Zara: IT for Fast Fashion
Zara is one of the oldest and biggest fashion brands of Inditex, one of the world’s largest distribution groups. It is a Spanish clothing and accessories retailer that was started in 1975 by Amanico Ortega. Jose Maria Castellano Rios joined Zara in 1985 as an IT manager and went on to become the CEO of Inditex in 1997. Ortega and Castellano shared many business beliefs about the company which has led Zara to become one of the world’s largest apparel retailers today. Zara still lives on a simple idea originated by Ortega, according to which, customer demand is the crux of the business. The idea is to link customer demand to manufacturing, and link manufacturing to distribution. Castellano along with Ortega brought computerization to Zara. Along with the need for Information Technology, Ortega and Castellano also shared other beliefs that Zara needs to be quick in responding to fashion demands of its customers and that the judgment of employees in speedy decision making will be of an advantage to Zara’s business.
Out of the 1,558 stores that Inditex operated in 45 countries in 2003, Zara chain had 550 stores with an average of opening one store per day worldwide. Today Zara has a huge international presence, with France being its largest international market. Its target market is young, fashion conscious city-dwellers. It offers a wide range of selection of clothes and accessories to three different segments of its target market– the largest being Women’s accounting for 60% of sales and the other two being Men’s and the fast-growing Children’s segment. Multinational clothing retailers such as H&M, Gap, and Benetton are its competitive rivals. Keeping this in mind, the consistent success of Zara in the ever-...
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...cause its Distribution Centers are not configured for handling and shipping small orders. Moreover, Zara understands that 5% store returns are a very small number as compared to 50% - 60% returns in the retail mail-order industry. It does have a website – www.zara.com- but it is only a digital display window.
Zara is extremely focused on its core fashion credo and therefore it is constantly seeking innovation in its products by introducing something completely new or by making changes to the existing products in a very short lead time throughout the year. Due to this solid commitment towards its goals, Zara does not have to predict its sales; be it six months down the line or a month. This helps it save a huge amount of production cost. The IT architecture is in alignment with their operating processes. All these factors give Zara an advantage over its competitors.
The ecommerce industry is growing faster than ever. TJ Maxx needs to start focusing more on ecommerce not only to keep up with competition, but also to make sure they do well during weak economic periods. ecommerce, overall, tends to do very well during lackluster economic times. TJ Maxx will be able to cut costs more easily the more they expand their ecommerce business. Our business idea will allow them to expand their ecommerce as we will take over their website and delivery. TJX Companies’ three ecommerce sites accounts for only about 1.0% of the company’s total sales. However, the online channel is a key growth driver and TJX is taking initiatives to improve its online business. The ecommerce sales
Zappos is an online shoe and clothing store. The idea of an online shoe store originally came from Nick Swinmurn in the year 1999. He then pitched the idea to Alfred Lin and Zappos’ current CEO Tony Hsieh. Zappos quick rise to success is mostly attributed to their ten core values. These values vary from creating fun and weirdness to being humble. However, the root of this company’s success lies only on one important thing: their regard for customer service. They value the quality time spent with customers over the phone rather than the quantity of customers.
1) With which of the international competitors listed in the case is it most interesting to compare Inditex’s financial results? Why? What do comparisons indicate about Inditex’s relative operating economics? Its relative capital efficiency? Note that while the electronic version of Exhibit 6 automates some of the comparisons, you will probably want to dig further into them?
The Zara fashion chain, with 546 stores in 30 countries today ?from which 340 are outside Spain- and ?2914,3 millions of total sales in 2002, is undoubtedly the group?s locomotive (Inditex, 2003). In 2002 it represented 33% of the group?s total stores, accounted for 72% of the group?s total sales and contributed to the holding?s total profits for ?540.4 millions (Inditex FY2002 Results Presentation, 2003). Moreover, Zara with 75-90 new stores within 2003 takes the lion?s share in group?s current year store openings (total openings for 2003: 260-315). The purpose of the Porter analysis is to analyse the competitiveness of the market.
Business strategy and model: Zappos.com had a differentiation strategy with which they had differentiated themselves from the rest of the market. They had use a unique corporate culture in their company which was one of the major competitive edges of the company. According to the CEO of the company, Tony Hsieh, that everything that they had done at Zappos such as their relationships with 1,200 to 1,500 brands, policies and website style could be copied, however, the only thing that no one could copy from them was their unique culture. Zappos had 10 unique core values as a basis of their company’s culture, employee performance and their overall operations. They were hiring and firing people on the basis of their abilities that whether they were living up to these core values or not.
Segmentation: Some of the important bases for segmenting consumer markets are Demographic, Geographic, benefits, Psychographic and Usage rate segmentation. Geographic segmentation is the priority of Zara. It is a global brand and its supply chain management is very much perfect. It helps Zara in getting the latest trends into stores in three weeks’ time based on consumer preferences. It’s a Spanish brand, so it would a better option for Zara to open more store in European countries. Consumers would be more interested in making their decision towards preferring Zara. It has dived its segment on the basis of gender where more preference is for women and less preference for men. It can be seen that in any Zara store there are two floor for women and 1 floor or a part of a floor for men products. For example, the store in Leeds. It focuses on women age group up to 35 years who is more concerned about having a fashionable life style. As per the psychographic segmentation, Zara consumers are more ambitious and are attracted towards fancy and trendy products. It makes products that give...
