ZARA: FAST FASHION

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ZARA FAST FASHION
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AGENDA

• Industry Overview
• Zara Overview
• Zara Supply Chain
• Zara Challenges
• Recommendations

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INDUSTRY OVERVIEW

• High Demand Uncertainty
• Push vs. Pull Method
• 30 of world production exported from developing
  countries
• Geographic Differences
• Per capita spending and preferences different in
  any given market

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INDUSTRY OVERVIEW COMPETITION
Gap, Inc. HM Benetton Zara
Production Outsourced Outsourced In-House 40 In-House 60 Outsourced
Production Lead Times High High High Low
Net Margins -.06 9.6 7.05 10.47
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INDUSTRY OVERVIEW POSITIONING
Price
Benetton
Gap
Fashion -
Fashion
ZARA
HM
Price -
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ZARA OVERVIEW

• Owned by Inditex (Industria de Diseno Textil)
• Largest of 6 Inditex Chains
• 500 stores in 30 countries
• For women, men, and youth
• From infants to age 45
• Zara starts with Z

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The yoo-goo-goo-lizer you know, the guy that
speaks at funerals!
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ZARA OVERVIEW ADVANTAGES

• Vertical Integration
• Quick Response to Demand (Pull System)
• Small Batch Production
• High Product Turnover
• Central Distribution Center / Strong IT
  System

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INDITEX MANAGEMENT / DESIGNERSDetermine apparel
designs and manufacturing locations
ZARA OVERVIEW SUPPLY CHAIN
System is designed for short production cycles,
quick response (QR) to demand, and reduced
number of markdowns
Manufacturing
ASIA(20) Low QRLow Cost
Design
Sale
Distribution
DISTRIBUTION CENTERIncreased shipment frequency
increases QR Small batch production lowers cost
of demand uncertainty
STORES Decentralized store management
supplements QR Managers determine products
to sell and return
IN-HOUSE (40) High QRHigh Cost
EUROPE / N. AFRICA (40) High QRHigh cost
Returns from stores either rerouted or disposed
of in local stores near dist. center
IT SYSTEMSProvides accurate demand information
to determine manufacturing locations and
production levels
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ZARA CHALLENGES

• Aggressive growth strategy needed
• 76 of equity value based on future growth
  expectations
• Need to maintain competitive advantages in new
  geographic markets
• Data collection, Quick response, High product
  turnover, Strong IT System

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RECOMMENDATIONS

• Short-Term Solution Expand in Europe
• Focus on Italy (63 Billion Euro Market)
• Implement Oil Stain expansion method
• Long-Term Solution Expand Outside of Europe
• Establish operations in North America
• North American Distribution Center (Mexico)
• Initially focus on coastal cities
• Implement Oil Stain expansion method
• Culturally Diverse Management Team

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Q A