case study zara

Zara Case Study: How Zara Lead The Fast Fashion Market?

Supti Nandi

Updated on: April 8, 2024

You asked, and we listened! Get ready to dive into the fascinating world of Zara with our highly requested Zara Case Study. 

Recently, Zara has been trending in Instagram reels and YouTube shorts for its funky model poses. You must have seen it too! Have you wondered what made this Spanish brand so famous?

You may say that Zara works on the concept of fast fashion, which makes it win in the competitive market. 

Well, that’s true but it is not the only reason. Let’s uncover the secrets behind Zara’s success through the Zara Case Study.

Let’s begin!

(A) Zara: A Brief Overview

Zara, a notable name in the fashion industry, is a Spanish retailer known for its distinctive approach to clothing and accessories. Operating on a fast fashion model, Zara excels in swiftly adapting to evolving fashion trends, setting it apart in the market. With a vertically integrated process, the brand manages everything from design to production in-house, allowing for efficient and responsive operations.

You’ll find Zara stores globally, each offering a diverse range of trendy and affordable clothing for men, women, and children. The brand’s commitment to delivering fashion-forward pieces at accessible prices caters to a broad audience, reflecting its significance in the industry.

Do you know what is fast fashion?

Fast fashion is a business model characterized by quickly producing affordable, trendy clothing items to meet rapidly changing consumer demands.

Zara works in the same way. We will look into its details in the upcoming section. Before that, let’s go through the profile of Zara-

What makes Zara stand out is its ability to balance responsiveness in manufacturing, a well-structured supply chain, and a keen understanding of consumer preferences. This combination has established Zara as a trendsetting and influential player in the fashion landscape. Its adaptability and dedication to making fashion trends accessible have solidified Zara’s place as a recognizable and influential name in the fashion industry.

(B) Zara Case Study: History & Evolution

Zara’s journey began with a dress-making factory called Inditex, established by Ortega in 1963. Over the years, Zara expanded its presence from Spain to Portugal and eventually to other European countries, the United States, and France.

Today, Zara boasts nearly 6,500 stores across 88 countries worldwide.

Let’s dive into the history of Zara in detail-

Zara is the flagship brand of the Inditex group, which is one of the world’s largest fashion retail conglomerates.

The head office of Zara is located in Arteixo, in the province of A Coruña, Galicia, Spain. Inditex also owns other popular brands like Massimo Dutti, Pull&Bear, Bershka, and Stradivarius.

(C) Brand Philosophy of Zara

Do you know why Zara stands out among its competitors? Due to its brand philosophy! Sara’s success hinges on several key principles-

Zara’s strategy is strikingly different from traditional fashion retailers. Reason? Fast fashion concept and in-house production of clothes! Go through the next section for detailed information.

(D) Zara Business Model: Effective Working Strategies

In this section, we will dive into the business model of Zara to determine its working strategies that played a huge role in its success-

Let’s dive into the details-

(D.1) Fast Fashion Model

Zara is known for its “ Fast Fashion ” approach. It releases new collections frequently, sometimes launching over 22 new product lines per year. This agility allows Zara to respond swiftly to changing trends and customer preferences.

• Rapid Trend Replication: Harnessing cutting-edge information technology, Zara excels at swiftly replicating prevailing fashion trends. This enables the brand to stay ahead of the curve, delivering the latest styles to customers promptly.
• Group Design Approach: Departing from the conventional individual designer model, Zara adopts a collaborative approach. Teams of designers work in synergy, fostering enhanced creativity and efficiency in product development. This collective effort ensures a diverse range of products aligned with dynamic market demands.
• Cost-Effective Materials: Zara strategically utilizes affordable materials without compromising on quality. This approach allows the brand to maintain competitive pricing while delivering products that meet or exceed industry standards. The focus on cost-effective yet quality materials contributes to Zara’s accessibility and broad customer appeal.
• Competitive Pricing: Zara optimizes its production costs by outsourcing to countries with cost-effective labor. This global approach not only supports competitive pricing but also facilitates the brand’s ability to swiftly adapt to market demands. The combination of efficient production and competitive pricing reinforces Zara’s position as a leader in the fast fashion landscape.

(D.2) Product Range

Let’s briefly look at its product range too-

• Clothing: From chic dresses and tailored suits to casual wear and activewear.
• Accessories: Including bags, shoes, belts, and jewelry.
• Beauty Products: Fragrances and cosmetics.
• Perfumes: Zara has its line of fragrances.

