ZARA
History of ZARA
ZARA is a Spanish clothing and accessories retail based in Arteixo, Galicia.
The company was sounded in 1975 by Amancio Ortega Gaona and his wife, Rosalia Mera
By 1989 there were 82 ZARA stores in Spain
Ortega began international expansion with ZARA stores in Portugal, Paris and New York
ZARA's parent company Inditex took on 4 other formats; Pull & Bear; Massimo Dutti; Bershka; Stradivarius and in 2001 had launched Oysho
ZARA's unique integrated business model had led to ZARA being desribed as "possibly the most innovative and devastating retailer in the world" by Daniel R. Piette CEO LV Capital
Inditex made an initial public offering os stock in May 2001 and was by then the world's thrid largest clothing retailer
A Sourcing of Dilemma
The Textile and Apparel Industry
a high quality segment encompassing items that incorporate fashion elements and emphasize quality of material and workmanship, such as ladies' suit
a medium quality segment for more basic items where quality of material and workmanship had to be acceptable but where there was little differentiation among producers and relatively little in terms of a time-sensitive fashion component ( cardigans and khakis)
a low quality segment where products had commodity-like characteristics and competed principally on price.
The Textile and Apparel Industry in the E.U. and in Spain
The textile and apparel industry in the E.U. employed about 2 million people in 1999, accounting for 7.6 percent of total E.U. manufacturing employment, and generated a turnover of 178 billion euros.
In apparel, the E.U's special strength was design-driven manufacturing, where design stayed close to the customer and was bound up to with production
The Spanish textile and apparel industry was comprised mostly of many very small firms, and had traditionally not been strong in R&D or technological innovation, nor had it needed to be in order to compete in domestic market
ZARA's Planning and Design Cycle
ZARA had 200 designers on staff, were catwalk-influenced and expected to adapt haute couture style for the mass market
Inditex's CEO, Castellano and other members of his management team, together with Ortega, constantly revisited ZARA's strategy
ZARA had announced that the proportion of outsourced manufacture would grow, initially to 60 percent, to take advantage of increased low cost production coming on-line, principally in China
ZARA produced about 11 thousand style each year, 5 times as many as comparable retailer would typically produce, and all in relatively small batches to begin with
The designers worked in large open spaces at ZARA's headquarters, with one design center for each of the women's, men's and children's lines
The store specialist worked in the same rooms, reviewing daily detailed printouts of store sales and speaking to store managers by phone to gather informal feedback
Patterns and Samples
In some cases designs were sent out to third party suppliers for them to prepare samples
Or the paper pattern and a sample garment were prepared in-house, with ZARA's pattern makers
Patterns once finalized could be made available to the computers that would guide the cutting tools
Production Sourcing and Scheduling
Once the initial collection for a season had been approved, the related fabric procurement and production planning started
The decision to source with external suppliers or to manufacture in-house was besed on a number of considerations, including expertise, relative cost, and time sensitivity
ZARA commited about 15-25 percent of ots season inventory-the more basic items-six months in advance of the season, compared with 40-60 percent for most apparel retailers.
In-house Manufacture
Prilla Lidyana / 29116001 / YP55
In-house manufacture entailed two basic steps: fabric procurement and garment assembly and finishing
Based on decisions about which styles were to be produced an in what sizes, the ZARA factories cut the fabric. The cut fabric pieces were marked and bundled for sewing
Sewing was suncontracted to a network of 400 smaller firms within Galicia and northern Portugal
Deliveries between the ZARA factories and the subcontractors occured many times a week, with subcontractors picking up new work as they left off completed work
In-season Production
ZARA committed only 50-60 percent of production in advance of the season, with the remainder manufactured on a rolling basis during the season
It was the ability to respond in-season that gave ZARA a different fashion risk profile from other apparel retailers
Distribution, Retailing and The Stores
Distribution: Shipment were made out of DC twice a week, by truck to Europe and by air-freight to stores outside Europe
Retailing: Stores managers asked for the items from collection that they wanted at their stores, but the final allocations of inventory were made centrally
ZARA stores were uniform, inluding as to lighting, fixtures and window display, as well as the arrangement of garments, with a targeted floorspace of 1200 square meters
Pricing and Growth Strategy
Pricing: ZARA contrasted its pricing strategy to many others in its business, which set price equal to cost plus a target margin
ZARA's growth had been outward from its base in Spain, with the locations for new stores chosen selectively to stake out sequentially new territories thatb could be supoorted within the ZARA model