s not. When a look doesn’t pan out, designers promptly put together new products. New arrivals are rushed to store sales floors still on the black plastic hangers used in shipping. Shoppers who are in the know recognize these designs as the newest of the new; soon after, any items left over are rotated to Zara’s standard wood hangers.
Inside and out, Zara’s stores are designed to strengthen the brand. Inditex considers this to be important because that is where shoppers ultimately decide which fashions make the cut. Stylists located in a faux shopping street in the basement of the company’s headquarters craft and photograph eye-catching layouts. These are e-mailed every 2 weeks to store managers for replication. Zara stores sit on some of the glitziest shopping streets—including New York’s Fifth Avenue, near the flagship stores of leading international fashion brands—which make its reasonable prices stand out. It’s all part of the strategy. “Inditex gives people the most up-to-date fashion at accessible prices, so it is a real alternative to high-end fashion lines,” said Luca Solca, senior research analyst with Sanford C. Bernstein in London. That is good news for Zara as many shoppers trade down from higher-priced chains.
A Single Fashion Culture
The Inditex group began in 1963 when Amancio Ortega Gaona, chairman and founder of Inditex, got his start in textile manufacturing. After a period of growth, he assimilated Zara into a new holding company, Industria de Diseño Textil. Inditex has a tried-and-true strategy for entering new markets: start with a handful of stores and gain a critical mass of customers. Generally, Zara is the first Inditex chain to break ground in new countries, paving the way for the group’s other brands, including Pull and Bear, Massimo Dutti, and Bershka.
Inditex farms out much of its garment production to specialist companies, located on the Iberian Peninsula, which it supplies with its own fabrics. Although some pieces and fabrics are purchased in Asia—many of them not dyed or only partly finished—the company manufactures about half of its clothing in its hometown of La Coruña, Spain. Inditex CEO Pablo Isla believes in cutting expenses wherever and whenever possible. Zara spends significantly less on ads than its rivals do. Isla disdains markdowns and sales as well.
H&M, one of Zara’s top competitors, uses a slightly different strategy. Around one-quarter of its stock is made up of fast-fashion items that are designed in-house and farmed out to independent factories. As at Zara, these items move quickly through the stores and are replaced often by fresh designs. But H&M also keeps a large inventory of basic, everyday items sourced from inexpensive Asian factories.
Fashion of the Moment
Inditex launched its Zara online store in the United States by offering free shipping and free returns in the model of e-retailer Zappos. A Zara iPhone app has been downloaded by more prospective clients in the United States than in any other market. But an open question is whether Inditex’s rapid expansion may bring undue pressure to its business. The rising number of overseas stores increases cost and complexity and could strain operations. Is Zara expanding too quickly? Will its existing operations and logistics systems carry it successfully through another decade of intense growth? Can fast fashion win the long-term retailing race?
Case Analysis Questions
1. DISCUSSION In what ways are elements of the classical and behavioral management approaches evident in how things are done at Zara International? How can systems concepts and contingency thinking explain the success of some of Zara’s distinctive practices?
2. DISCUSSION Zara’s logistics system and management practices can handle the current pace of growth, but they will eventually need to be updated. How could quantitative management approaches and data analytics help Zara executives plan for the next generation of its logistics and management approaches?
3. PROBLEM SOLVING As a consultant chosen by Zara to assist with the expansion of its U.S. stores, you have been asked to propose how evidence-based management might help the firm smooth its way to success with an American workforce. What areas will you suggest be looked at for evidence-based decision making, and why?
4. FURTHER RESEARCH Gather the latest information on competitive trends in the apparel industry, and on Zara’s latest actions and innovations. Is the firm continuing to do well? Are other retailers getting just as proficient with the fast-fashion model? Is Zara adapting and innovating to stay abreast of both its major competition and the pressures of a changing global economy? Is this firm still providing worthy management benchmarks for other firms to follow?
