Zara Group5

7/29/2019 Zara Group5

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ZARA: FAST FASHION(CASE STUDY)

Group 5 (Section B)

Anurag Nigam 12P072

Pankaj Gurbani 12P079

L R Krishnan 12P083

M Gireesh Babu 12P084

Saumil Parekh 12P091

Zain Zafar Khan 12P120


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INDITEX: TIMELINE OF EVENTS

1963-1974 Amancio Ortega Gaona founded Inditex

1975 The first Zara store Opens in Spain

1976-1984 Expansion of Zara stores in Spain

1985 Zara starts to enter the overseas market (inPortugal)

1989 Enters New York City, USA

1990 Enters Paris, France, Introduction of JIT

1991-2004 Acquisition of Massimo Dutti & Stradivarious,

Launch of Pull & Bear, Bershka and Oysho

2007 Enters R.O.Korea in 30, April at COEX Mall and

Lottte Young Plaza


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ZARA: BACKGROUND

Established in Galicia, Spain in 1975

A key subsidiary of its Spain-based parent company

Inditex

Most popular brand, contributes to 85% of totalEBIT and 76% of total sales

The brand provides an alternative outlook to the

fashion retail business model by:

Rejecting media advertising and blow-out sales Maintaining the bulk of its production process in-house

reducing the cycle times.

It has become one of the leading fashion retailers in

the world


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INDUSTRY ANALYSIS

Bargaining Power of Consumers

Consumers decide whether a fashion is hit or a miss

Consumer preferences vital and determined if a design

is retained or scrapped

Pricing power rests with the company due to perceived

brand image of high fashion

Bargaining Power of Suppliers

Suppliers highly fragmented

Apparel chains had multiple sources for cheap labour

Suppliers had no independent existence

Zara sole/majority buyer from suppliers hence enjoyed

greater bargaining power


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INDUSTRY ANALYSIS (CONTD)

Rivalry

Benetton: large international presence

GAP: significant presence in US

H&M: Inditexs closest competitor Inditex enjoyed greater stability than its competitors

Had lower lead times (6 weeks) and higher

operating margins 22% than competitors


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ZARA: BUSINESS MODEL

Design Sourcing and Manufacturing

Teams used information systems to

track customer preferences and sales

Zaras store managers lead the

intelligence gathering effort thatdetermines what ends up on each

stores racks

Digital assistants (PDAs) used to

gather customer input, staff regularly

chat up customers to gain customer

feedbackThe goal - to improve the frequency

and quality of information system

allows for the best design trends.

About 40% of finished garments

were manufactured internally

Of the remainder, two-thirds of the

items were sourced from Europeand North Africa and one-third from

Asia

Most fashionable items tended to

be the riskiest and were produced

in small lots

JIT implemented allowed lowinventory levels, shorter lead times

and improved quality


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ZARA: BUSINESS MODEL

Centralized distribution system in

Arteixo, Spain

Sources of InformationCentralized Distribution System

Mobile Tracking Systems

Zara known for its innovative supply

chain in retail

Believed in frequent shipment of small

lots Shipment made by 3PL twice a week

Products delivered within 24 48

hours

JIT applied to reduce costs and

Bullwhip effect

Distribution Retailing

About 3/4th of the merchandise on

display changed every three to four

weeks Average Zara shopper visited the

chain 17 times a year, compared with

an average figure of 3-4 times a year

for competing chains

Aggregated demand is ascertained

and the supply is allocated accordingto past performance of the various

garments at the stores


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PROSAND CONSOFZARAS MODEL

Most significant advantage: reduced cycle time due tothe implementation of the quick response system

Different product pre-commitment

Design:

Store managers gather information directly at point ofsale

Design department organized in flat structure

Zara has more staff employed although it is smaller thanH&M- higher labour costs, but lower risk of fashion miss(as H&M)

Continuous tracking of customer preferences, numerousvariations of items

Presentation of items in key stores

Reduced failure rates


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EXPANSION: KEY DECISIONS

Expansion

MarketSelection

MarketEntry

Marketing

Management


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HOWTO EXPAND : MARKETSELECTIONAND

ENTRY

MarketSelection

Open more stores in Spain and adjoining areas where Zara is largely

successful

Go for countries that are similar to Spain in terms of costs like salaries,legal cost and also demand/supply

Target the Asian countries as they offer a huge potential

MarketEntry

Focus on more company owned stores compared to franchising. Highinvestment required in terms of capital and human exp. Currently have225 stores in Spain, 231 in 18 other countries.

Franchising in countries that have legal and administrative issues. Goodfor expansion. Currently have 31 stores in 12 countries

Joint Ventures. Existing JV in Germany with Otto Versand and in Japanwith Bigi. JV with Benetton had failed though


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HOWTOEXPAND : MARKETING

Central Design team in La Caruna 90% range of products same in all storesProduct

Higher distance from distribution centres leads tohigher prices

Decide price based on disposable income of thepopulationPrice

Establish stronghold in Spain and all of Europe

Move towards Asian countries for expansionPlace

Each new collection i.e Winter and Springcollections are advertised

End of season sales marketed heavilyPromotion


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FUTURE STRATEGY

Zara should target the neighboring Europeancountries

Italy

Fashion Capital of the world

Apparel Industry is a big industry

Apparel sales are high due to high number of visits andhigh spending

Competition is stiff due to large number of existing and well-

established players

Germany

Huge potential as a successful market in the coming years

High growth rate of 142%


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FUTURE STRATEGY

Increasing disposable incomes

Market is huge in terms of absolute numbers

Highly fragmented and not a lot of competition,need to take first mover advantage

People becoming increasing fashion-conscious

South-East Asia, China and Middle-East

Open more centres in Asia, close to south-eastAsian countries and middle-east

Inditex to open 2nd distribution centre

Distribution Centres


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THANK YOU

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Zara Group5