ZARA:

THE LARGEST SPANISH

CLOTHING COMPANY
OWNED BY INDITEX

Prepared by: Venkata Rajesh polampalli,

PGDIE-44,
1401108,
Section-B.

Zara, global fast-fashion retailer and largest chain in Inditex group

ZARA Vision
ZARA is committed to
satisfying the desires of its customers.
As a result we promise
to continuously innovate our business
and
to provide new designs made from
quality materials that are affordable.

ZARA Mission Statement

Through its business model,

Zara aims
to contribute to the sustainable
development
of society and that of the environment with
which we interact.

What we know about Zara and

its history?

Zaras founder is the first richest person

in Spain and the third richest person in
the world (2013). This person is Amancio
Ortega (Born: March 28, 1936).
Inditex founder

His doughter:
Marta Ortega

THE CHAINS NAME:

In 1975, the first Zara store was founded

in La Coruna.

In 1988 Zaras
company opened the
first store outside
Spain.

p
o
r
t
u
g
a
l

In 2010 Zaras company

opened his first online shop.

Price

Perceptual Map

X
X

prices
Everyday Low quality

Fashion Value

Sale
Promotion

Feedbac
k
Design

Zara
Display

CONTROL

Cut

Production

Shipment

Sale
Outsource

Outsourc
e
Design

Armani
Display
Co-OP

Outsource

Outsource
Outsource

None

Promotion

Outsource

Hilfiger
Outsource

Outsource

Outsource

Outsource

HeadOffice&
Designlab.

Manufacturing

Logistics

Europe Production
Cost:

$$$$$$$$$$

Fashion Value: ZZZZZZZZZZ

High fashion suits & skirts

Asian Production
Cost:

$$

Fashion Value: ZZZZZ

Commoditized eyewear and plain
shirts

Competitors Copying
Management

Zara

H&M

Once a week shipments

Target

Limited supply designers

Benetton

Mid-season lineup adjustments

Patagonia

Increased seasonal shipments

ore about Zara

Zaras company is owned by Inditex group.

Inditex group contains Zara and more

different brands.

Zara clothing offers quality trend to an

audience:
female
male
adolescent
child.

From Zara derive other

shops like:
Zara home
Zara shoes
Zara accesories

This chain of Spanish fashion stores has

more than 200 designers and a higher
number of models.

Zaras collections are small and sell out

quickly.

Zara has no advertising, the only trade

exhibition is based on trucks
,storefronts,catalog and in the zara bag.

ZARA STORES:
In Zara:
customer
first

ZARA

In Spain Zaras company has:

452 stores and 131 of them with Zara kids
(2013)

2
5
4

Zara Global expansion:

1925

Onli
ne

store
s

store
in 21
s aro
coun
u
tries
nd th
1947
e Wo
in 20
store
rld in
12
s aro
und
86 co
the W
untr
orld
ies in
in 87
2012
coun
tries
in 20
13

60%
Spain

20%
Europe

ZARA Production Facilities

20%
Asia

ZARA Summary
Owned by Inditex

Based in La Coruna, Spain

1947 stores in 87 countries
Fast fashion strategy
30,000 designs per year
40% of designs produce in-house
Stock updated twice a week
Vertical Model limited outsourcing
Zero advertisement

Where are Zara stores in 2013?

1947 stores in 87 countries.

77% of stores are outside Spain.
166 Kiddy's Class stores out of 1947 stores.

Where are Zara stores

in 2013?

Where are Zara stores

in 2013?

Where are Zara stores

in 2013?

Zara Target & price

Zaras consumers are young,
highly sensitive to latest fashion
trends .
Zara sells apparel, footwear and
accessories for women, men and
children .
Zara offers fashion at affordable
price by following the most up to
date fashion trends .

Inditex

Founder: Amancio Ortega Gaona

He Thought:
Consumer would regard clothes
as a perishable commodity just like
yoghurt,
bread or fish to be consumed quickly,
rather than
stored in cupboards, and he has gone
about building a retail business that
provides Freshly Baked Clothes.

