Zara - From 30 euros to 7000 stores

Table of Contents 

A. Introduction

B. Core Philosophies of ZARA

C. Marketing Strategy of ZARA

D. Supply Chain Pattern of ZARA

E. Just-In-Time Production 

F. Conclusion 

Amancio Ortega and Rosalía Mera established Zara in 1975 as a family business in Galicia in the northern part of Spain with mere 30 euros. The first store showcased low-priced similar products of the then-popular, higher-end fashion brands. Amancio Ortega had earlier thought of the name as Zorba after the movie, Zorba the Greek, but changed after he got to know about a bar named the same, a few blocks away, so he decided to name it Zara. In the next decade, Zara’s plan towards fashion and its business model deliberately produced bonding with the Spanish consumer, leading to the establishment of 9 new stores in the heftiest cities of Spain.

CORE PHILOSOPHIES OF ZARA

In 2019, Zara was ranked 29th on global brand consultancy Interbrand’s list of Best Global Brands. Its core values are found in these simple terms: beauty, customer service and sustainability.

1) Customer Service

Enhancing the quality of their customer service along with the brand quality, Zara stores also include Radio Frequency Identification Technology (RFID) which applies cutting-edge networks to track the locale of garments promptly and making those most in-demand quickly available to customers. Due to this technology Zara easily executes its integrated stock management system in the 49 markets of its operating online and offline platforms.

2) Sustainability

Zara’s Join Life collection and the eco-stores are two examples that underline the brand’s unwavering emphasis on sustainability and enriched customer experience. These improvements have been further augmented by a spectrum of new and ingenious projects, such as the installation of clothing recycling cartons in-store and a scheme providing for a free at-home compilation of used garments to complement the delivery of online orders.

3) Beauty

Rather than producing more quantities per style, Zara develops more styles, roughly 12,000 a year. Even if a style sells out very quickly, new styles are continuing to take up the space. This means more options and a greater likelihood of getting it right with the consumer.

MARKETING STRATEGY OF ZARA 

There have been almost zero advertising expenses by Zara and yet, the brand is one of the most powerful retail brands across the world. If there was an epitome of pull strategy based on product and strategic design, then Zara would be among the top 10 contenders. It is the flagship brand of the Inditex group, which has more than 8 brands and subsidiaries in its belt. Out of all these, the one brand driving a lot of revenue towards Inditex is Zara. Handling 7000+ stores across the world. One of the world’s largest fashion retail organisations. A few of the marketing facts can be those of the following: 

1) Creating exclusivity and scarcity

One of the major reasons for Zara being profitable is that it never produces too many products of an individual design, generating scarcity in the minds of the customers prompting them to buy their fav designs quickly as they know they will go out of stock soon. 

2) New range throughout the year

While most fashion brands come up with new designs seasonally, ZARA brings new contours often throughout the year. This makes customers want to visit their stores more repeatedly than others.

3) Making customer feedback a part of the creative process

ZARA tends to take customer feedback very particularly. Employees at their stores have been told to note down what the customers want and this feedback is very quickly sent to the design and production team to make new designs according to the new prerequisites set by the customers. On online platforms, it perennially analyses what customers are scouring for. This investment of customers also helps in building brand loyalty and goodwill. 

 

SUPPLY CHAIN PATTERN OF ZARA

Zara’s greatly responsive, vertically integrated supply chain facilitates the export of garments 24 hours, 365 days of the year, transpiring in the shipping of new products to stores almost twice a week. After the products are designed, they take around 10 to 15 days to reach the stores.

1) Frequency of customer insights collection

Information that is trendy and of customer relevance flows every day into a database at the head office, which is used by designers to create new and unique layers and revise the prevailing ones. 

2) Standardization of product information 

Storages of ZARA have standardised product information, enabling factual and timely preparation of designs with clear manufacturing instructions.

3) Product information and inventory management

By effectively overseeing thousands of fabrics, trims and design specifications and their physical inventory, Zara is capable of designing a garment with an accessible stock of required raw materials. 

4) Procurement strategy

Around two-thirds of fabrics are undyed and are bought before designs are confirmed to collect savings through demand aggregation. 

5) Manufacturing approach

Zara uses a “make and buy” strategy – it produces the more trendy, stylish and riskier items (which need testing and piloting) in Spain and later, outsources production of more traditional designs with predictable demand to Morocco, Turkey and Asia to curtail production costs.

6) Distribution management

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

JUST IN TIME PRODUCTION

The retail giant delivers fashionable numbers catered for different tastes through a controlled and integrated process – Just in Time production.

• Zara’s success banks on maintaining a considerable percentage of its production in-house and making sure that its own factories reserve 85 per cent of their capability for in-season adjustments. In-house production allows the organization to be nimble in the amount, frequency, and variety of new products to be launched.

• Zara also perpetrates six months in advance to only 15 to 25 per cent of a season’s line. And it only locks in 50 to 60 per cent of its line by the start of the season, indicating that up to 50 per cent of its clothes are designed and fabricated smack in the middle of the season.

• If a certain style or design becomes the new must-have on the street, Zara gets to work. Designers churn out the new styles and they're fast-tracked to stores while the trend is still going strong.

• Zara also has extra capacity on hand to respond to demand as it develops and changes. For example, it operates typically 4.5 days per week around the clock at full capacity, leaving some flexibility for extra shifts and temporary labour to be added when needed.

 

CONCLUSION 

The core of Zara’s success story is its centralized enterprise resource planning – central cloud-based software inventory, products, and logistics. Also, Zara gets 85 per cent of the entire price on its clothes, while the industry standard is just 60 to 70 per cent. Zara is one particular illustration of the enterprises that totally comprehend and conform to their customers. The company concentrates on conceding to substantial fashion desires rather than predicting fashion trends for the distant future. This has been the ultimate mantra for Zara's success story.