Zara International: fashion at the speed of light In this world of rapidly moving trends, no...

   

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Zara International: fashion at the speed of light In this world of rapidly moving trends, no company does fast fashion better than Zara International. Shoppers in a growing number of countries – 88 as of April 2016 - are fans of Zara's knack for bringing the latest styles from sketchbook to shopfront at lightning speed and 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 res- ponse to fashion trends have pushed it into the top ranks of global clothing vendors. The chain special- ises in lightning-quick turnarounds of the latest designer trends at prices tailored to the young - about A$35 an item. Louis Vuitton fashion director Daniel Piette has described Zara as 'possibly the most innovative and devastating retailer in the world'.3 Inditex shortens the time from order to arrival using a complex system of just-in-time production and inven- tory management that keeps Zara ahead of the competition. Their distribution centres can have items in Euro- pean stores within 24 hours of order receipt, and in American and Asian stores in less than 48 hours. "They're a fantastic case study in terms of how they manage to get product to their stores so quick', said Stacey Cart- wright, executive vice president and CFO of Burberry Group PLC. 'We are mindful of their techniques.5 The firm carefully controls design, production, distribution and retail sales to optimise 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.6 Twice a week Zara's finished garments are shipped to physical distribution centres that all simultaneously distribute products to stores world- wide. These small production batches help the company avoid the risk of oversupply. Because batches always contain new products, Zara's stores perpetually energise 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 handheid 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 shop sales floors still on the black plastic hangers used in shipping. Shoppers who are in the know recognise 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 very important because that is where shoppers ulitimately decide which fashions make the cut. In a faux shop- ping street in the company's headquarters, stylists craft and photograph eye-catching layours that are emailed every two weeks to store managers for replication. Zara stores sit on some of the hottest shopping streets, including Bourke St Mall in Melbourne, near the flagship stores of Sportsgirl, General Pants and Myer. While those adjacent stores all vie for the same consumer dollar, Zara sells fashion items at a lower price point. It's all part of the strategy. 'Inditex gives people the most up-to-date fashion at accessible prices,' 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. 10 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 com- pany, Industria de Diseño Textil, 12 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.3 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 just 0.3 per cent of sales on ads, making the 3-4 per cent typically spent by rivals seem excessive in comparison. Isla disdains markdowns and sales as well.5 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. 16 Inditex's score of A was averaged from an A+ rating on numbers 1-3 of the above elements and a B for worker empowerment." Is Zara expanding too quickly opening about 400 stores per year?is Will its existing logistics system carry it into another decade of intense growth? Can fast-fashion win the long-term retailing race? 17 QUESTIONS 1. In what ways are elements of the classical and behavioural 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. Zara's logistios system and managemant practices can handle the current pace of growth, but they will need updating at some point in the future. How couid quantitative management approaches and data analytics help Zara executives plan for the next generation of its logistics and menagement approaches? 3. As a consultant chosen by Zara to assist with the expansion of its Australian stores, you have been asked to propose how evidence-based management might help the company smooth its way to success with an Austraian workforce. What areas will you suggest to be looked at for evidence-based decision making, and why? 4. Gather the latest information on competitive trends in the apparel Industry, and on Zara's latest actions and innovations. Is the fim continuing to do welr? Are other retailers getting just as proficient with the fast-fashion model? Is Zara adapting and innovating in ways needed to stay abreast of both its major competition and the pressures of a changing global economy? is this firm still provicing worthy management benchmarks for other firms to follow? Zara International: fashion at the speed of light In this world of rapidly moving trends, no company does fast fashion better than Zara International. Shoppers in a growing number of countries – 88 as of April 2016 - are fans of Zara's knack for bringing the latest styles from sketchbook to shopfront at lightning speed and 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 res- ponse to fashion trends have pushed it into the top ranks of global clothing vendors. The chain special- ises in lightning-quick turnarounds of the latest designer trends at prices tailored to the young - about A$35 an item. Louis Vuitton fashion director Daniel Piette has described Zara as 'possibly the most innovative and devastating retailer in the world'.3 Inditex shortens the time from order to arrival using a complex system of just-in-time production and inven- tory management that keeps Zara ahead of the competition. Their distribution centres can have items in Euro- pean stores within 24 hours of order receipt, and in American and Asian stores in less than 48 hours. "They're a fantastic case study in terms of how they manage to get product to their stores so quick', said Stacey Cart- wright, executive vice president and CFO of Burberry Group PLC. 'We are mindful of their techniques.5 The firm carefully controls design, production, distribution and retail sales to optimise 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.6 Twice a week Zara's finished garments are shipped to physical distribution centres that all simultaneously distribute products to stores world- wide. These small production batches help the company avoid the risk of oversupply. Because batches always contain new products, Zara's stores perpetually energise 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 handheid 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 shop sales floors still on the black plastic hangers used in shipping. Shoppers who are in the know recognise 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 very important because that is where shoppers ulitimately decide which fashions make the cut. In a faux shop- ping street in the company's headquarters, stylists craft and photograph eye-catching layours that are emailed every two weeks to store managers for replication. Zara stores sit on some of the hottest shopping streets, including Bourke St Mall in Melbourne, near the flagship stores of Sportsgirl, General Pants and Myer. While those adjacent stores all vie for the same consumer dollar, Zara sells fashion items at a lower price point. It's all part of the strategy. 'Inditex gives people the most up-to-date fashion at accessible prices,' 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. 10 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 com- pany, Industria de Diseño Textil, 12 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.3 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 just 0.3 per cent of sales on ads, making the 3-4 per cent typically spent by rivals seem excessive in comparison. Isla disdains markdowns and sales as well.5 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. 16 Inditex's score of A was averaged from an A+ rating on numbers 1-3 of the above elements and a B for worker empowerment." Is Zara expanding too quickly opening about 400 stores per year?is Will its existing logistics system carry it into another decade of intense growth? Can fast-fashion win the long-term retailing race? 17 QUESTIONS 1. In what ways are elements of the classical and behavioural 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. Zara's logistios system and managemant practices can handle the current pace of growth, but they will need updating at some point in the future. How couid quantitative management approaches and data analytics help Zara executives plan for the next generation of its logistics and menagement approaches? 3. As a consultant chosen by Zara to assist with the expansion of its Australian stores, you have been asked to propose how evidence-based management might help the company smooth its way to success with an Austraian workforce. What areas will you suggest to be looked at for evidence-based decision making, and why? 4. Gather the latest information on competitive trends in the apparel Industry, and on Zara's latest actions and innovations. Is the fim continuing to do welr? Are other retailers getting just as proficient with the fast-fashion model? Is Zara adapting and innovating in ways needed to stay abreast of both its major competition and the pressures of a changing global economy? is this firm still provicing worthy management benchmarks for other firms to follow?

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1 Zara undoubtedly utilizes components of oldstyle and social administration in manners with the end goal that they recognize what their buyers need so there is clear correspondence from the top to th... View the full answer