Inditex Companies
1. Zara
2. Pull and Bear
3. Massimo Dutti
4. Bershka
5. Stradivarius
6. Oysho
7. Zara Kids (Kiddy's Class)
8. Zara Home
9. Uterque
Total Stores (2013)

Number of
Stores (2013)
1781
825
634
910
816
533
166
363
87
6115

Year of
Creation
1975
1991
1995
1998
1999
2001
2001
2003
2008

INDITEX
2012
Revenue
13.79 billion
Operating income 2.522 billion
Profit
1.932 billion
Total Assets
10.95 billion
Total equity
7.455 billion
Employees
120,000

INDITEX Growth
Fiscal Year

2012

2011

12/11

Net sales (millions of euros)

Net profit (millions of euros)
No of stores
No of markets
Employees
Total Stores (2013)

15,946
2,361
6,009
86
120,314
6115

13,793
1,932
5,527
82
109,512

16%
22%
482
4
10,802

Fiscal Year
Net sales (millions of euros)
Gross profit (millions of euros)
Net income (millions of euros)

2013
7,655
4,486
951

2012
7,239
4,313
944

13/12
6%
4%
1%

INDITEX Gross margin and Operating

expenses
% on sales
Gross margin

2013
58.6%

2012
59.6%

2011
58.4%

Gross profit growth of 4% or 4.5 billion

Millions of euros
Operating expenses

2013
2,861

2012
2,690

13/12
6%

INDITEX Strong Growth

INDITEX Strong Growth

(millions of euros)

INDITEX Net profit

(millions of euros)

INDITEX Sales by geographical area

(%age)

INDITEX Employees by
Geographical area 2011-12
Employees 2012

INDITEX Employees by Gender

2011-12

INDITEX Employees by
Gender 2012

Waste Management

Garments released on the

market VS total industrial waste

INDITEX Number of Employees

INDITEX Results
(millions of euros)

INDITEX Stores

INDITEX Markets

INDITEX Sales by Concept

Concept Name

2013 13/12

1. Zara
5,004
2. Pull & Bear
530
3. Massimo Dutti 575
4. Bershka
702
5. Stradivarius
463
6. Oysho
152
7. Zara Home
196
8. Uterque
33

4%
13%
17%
5%
2%
6%
30%
-

CAGR
(2 year)
11%
13%
12%
8%
8%
4%
21%
3%

CAGR = Compound Annual Growth Rate

INDITEX Global Sales Platform

Store sales (%)

Europe excluding-Spain
Asia & RoW (Rest of World)
Spain
Americas

2013
45%
22%
19%
14%

2012
44%
20%
22%
14%

INDITEX Zara Sales

INDITEX Global Online

Sales

Europe
US
China
Japan
Russian
Federation
Canada

INDITEX Supply Chain Management

Clusters of suppliers

Spain
Portugal

87% of Inditex's total production

Turkey

Morocco
Argentina
Brazil

Banglades
h
China
India

INDITEX Supply Chain

Management

Geographical Distribution of
Suppliers to the Inditex Group 2012

Inditex's Supply Chain in 2012-13

INDITEX Principal Indicators

Principal indicators
Pull & Massimo
Zara
ZARA
Bershka Stradivarius Oysho
Uterque
in 2012
Bear
Dutti
Home
Net sales
(in millions of 10,541 1,086 1,134
1,485
961
314
350
74
euros)
Number of stores
1,925 816
630
885
780
524
357
92
Net openings
120
69
57
74
96
41
47
3
Markets
86
59
60
62
52
35
35
18
New markets in 2012
5
11
10
6
7
4
5
1

ZARA Sales

Zara sales increased by 18% in 2012, up

to 10,541 million

INDITEX (Business
Structure)

Name: Industria de Diseno Textil,

S.A. (Inditex)