(D.3) Vertical Integration: In-House Operations & Logistics

Zara’s way of doing business centers on something called vertical integration. Here is how it works-

• Design: Zara takes charge of creating its designs, meaning it controls how its clothes look and stay on-trend. This ensures that what you find in Zara stores reflects the latest fashion trends.
• Manufacturing: Zara doesn’t just design; it also makes its clothes in-house. This is a big deal because it lets Zara make changes to its products fast. If there’s a new trend or customer feedback, Zara can respond quickly, which is pretty cool.
• Shipping and Distribution: Zara doesn’t stop at making the clothes; it handles everything from getting them to the store to making sure they’re sent to the right places. This full control of the supply chain ensures that the clothes you see in Zara are not only stylish but also reach the stores efficiently.

In short, the fast fashion concept, vertical integration, and supply chain efficiency helped Zara to achieve impressive milestones.

(E) Revenue Model of Zara: How does Zara make money?

Do you know Zara earned Rs.2,562.50 crore in India? That’s not all. It earned over 23 billion euros from its stores worldwide.

That’s quite amazing! Isn’t it?

But how does Zara earn such a whopping amount of money? Due to its impressive revenue model.

Let’s go through them one by one-

Let’s briefly dive into Zara’s finances for the years 2022 & 2021-

That’s how Zara is going through its purple patch in terms of revenues!

(F) Zara Marketing Strategies

Zara, the renowned Spanish fashion retailer, has crafted a distinctive marketing strategy that contributes to its global success. In this section, we will delve into the key elements of Zara’s marketing approach-

(F.1) Fast Fashion Strategy

The fast fashion model functions as a highly effective marketing strategy for Zara in several ways. First and foremost, the rapid turnover of collections, with over twenty product lines per year, creates a sense of urgency and novelty for customers. This continual introduction of fresh styles not only keeps Zara top-of-mind but also fosters a dynamic shopping experience, encouraging frequent visits to discover the latest trends.

Moreover, the quick response to changing trends and customer preferences positions Zara as a trendsetter, appealing to fashion-conscious consumers. The ability to swiftly translate runway trends into accessible and affordable pieces reinforces Zara’s image as a go-to destination for staying in vogue.

Additionally, the limited production batches contribute to an atmosphere of exclusivity, prompting customers to make timely purchases to secure unique and in-demand items. This scarcity-driven approach enhances the perceived value of Zara’s offerings.

In essence, the fast fashion model serves as a powerful marketing tool for Zara by creating a sense of immediacy, exclusivity, and trend relevance, fostering customer loyalty and consistently attracting a diverse audience seeking the latest in fashion.

(F.2) In-Store Experience

Zara places a strong emphasis on crafting an exceptional in-store experience, carefully curating showrooms to exude an atmosphere that is both exclusive and professional. The meticulous design choices contribute to an ambiance that goes beyond a mere shopping space, creating an environment where customers feel engaged and inspired. 

The meticulous attention to detail is aimed at ensuring that every aspect of the in-store setting is carefully considered, from layout to lighting.

This focus on the in-store ambiance goes beyond aesthetics—it becomes a vital part of Zara’s marketing strategy. The thoughtfully designed physical stores act as powerful marketing tools in themselves, drawing in customers by providing a memorable and immersive shopping environment. 

By enticing shoppers to explore the latest trends in this carefully curated setting, Zara not only enhances the overall customer experience but also reinforces its brand image as a trendsetting and sophisticated fashion destination!

(F.3) Affordability & Differentiation

Zara strategically positions itself by prioritizing affordable pricing while maintaining a commitment to quality. This dual emphasis allows the brand to resonate with a wide range of customers. By providing stylish clothing at reasonable prices, Zara ensures accessibility, making fashion-forward designs attainable for a diverse audience.

The effectiveness of this marketing strategy lies in Zara’s ability to differentiate itself in the market. The brand stands out not only for its trendsetting designs but also for its adept balance of fashion-forward aesthetics and accessible costs. 

This unique blend positions Zara as a go-to destination for those seeking both style and value, enhancing the brand’s appeal and solidifying its market presence. The affordability and differentiation strategy contribute to Zara’s ability to capture a broad customer base and maintain its status as a leading player in the competitive fashion landscape.

