Zara

1
Zara

• Jose Berengueres Tokyo Institute of Technology
  2002.7.16

2
Zara

• HQ locations

3
Facts and Figures
Net Income 340 M Net Sales 3 249 M Market
Value 9 bilion Euro Employees 26 000 1300
stores worldwide 20 000 apparel clothes a year
10.5
Net Operating Profit
HM 8.5 GAP 6.5

• (figures in Euro)

4
Key to Success Listen the customer

• 1.Flexibility
• Trend-tracking
• 2.Vertical
• Integration
• 3.Total
• Control
• 1 50 of apparel produced in season
• 2 50 produced in-house

• (2001 data)

5
Holding Company, controls over 100 subsidiaries
comprising retail, manufacturing and logistics,
finance
INDITEX STRUCTURE
INDITEX
100
100
RETAIL CHAINS,7 (MARKET SEGMENTATION)
100
9 State of Art FACTORIES in Galicia
Cutting, dying, garment production Facilities
APPAREL
HQ Logistic Center
QUALITY CONTROL
Subsidiaries (100)
PRE CUTS
APPAREL
Workshops (350)
APPAREL
ok
50
Shipping
Out House Production SUPPLIERS (including sweat
shops)
Grey economy

6
Origin of Garments

• 2001 data

7
Origin of Finished Apparel
 

• 2001 data

8
Work Force Facts

• Average age 26
• 78 Women
• 80 in Retail
• 8.5 Manufacturing

• (2001 data)

9
Business Strategy
 
KEYWORD Fashion Risk
How to Minimize Risk? 1.Produccing High
component fashion nearby (Galicia, Portugal)
?Flexible prod. 2.Outsource Low component
fashion (Basics) In cheap countries ? GAP
seasson canpaign model
The higher the fashion component of an apparel,
the Higher its returns might be (premium), BUT
Risk Increases as COST increases.
Fashion
Cost
Risk
- Risk
- Cost
- Fashion

• 1. A new apparel model of Zara usually starts
  with in a small production batch, which, if its
  well received by costumers, is increased
  gradually otherwise, in case the new model does
  not sell, as the factories are nearby, the
  production can be reoriented or even stopped

10
Worldwide Prices

• (2001 data)

11
Cycle of a New Product
Design prototype
Customer Need
Precuts
QC? Shipping twice a WEEK By AIR 48 h or TRUCK
24 36h (in EU)

• (NY shop) Notes SM Orders through PDA with a
  store inventory of the the last 3 days.
• change show Windows change 2 a week. Shippements
  are 2 a week. This production cycle last 2 to 5
  weeks. Store Inventory 1 month

12
All designs are digitalized

• (NY shop)

13
Summary

• Zara sells medium quality apparel at reasonable
  prices. Shipping twice a week means
• Overhead Transport costs But allows
• Tracking of customer preferences ? Premium
• Stores operate with 1 month stock ? savings
  less risk

• (NY shop)