Inditex
Group:
subsidiaries

Centralized management: Applying

policies and strategies at group level

Inditex

and

its

INDITEX (Business
Structure)
Head office: La Coruna (Spain)

Sets Inditex strategy

Co-ordinates brands

Provides centralized IT, HR, Logistics,

design and real estate functions

INDITEX (Business Structure)

Textile Sourcing

Manufacturing

Brand Divisions

Logistics (Zara)

Comditel S.A (La Coruna)

Internal
Choolet SA,
Confecciones Fios,
Gonfecciones Goa,
Denlio, Hampston,
Jema Creacione
Infantiles, Samlor,
Stear, Trisko, Zintura,
Glencare, Indipunt
(all based in La
Coruna)

Zara

Zara Logistica SA (La

Coruna, Spain) - 50%
of Zara women and
menswear, serving
Iberia, Americas and
Middle East

Zara Asia Ltd (Hong Kong)

Nikole S.A (La Coruna)
ITX Trading S.A (Freiburg, CH)
Uterque S.A (La Coruna)
Lefties Espana (La Coruna)
Tempe S.A. (Alicante)

Tempe, Inditexs
footwear company is
only 50% consolidated
at corporate level, but is
solely responsible for
sourcing,
manufacturing and
distributing footwear
for the group.

External
Inditex works with
around 1,500 external
suppliers around the
world.

E-commerce
ITX Fashions Ltd
100% (Ireland)

Pull & Bear

Massimo Dutti
Bershka
Stradivarius
Oysho
Uterque
Zara Home

Each Inditex brand is

managed
independently with
its own logistics and
production facilities.

Plataforma Europa SA
(Zaragoza, Spain) 50% of Zara women
and menswear, serving
non-Iberian Europe,
Russia and Asia
Plataforma Logistica
Leon SA (Leon, Spain)
Zara Home and Zara
distribution
Plataforma Logistica
Meco SA (Madrid,
Spain) manages Zara
childrenswear

INDITEX (Business Structure)

Traditional model
Opposite of traditional clothing
cycles
Pull type production process
Quick response
Design
Real-time sales information from
its stores
Small batch quantities allow the
retailer to see what items are
Sourcing
working with shopper
A central distribution centre in
Arteixo, with strong IT systems
developed by Inditex and third
Store
parties, supports its supply chain
model
All items are shipped back to
Spain where they are then shipped
Customer
out to stores around the world
60

Inditex model

Customer

Store

Design

Sourcing

INDITEX'S Waste Management

ZNormativa: Set of
rules and
regulations
common to all
suppliers to
optimize
Packaging process
Waste
management
Distribution and
logistics

Good Waste Management Practices:

Methodology of work used to manage
waste to
Reduce content of packaging material
Improve waste separation and
storage
Facilitate recycling

ZARA Business Model

1.Develop system
short lead times

that

requires

2.Decrease quantities produced to

decrease inventory risk
3.Increase the number of available
styles and/or choice

ZARA Competitive Advantage

Cost Leadership
Fashionable (quality) at reasonable price
1.
Based on Product Positioning:
ZARA is cheaper price than Benetton and GAP, and still being
fashionable
Fast Production
2.
Ability to Design and get finish goods in stores
within 4 to 5 weeks
3.
Very quick to get designer-influenced
products into their stores
Product Variation
4.
Ability of ZARA to launch new trends, design and variation of
product
5.
6.
7.

Low Level of Inventory

Efficient Distribution System
Turnover of Product is High

ZARA Objectives
Maximize Profit:

Maintain an ability to go further

fashionable
(quality) at reasonable price
ZARA positioning
Before
+ Price

Transform

Objective/Expectation
+ Price

+
-

ZARA fashion

+
Fashion

ZARA
(New)

ZARA Objectives

Analysis map of Zara

Adapted from the Survey.