(F.4) Word of Mouth and Limited Advertising

Zara strategically leverages the power of word of mouth and customer recommendations as primary drivers of its marketing efforts. In a departure from traditional advertising-heavy approaches, Zara relies on the subtlety of customer satisfaction and positive experiences to promote its brand.

This unique strategy involves cultivating a strong and positive buzz around Zara’s collections, encouraging customers to share their experiences and recommendations. The reliance on word of mouth creates an authentic and organic promotion of the brand, fostering a sense of trust and credibility among potential customers.

The limited advertising approach doesn’t diminish Zara’s impact; rather, it aligns with the brand’s commitment to providing an outstanding in-store experience and quality products. The positive buzz generated by satisfied customers becomes a powerful force, driving foot traffic to Zara’s stores and contributing to the brand’s sustained success in the competitive fashion market.

(F.5) Social Media Marketing

Zara actively embraces social media platforms as a crucial component of its marketing strategy. The brand leverages platforms like Instagram, Facebook, and Twitter to engage directly with its audience, creating a dynamic online presence.

The strategy involves regular updates across these platforms, keeping followers informed about the latest arrivals, ongoing trends, and behind-the-scenes glimpses into Zara’s fashion world. By maintaining an active and visually appealing presence, Zara not only stays connected with its audience but also cultivates a sense of anticipation and excitement around its offerings.

In addition to direct engagement, Zara strategically collaborates with influencers. These collaborations amplify Zara’s reach, tapping into the influencers’ follower base and creating a ripple effect of brand awareness. 

Through this multi-faceted approach, Zara effectively utilizes social media not just as a promotional tool but as a means to foster a dynamic and interactive relationship with its audience, contributing to the brand’s overall success in the digital landscape.

(F.6) Personalization & Community Engagement

Zara adopts a customer-centric strategy by customizing its offerings to cater to local tastes and preferences. This personalization ensures that Zara’s collections resonate with diverse communities, creating a more inclusive and relatable shopping experience.

Community engagement takes center stage in Zara’s approach. Events like fashion shows or store openings play a pivotal role in fostering a sense of belonging among customers. By actively involving the community in these events, Zara goes beyond being a retailer and becomes an integral part of the local fabric.

Crucially, Zara prioritizes customer feedback. Actively listening to what customers have to say, the brand adapts and evolves its offerings based on this valuable input. This responsiveness not only enhances the overall customer experience but also reinforces a sense of collaboration between Zara and its community. 

In essence, Zara’s commitment to personalization and community engagement contributes to a brand image rooted in customer satisfaction and a genuine connection with the diverse communities it serves.

(G) Sustainability Efforts: Crucial Part of Zara Case Study

Do you know what Zara is famous for apart from fashion? Its sustainability efforts to preserve mother nature! Let’s look at the sustainability efforts of Zara-

Thus, Zara is increasingly conscious of sustainability. The brand aims to reduce its environmental impact by using eco-friendly materials and promoting recycling. Such initiatives resonate with socially aware consumers.

(H) Challenges Faced by Zara

The journey of Zara was not free of challenges. Let’s look at some of the major challenges of Zara- 

Zara brilliantly addressed those challenges to produce effective results that ultimately helped them grow their business.

(I) Summing Up: Zara Case Study

Zara’s remarkable success in leading the fashion market can be attributed to its unique blend of rapid fashion cycles, vertical integration, and a customer-centric approach. By staying ahead of trends with its fast fashion model, ensuring control over the entire production process, and tailoring offerings to local tastes, Zara captures a diverse and loyal customer base. 

The brand’s commitment to affordability, engaging in-store experiences, and strategic use of social media further solidify its market leadership. Zara’s story showcases the power of adaptability, responsiveness, and a strong connection with customers in navigating the dynamic landscape of the fashion industry!

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Apart from selling clothes and accessories at higher prices, still it is among the favourite ones for many!

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Zara Marketing Strategy: The Secret Behind

• October 31, 2024

Zara Marketing Strategy – What’s the secret behind Zara’s rise to become one of the world’s leading fashion retailers? A single clothing store in Spain has grown into a global fashion powerhouse. 

Today, Zara operates more than 2,000 stores worldwide and generates billions in annual revenue. The retail giant keeps up with trends through its unique approach to product development and customer relationships.

