Zara: Fast Fashion & Global Expansion

• Zara undergoes one of the fastest global expansions, opening one store per day and entering ninety-six markets.
• Zara's profitability ranks among the highest in the industry.
• Zara's items resemble high fashion at inexpensive prices.
• Zara's strategy is counterintuitive, and relies on technology.

Gap: An Icon in Crisis

• Too much unwanted product forces a firm to mark down or write off items.
• Leveraging cheap contract manufacturing in developing countries keeps costs low.

Don't Guess, Gather Data

• Stores determine the types of things customers want to buy by asking them.
• Zara's store managers influence the products that the firm produces.
• Armed with custom staff use apps on mobile devices (initially Windows PDAs, now touch screen iPods) to chat with customers and gain insight on what patrons would like to see in stores.
• As much as 70 percent of salaries come from store sale performance.
• Staff look for evidence in the piles of unsold items for evidence of trends.
• Point-of-sale (POS) systems tally information on what's selling via cash registers, which ring up sales and deduct sold items from inventory.
• Feedback rather than hunches and guesswork helps the firm to plan new styles and issue rebuy orders.
• Design and planning teams aim to improve decision quality and frequency.
• Zara designs follow evidence of customer demand rather than pushing new lines via catwalk fashion shows.
• Rather than designing a collection before the season, Zara comprehends what the customers like, and then they design and produce it.
• Data on what sells and what customers want goes directly to the designers who produce thirty thousand items a year, versus two to four thousand items at big chains like H&M and Gap.
• The Zara design staff uses young and fresh graduates from design school.
• Teams are regularly rotated to cross-pollinate experience and encourage innovation.

Manufacturing and Logistics

• Zara excels at locally targeted designs getting onto store shelves quickly.
• A Zara concept averages fifteen days to go from idea to appearance in store.
• Vertical integration and coordinated technology and logistics allow Zara to be responsive.
• Vertical integration means a single firm owns several layers in its value chain.
• A data-driven fashion sense blended with math is how profits are generated.
• Inventory optimization models determine how many of which items in which sizes should be delivered to each store during twice-weekly shipments.
• Many items are stitched together through a network of local cooperatives, that have worked with Inditex, after cutting and dying.
• The firm leverages some contract manufacturers, but most of those are located close (Portugal, Morocco, and Turkey).
• Clothes are ironed, packed on hangers, and include security and price tags to save time for salespeople.
• Custom-made security tags include RFID (radio frequency identification) technology, capable of wirelessly emitting unique identifying codes.
• Zara knows where specific item are with RFID.
• If an item is asked for, staff can use apps on an iPod Touch to know if a product is in store, in a nearby store, or if it can be ordered from Zara.com.
• From Walmart to JCPenny, firms have been unable to implement RFID, but Zara's vertical integration is an advantage.
• Zara controls the entire supply chain, all items flow through one of two warehouses, and Zara can affix tags to all products before sending them out to stores.
• Stores send tags back to Zara warehouses for reuse and reassignment of a tag's identification number.

Stores

• Most products are manufactured for a limited production run to cultivate exclusivity.
• Each Zara store is stocked with items tailored to the tastes of local clientele.
• Customers are encouraged to buy right away and at full price.
• New, limited-run items encourage customers to visit often.
• Zara customers average seventeen visits per year compared with only three by competitors.
• It achieves this without advertising.
• Limited production runs reduce the risk of making a mistake.
• Headquarters directs in-store operations, while stores provide data.
• The staff is scheduled based on each store's forecasted sales volume through internal software.
• Locations staff up at peak times such as lunch or early evening
• Store displays are directed centrally.

Integrating E-Commerce

• Zara views e-commerce as a key part of its omnichannel strategy.
• An approach that blends online and offline sales to benefit the customer.
• Online and offline sales are viewed as very similar to being from the exact same source, and is not broken out as a separate number.
• Zara utilizes 52 special e-commerce stockrooms capable of delivery to stores or customer homes so as to expand the firm's ability to fulfill e-commerce orders.
• One review of fashion e-commerce apps rated Zara's offering as best-in-class.
• There is no impact or cannibalizing of existing in-store sales.
• Its unique product line and price gives Zara price cushioning.
• Zara seems blends its approach to online perfectly with its overall strategy/technology alignment.

COVID-19 Response

• Inditex sales dropped when 88 percent of stores closed by spring 2020.
• A 44 percent drop in quarterly sales led to the firm's first ever loss
• Integrated inventory and omnichannel systems helped limit the losses due to the pandemic.
• E-commerce sales shot up 95 percent in April 2020 and increased 50 percent that same quarter, representing 14 percent of pre-pandemic sales.
• The RFID system helped shift inventory from closed stores to meet increased e-demand.