ZARA Objectives

Continuous design, production and distribution

Creative Departments:
Staff = 200+
Delivery: Garments
arrive in store within
48 hours of ordering

Shipping: From
Logistics centres to
stores, road and air

Finishing: Garments
are pressed, dressed
and quality checked

Design, Product
and market Cycle;
1. Final design : 1 day
2. Manufacture : 3-8 days
3. Transport
: 1 day
4. Selling
: 17-20 days
TOTAL : 22-30 days

Sewing: Cut fabric is

shipped to workshops
to be stitched

Samples: Prototypes
made in-house and
by suppliers

Spreading: Material
for garments laid out
in layers and marked

Cutting: A machine
cuts the fabric according
to the patterns

ZARA Strategies
MIS

Production
&
distribution

Objectives

Design

Marketing

ZARA Strategies
Production & distribution

Maintain quality
Cost leadership
High bargaining power to suppliers
Fast distribution system

Design
Coordinate with R & D and stores
to get the new trends
Ability to produce new trends

ZARA Strategies
MIS
Product distribution system
Improving inventory system
Order information flow stores
ordering system

Marketing

R&D
Market penetration
Market , location of stores , consumer
behavior analysis

ZARA Value Chain

MIS
Production :

MIS

Store

Store

Store

Store

Factory & distributor

Inventory

Store

Check the
Material availability
then deciding
How much this
product will be
Produce

Design

Close watch
On trend and
Buying Behaviors

Marketing :

Commercial Team
& designer

Market Research
and Analysis

MIS

MIS

Strengths
Ability to recreate fashion
Owned 1947 stores and Active use
of stores
Cost leadership strategy
Differentiated in high price fast
fashion industry
Dedicated supply chain process
Vertical
systematization
of
production process
Efficient distribution and High

Weaknesses
Centralized distribution system
Doesn't spend much money on
advertising
Lack of online stores in many
countries
Repeated sales of out-of-stocks
Low quality

Opportunities
Growth of fashion market
Diverse cultural area
Constant use of social media
marketing strategy
Online marketing strategy
Global market penetration
Distribution center in US
Expanding into potential new market
e.g. China, Australia

Threats
Emerging new comers
Local and Global competitors
Cheaper alternatives may be available
in economic downturn
Zara based in Spain and has a great no
of stores in Europe will dent in revenues
Limitation of design copies
Product Cannibalism

ZARA International Strategy

Combined Strategy:
1. Cost Leadership is usualy captured in mass
production (mass product, less
differentiation) Standardization
2. Differentiation Strategy is ussualy
captured to produce goods that are more
value added fashionable, fast delivery
customization
. Good Consideration:
1. Market selection
2. Marketing approach

ZARA International
Strategy
Market Selection

Market
Entry

International
Strategy

Marketing
Approach

ZARA International
Strategy
Market Selection:

ZARA International
Strategy
Market Selection:

ZARA International
Strategy
Market Selection:
Consideration
Characteristic or behavior of
Consumers
Country

Character of Consumers

French

More Fashionable (Quality

Oriented)

German

Price Sensitive

Italian

More Fashionable

USA

Less Trend

Japan

More Trendy

British

Stores Based on Social Affinity

ZARA International
Strategy
Market Entry:
Economics
Factor

Market Entry
Consideration

Market Entry

Barriers Factors

Government

ZARA International
Strategy
Market Entry:
Consideration
Economics
Macroeconomics Factor :
tax, political condition, export
tariff
Microeconomics Factor :
Local Competitors
Demand
Location of Store
Government
Regulation from Government
Barriers
Local producers protection issues

ZARA International
Strategy
Marketing Approach:
Consideration
4 P consideration Product, Price,
Promotion
and Placement. Each Country has
different
marketing approach.
Product local preferences, design,
trends
Price different pricing strategy for
each
country. For example: Italy and Paris
has no
problem for price but qualityoriented, but
German has sensitive price.