This deep dive into Zara marketing strategy will show you their winning formula. You’ll learn about their innovative product strategy, including their quick-response manufacturing system and local market adaptations. 

Red More: Exploring Yakult Marketing Strategy: Case Study

The Origins of Zara

Zara Marketing Strategy – Zara’s path to fashion dominance began in a quiet corner of Spain. A visionary entrepreneur would later change the retail industry forever. You would have found Amancio Ortega working from his home workshop in 1963. He worked alongside his siblings and future wife, Rosalia Mera, as they crafted quilted bathrobes and lingerie.

Here’s something interesting, “Zara” wasn’t Ortega’s first pick for the name. He wanted to name it “Zorba” after the classic film “Zorba the Greek.” His plans changed after he found that there was a local bar with the same name. He got creative with the letters he’d already bought, and “Zara” came to life.

The brand’s first store welcomed customers in 1975 in downtown La Coruna, Spain. It brought a fresh idea to market: stylish clothes at prices people could afford. Ortega’s vision was crystal clear from the start. Speed and efficiency would be the life-blood of his business philosophy.

Zara’s influence now reaches 96 countries with 2,264 stores in prime city locations. The company stays true to its roots as an innovator in fashion. Beautiful, trendy clothes are available to everyone, while sustainability guides their everyday choices.

Innovative Product Strategy

Zara marketing strategy – Zara’s success stems from a revolutionary approach to fashion retail that keeps competitors constantly trying to catch up. Let’s head over to how this fashion powerhouse remains proactive with its innovative product Zara marketing strategy.

1. Localized offerings

Zara’s collections show subtle differences across countries, and this happens by design. The brand carefully adapts its product lines to match local tastes and priorities. 

Chinese customers benefit from Zara’s mutually beneficial alliances with up-and-coming designers like Susan Fang and Calvin Luo that strike a chord with local buyers. 

This thoughtful approach means customers will find pieces that reflect their cultural priorities while experiencing Zara’s signature style, whether they shop in Paris or Tokyo.

2. Frequent new releases

Zara operates at lightning speed to keep their collections fresh. Traditional retailers launch new collections every few months, but Zara brings new designs every two weeks to their stores. 

Their speed-to-market strategy stands out with remarkable numbers: Produces over 450 million items annually, Launches approximately 12,000 new designs each year.

This rapid turnover creates a “see it, buy it, or miss it” mindset that drives customers back to stores frequently. Most retailers see their customers about three times per year, while Zara customers visit approximately 17 times annually.

3. Quality at affordable prices

Zara helps you stay stylish without hurting your wallet. The brand has become skilled at delivering quality at available price points. Their unique approach involves:

• Producing limited quantities of each design to maintain exclusivity
• Selling 85% of items at full price (compared to industry average of 60%)
• Maintaining only 10% unsold inventory (versus industry standard of 17-20%)

Zara marketing strategy works exceptionally well because they quickly adapt to market needs. The brand produces smaller batches and makes adjustments based on live customer feedback instead of investing heavily in seasonal collections. This strategy helps them reduce waste while delivering stylish and affordable clothing.

The brand makes over 50% of their products in-season, and their steadfast dedication to rapid response manufacturing delivers affordable clothes with the latest trends. You will always find current and desirable items in their stores.

Digital Marketing Tactics

Zara marketing strategy stands out in the digital world through its sophisticated online presence. The fashion giant utilizes digital channels effectively to ensure customers return consistently.

A. Social media strategy

Zara marketing strategy – Scrolling through Zara’s social media reveals their distinctive approach to connecting with audiences. 

The brand has built a substantial following across multiple platforms with high-quality visual content that showcases their latest collections and fashion inspirations. 

Their strategy has:

• Instagram for stunning product photography
• Facebook for community building
• Twitter for timely updates
• YouTube for fashion videos and runway shows

Zara’s social approach stands out through their visual storytelling mastery. They avoid overwhelming audiences with advertisements and rely on word-of-mouth and organic social media growth instead. Their content strategy creates visually compelling stories that appeal to their audience.

B. Influencer partnerships

Zara marketing strategy – Zara’s approach to influencer marketing is different from other fashion brands. The company works with micro-influencers instead of celebrity endorsements to create authentic and relatable content. 

These influencers, typically with followings between 5,000 to 50,000, create genuine reviews and share styling tips with Zara products.