Therefore their consumer promise is also the force behind the combination of their environmental and preservation guidelines used through the group 's supply chain. Zara, has been a groundbreaker in conveying new fashions, new designs, and new ideas rapidly to its stores. Zara’s tenacious thrust of on-trend products into the supply chain channel keeps its stores in stock on the latest fashions at lucrative prices. Lots of their new concepts have come from some of the fashion shows that just ended in New York, Paris and Milan will soon be on Zara’s racks.
The first ZARA store opened in Spain in 1975 and it is now the highest profile chain store of its parent group Inditex with over 1000 stored worldwide. Zara unlike H&M have adopted a more vertically integrated business model. 60% of their goods are manufactured in spain whilst only 24% are manufactured in low cost regions like africa and
The key for Zara’s business model is all about the customer – they are the starting point for all Zara’s activities. It has a leading role on the business model since it’s a customer oriented brand. They provide excellent customer care and are frequent to see campaigns to collect customer’s opinion (Figure 2). Overall, Zara’s consumers are young, value conscious and highly sensitive to the latest fashion trends in the industry. An advantage that the brand has over conventional retailers is that they do not define and segment their target market by ages resulting in designs and styles that can reach a broader market. Today, we define Zara as such a success because of the customers that are essentially
Zara’s designers have unique creativity with tendency and enthusiasm towards young people. They often visit New York, London, Paris, Milan and Tokyo, to have ideas about latest female fashion and trends in order ...
Carr’s (2003) analysis of the commoditisation of IT represents food for thought for Zara. IT capability is valuable, regardless of whether or not it is a commodity, only if it enables the business’ strategy. Zara uses a vertically integrated supply chain to deliver their competitive strategy of fast fashion. IT is a vital component of its strategy as its employees need access to information across all stages of its value chain. The data contained on its network is vital to support critical business decisions. The fast fashion strategy requires all personnel to be in a position to respond quickly and effectively to changing fashion trends and customer demands. Zara are fast followers of fashion and IT is important for keeping its designers in contact with its suppliers.
Zara, a clothing and accessory brand first established in Arteixo, Spain in 1975 by Amancio Ortega and Rosalina Mera. Ortega and Mera originally named the company Zorba, inspired by the movie called “Zorba the Greek”, but later they found out that there was a bar two blocks away called Zorba too, so they rearranged the letter and came up with a new name called Zara. The first store was opened in downtown Galicia, Spain and had the trendiest items with low priced. Ortega’s idea of developing a fast turnaround fashion market led to the success of Zara today. By 2015, Zara has more than 2,100 stores worldwide and also known for its ability to produce the most up-to-date fashion pieces and distribute to each store within two weeks. Globalization
The business model that sets Zara apart from other clothing retailers is how rapidly the company changes stocks and releases new product lineups. The company averages 12-16 collections annually which equates to more than one lineup a month. Due to stock being limited and the rapid production Zara brings forth, their items are viewed as exclusive promoting further business. Their customers are happy knowing that their specific article of clothing is more “rare” due to only having an average of a two-week window to purchase the clothing. The company specifically targets current trends and has them in the store within 30 days. This maintains the brand’s uniqueness and relativity in fashion.
Miuccia Prada once said that “What you wear is how you present yourself to the world, especially today, when human contacts are so quick. Fashion is instant language”. Miuccia Prada and the Prada brand have grown from humble beginnings making quality leather goods to a public traded company with a current market capitalization of over $26 billion (USD) . With the development of Prada as one of the world’s premier luxury brands it provides an excellent case study to examine how strategy paved the way for the success of the Prada brand. First, an examination of Prada’s strategic positioning against luxury brand rivals Louis Vuitton Hennessey Moet (LVHM) and Kering (Gucci). The acquisition history of Prada will be reviewed, where some preliminary conclusions can be made about what has been contributing factors to both the successes and failures. Then finally, an evaluation of what the future holds for Prada and the sustainability of its competitive advantage.
H&M is the world’s second largest retailer, only behind its main rival Zara of Inditex (Petro, 2012). The company currently has 3006 stores in 53 countries. The company does not own any factories. H&M outsources production to network of 800 independent suppliers; 75% in Asia and 25% in Europe. In order to increase the efficiency and productivity of its supply chain, the company strategically locates its network of 20 to 30 production offices close to its suppliers. According to Stockholm Newsroom, the pretax profit of the company for the month of June to August of 2013 is $907 million, which indicates an 11 rise in turnover (Pollard, 2013). The company continuous development plan facilitates its goal for both brick and mortar, and online stores expansion worldwide. The target segments for H&M, a category specialist store, are trendsetters and fashion/money conscious males and females ranging from 16 to 40 years old with income ranging $15,000 to $60,000 annually.