ZARA Financial Position

as Compared with
Competitors
GAP

H&M

-0.06%

9.60%

7.05%

10.46%

1.82

1.96

0.74

1.25

ROA

-0.11%

18.78%

5.25%

13.05%

ROE

-0.27%

24.85%

11.93%

22.88%

Net Margin
Asset
Turnover

Benetto Inditex
n

ZARA Inventory Management

Focus
on
reducing
response time

Approximately
11,000
new
items per year,
compared
with
2,000-4,000 for
H&M and Gap.

ZARA Inventory Management

Stock outs: Common

Short shelf life: More

customers
Inventory holding:
ZARA: 6 days
H&M: 52 days
Cortefiel (Spain): 94
days

ZARA Forecasting

Extensive market research

Quick input and output

response

Frequent new styles

Near-term forecasts

Customer feedback

Short product life cycles

Reduce errors
Improve current products

ZARA Procurement

In-house production: Half

Each clothing line: Separate

staff

Basic textiles: Global suppliers

Simple items: Outsourced to

China.

Difficult items: Zara factories

and domestic outsourcing

Most suppliers: Close to

distribution centers

ZARA Production Planning

Design & Production

Centre: Centralized

Supply chain: Constant data

flow

Retailers: Have authority to

change 40%-50% orders

Factories:
Single-shift
Change quickly according to
demands

ZARA Warehousing

High-velocity shipping: Rapid

information flows

Stores: Electronically
connected to headquarters

Logistics system: Speed and

flexibility

Products:

Selected
Sorted
Routed
Delivered
Local distribution centers
Retail store stockrooms

ZARA Transportation

Distribution: 2 weeks

Supply chain: Quick

response

Transportation network:
Effective and efficient

Zara Promotes: Service

quality

Zara Coordinates: All

aspects of logistics

Production Commitment and Markdown

6-month
Pre-season

Traditional
Industry
Model

Zara

45-60%

15-25%

Start of season

In-season

80-100%

0-20%

Advertisement

Advertisement
+
Markdowns

50-60%

40-50%

Fresh items

Sales%
Not at full
price

30-40%

15-20%

Recommendations to ZARA
KEY PROBLEMS:
Emphasize on high efficiency and fast
production processes

Demotivation of workers

Quality drops

Lack of inventory tracking

Inability to check inventory within

stores

Real time counts and scan must be

done.

Recommendations to ZARA

ZARA SEEMS TO:

Go in the right direction

Grow at a remarkable rate
Show no signs of slowing down

ZARA SHOULD:

Expand in each district/region

Expand into North American and Asian markets

Continue growth throughout Europe

Increase its production and reduce costs by

outsourcing to Asian countries

Recommendations to ZARA

CHANGE THE SYSTEM

CentralizedTransform
Decentralized
Build decentralized distribution &
Production in each region (Asia,
Europe & America, more is better) to
Penetrate new market & trend
Decrease the complexity of process

Recommendations to ZARA
INCREASE ADVERTISEMENT

Part of marketing

Bridge between customers and companies

INCREASE NETWORKING CAPABILITIES:

Ineffective communication between its

stores and the home office.
Currently used POS terminals are not
connected to other store POS terminals
or to corporate headquarters.

Recommendations to ZARA
Improve IT Infrastructure

Efficient for past operations

Insufficient
technology

with

modern

Ineffective in future as
continues
to
grow
and
internationally

company
expand

to

deal

References
1.

2.

3.

4.
5.
6.

Bureau of Labor Statistics (2011). International

comparisons of hourly compensation costs in
manufacturing,
2010.
http://www.bls.gov/news.release/pdf/ichcc.pdf
Werner International management consultants (2012).
Comparison of the hourly labor cost in the primary
textile industry winter 2011.
Verlina N. Whatley (2011). Case Analysis of Zara: IT for
Fast
Fashion
http://www2.uhv.edu/luj/MGT6352/
Samples/Student%20Sample%202.pdf
http://en.wikipedia.org/wiki/Zara_(retailer)
http://en.wikipedia.org/wiki/Inditex
http://www.inditex.com

ANY QUESTION?