This strategy works because it stays authentic. These micro-influencers showcase Zara pieces in their daily lives and make the brand more approachable for you. 

The approach works well especially when you have influencers who maintain closer, more personal relationships with their audiences.

C. Mobile app engagement

Zara marketing strategy – Zara’s mobile app brings digital breakthroughs to life. Did you know that 67% of consumers research products online before visiting physical stores? The app’s revolutionary Store Mode feature has changed the way people shop both online and offline.

Here’s what makes the app special:

• Live item tracking in stores
• Virtual fitting room queue management
• Two-hour click-and-collect service
• Tailored shopping recommendations

Store Mode helps you find available items in your chosen store and locate them on a store map. This natural blend of digital and physical shopping shows how Zara utilizes data to create tailored experiences.

Your shopping with Zara now moves naturally between physical and digital worlds. The brand connects with you through personalized emails, social media, and mobile notifications. You’ll stay updated with the latest trends and offers that match your priorities.

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Zara marketing strategy – Zara’s remarkable trip from a single Spanish store to a global fashion powerhouse demonstrates how smart marketing can reshape an industry. Their winning formula blends rapid production, local market awareness, and affordable quality with state-of-the-art digital tools. 

This fashion giant proves that quick responses to trends and understanding customer needs matter more than traditional seasonal collections. Zara has created a strong connection between online and offline shopping through their innovative mobile app, social media presence, and partnerships with micro-influencers. 

Their Zara marketing strategy shows how modern retail can succeed when businesses put customers first and adapt quickly in an ever-changing fashion world.

Lydia Pricillia

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How Zara’s strategy made her the queen of fast fashion

Table of contents, here’s what you’ll learn from zara's strategy study:.

• How to come up with disruptive ideas for your industry.
• How finding the right people is more important than developing the best strategy.
• How best to address the sustainability question.

Zara is a privately held multinational clothing retail chain with a focus on fast fashion. It was founded by Amancio Ortega in 1975 and it’s the largest company of the Inditex group.

Amancio Ortega was Inditex’s Chairman until 2011 and Zara’s CEO until 2005. The current CEO of Zara is Óscar García Maceiras and Marta Ortega Pérez, daughter of the founder, is the current Chairwoman of Inditex.

Zara's market share and key statistics:

• Brand value of $25,4 billion in 2022
• Net sales of $19,6 billion in 2021
• 1,939 stores worldwide in 2021
• Over 4 billion annual visits to its website
• Inditex employee count of 165,042 in 2021

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Humble beginnings: How did Zara start?

Most people date Zara’s birth to 1975, when Amancio Ortega and Rosalia Mera, his then-wife, opened the first shop. But, it’s impossible to study the company’s first steps, its initial competitive advantage, and strategic approach by starting at that point in time.

When the first Zara shop opened, Amancio Ortega already had 22 years of industry experience, ten years as a clever and hard-working employee, and 12 years as a business owner. Rosalia Mera also had 20 years of industry experience.

As an employee , Ortega worked in the clothing industry, first as a gofer and then as a delivery boy. He quickly demonstrated great talent for recognizing fabrics, understanding and serving customers, and making sound business suggestions. Soon, he decided to use his insights to develop his own business instead of his boss’s.

As a business owner , he started  GOA Confecciones  in 1963, along with his siblings, his wife, and a close friend. They started with a humble workshop making women’s quilted dressing gowns, following a trend at the time Amancio had noticed. Within ten years, that workshop had grown to support a workforce of 500 people.

And then, the couple opened the first Zara shop.

Zara’s competitive positioning strategy in its first year

The opening of the first Zara shop in 1975 wasn’t just a new store to sell clothes. It was the final big move of a carefully planned vertical integration strategy.

To understand how the  strategy was formulated , we need to understand Amancio’s first steps. His first business, GOA Confecciones, was a manufacturing business. He was supplying small stores and businesses with his products, and he wasn’t in contact with the end customer.

That brought two challenges:

• A lack of insight into market trends and no direct consumer feedback about preferences.
• Very low-profit margins compared to the 70-80% profit margin of retailers.

Amancio developed several ideas to improve distribution and get a direct relationship with the final purchaser. And he was always updating his factories with the latest technological advancements to offer the highest quality of products at the lowest possible price. But he was missing one essential part to reap the benefits of his distribution practices:  a store .

So, in 1972 he opened one under the brand name  Sprint . An experiment that quickly proved unsuccessful and, seven years later, was shut down. Although it’s unknown the extent to which Amancio put his ideas to the test, Sprint was a private masterclass in the retail world that gave Amancio insights that would later turn Zara into a global success.

Despite Sprint’s failure, Amancio didn’t abandon the idea of opening his own store mainly because he believed that his advanced production model was vulnerable and the rise of a competitor who could replicate and improve his system was imminent.

Adding a store to his vertical integration strategy would have a twofold effect:

• The store would operate as a direct feedback source. The company would be able to test design ideas before going into mass production while simultaneously getting an accurate pulse of the needs, tastes, and fancies of the customers. The store would simultaneously reduce risk and increase opportunity spotting.
• The company would have reduced operating costs as a retailer. Since the group would control all aspects of the process (from manufacturing to distribution to selling), it would solve key retail challenges with stocking. The savings would then be passed on to the customer. The store would have an operational competitive advantage and become a potential cash cow for the company.

The idea was to claim his spot in prime commercial areas (a core and persistent strategic move for Zara) and target the rising middle class. The market conditions were tough, though, with many family-owned businesses losing their customer base, giant players owning a huge market share, and Benetton’s franchising shops stealing great shop locations and competent potential managers.

So the first Zara store had these defining characteristics that made it the successful final piece of Amancio’s strategy:

• It was located near the factory = delivery of products was optimized
• It was in the city’s commercial heart = more expensive, but with access to affluence
• It was located in the city where Ortegas had the most customer experience = knowing thy customer
• It was visibly attractive = expensive, but a great marketing trick

Amancio’s team lacked experience and expertise in one key factor:  display window designing . The display window was a massive differentiator and had to be bold and attractive. So, Amancio hired Jordi Bernadó, a designer with innovative ideas whose work transformed display windows and the sales process.

The Zara shop was a success, laying the foundations for the international expansion of the Inditex group.

Key Takeaway #1: Challenge your industry’s conventional wisdom to create a disruptive strategy

Disrupting an industry isn’t an easy task nor a frequent occurrence.

To do it successfully, you need to:

• Understand the prominent business mode of your industry and the forces that contributed to its development.
• Challenge the assumptions behind it and design a radically different business model.
• Develop ample space for experimentation and failures.

The odds of instantly conquering the industry might be low (otherwise, someone would have already done it), but you’ll end up with out-of-the-box ideas and a higher sensitivity to potential disruptors in your competitive arena.

Recommended reading:   How To Write A Strategic Plan + Example

How Zara’s supply chain strategy is at the core of its business strategy

According to many analysts, the Zara supply chain strategy is its most important innovative component.

Amancio Ortega and other senior members of the group disagree. Nevertheless, the Inditex  logistics strategy  is extraordinarily efficient and plays a crucial role in sustaining its competitive advantage. Most companies in the clothing retail industry take an average of 4-8 weeks between inception and putting the product on the shelf. The group achieves the same in an average of two weeks. That’s nothing short of extraordinary.

Let’s see how Zara developed its logistics and business strategy.

Innovative logistics: how Zara’s supply chain evolved

The logistics methods developed by companies are highly dependent on external factors.

Take, for example, infrastructure. In the early days of Zara, when it was expanding through Spain, the company considered using trains as a transportation system. However, the schedule couldn’t keep up with Zara’s needs, which had the goal of distributing products twice a week to its shops. So transportation by road was the only way.

However, when efficiency is a high priority, it shapes logistics processes more than anything else.

And for Zara, efficient logistics was – and still is – of the highest priority.

Initially, leadership tried outsourcing logistics, but the experiment failed and the company assigned a member of the house with a thorough knowledge of the company's operating philosophy to take charge of the project. The tactic of entrusting important big projects to employees imbued with the company’s philosophy became a defining characteristic.

So, one of Zara’s early strategic decisions was that each shop would make orders twice a week. Since the first store was opened, the company has had the shortest stock rotation times in the industry. That’s what drove the development of its logistics methods. The whole strategy behind Zara relied on quick production and distribution. And the proximity of manufacturing and distribution was essential for the model to work. So Zara had these two centers in the same place.

Even when the brand was expanding around the world, its logistics center remained in Arteixo, Spain, despite being a less-than-ideal location for international distribution. At some point, the growth of the brand, and Inditex as a whole, outpaced Arteixo’s capacity, and the decentralization question came up.

The debate was tough among leadership, but the arguments were strong. Decentralization was necessary because of:

• Safety and security.  If there was a fire or any other crippling disaster there (especially on a distribution day), then the company would face serious troubles on multiple fronts.
• Arteixo’s limitations.  The company’s center in Arteixo was reaching its capacity limits.

So the company decided to decentralize the manufacturing and distribution of its brands.

Initially, the group made the decision to place differentiated logistics centers where the management of its chain of stores was based, i.e. Bershka would have a different logistics center than Pull&Bear, although they were both part of the Inditex Group. That idea emerged after Massimo Dutti and Stradivarius became part of Inditex. Those brands already had that geographical structure, and since the group integrated them successfully into its strategy and logistics model, it made sense to follow the same pattern with its other brands.

Besides, the proximity of the distribution centers to the headquarters of each brand allowed them to consolidate them based on the growth strategy and purpose of each brand (more on this later).

But just a few years after that, the group decided to build another production center for Zara that forced specialization between the two Zara centers. The specialization was based on location, i.e. each center would manufacture products that would stock the shelves of stores in specific locations.

Zara’s  supply chain strategy  is so successful because it’s constantly evolving as the group adapts to external circumstances and its internal needs. And just like its iconic fashion, the company always stays ahead of the logistics curve.

Zara’s business strategy transcends its logistics innovations

Zara’s business strategy relies on four key pillars:

• Flexibility of supply
• Instant absorption of market demand
• Response speed
• Technological innovation

Zara is the only brand in the Inditex group that is concerned with manufacturing. It’s the first brand in the clothing sector with a complete vertical organization. And the production model requires the adoption or development of the latest technological innovations.

This requirement is counterintuitive in the clothing sector.

Most people believe that making big investments in a market as mature as clothing is a bad idea. But the Zara production model is very capital and labor intensive. The technological edge derived from that investment gave the company, in the early days, the capability to manufacture over 50% of its own products while maintaining an extremely high stock rotation frequency.

Zara might be one of the best logistics companies in the world, but that particular excellence is a supporting factor, or at least a highly contributing factor, to its successful business strategy.

Zara’s business strategy is so much more than its supply chain strategy.

The company created the “fast fashion” term and industry. When other companies were manufacturing their collections once per season, Zara was adapting its collection to suit what people asked for on a weekly basis. The idea was to offer fashionable items at a fair price and faster than everybody else.

Part of its cost-cutting strategic priority was its marketing strategy. Zara didn’t – and still doesn’t – advertise like the rest of the clothing industry. Its marketing strategy starts with choosing the location of the stores and ends with advertising that the sales period has started. In the early years of the brand’s expansion, Amancio would visit potential store locations himself and choose the site to build the Zara shop.

The price was never an issue. If the location was in a commercial center, Zara would build its store there no matter how high the cost was because the company expected to recoup it quickly with increased sales.

Zara’s marketing is its own stores.

The strategy of Zara and her Inditex sisters

Despite Zara’s success (or because of it), Amancio Ortega created – or bought – multiple other brands that he included in the Inditex group, each one with a specific purpose.

• Zara  was targeting middle-class women. ‍
• Pull&Bear  was targeting young people under twenty-five years old with casual clothing. ‍
• Bershka  was targeting rebel teens, especially girls, with hip-hop-style clothing. ‍
• Massimo Dutti  was targeting both sexes with more affluence. ‍
• Stradivarius  was competing with Bershka, giving Inditex two major brands in the teenage market. ‍
• Oysho  was concentrating on women's lingerie. ‍
• Zara Home manufactures home textiles and decor.

Pull&Bear  was initially targeting young males between the ages of 14 and 28. Later it extended to young females of the same age and focused on selling leisure and sports clothing. It has the slowest stock turnaround time in the group.

Bershka’s  target group was girls between 13 and 23 years of age with highly individualized tastes. Prices were low, but the quality average. Almost a fiasco in the beginning, it underwent a successful strategic turnaround becoming today one of the biggest growth opportunities for the group. And out of all the Inditex chains, Bershka has the most creative designs.

Massimo Dutti  was the first retail brand Amancio bought and didn’t create himself. Its strategy is very different from Zara, producing high-quality products and selling them at a high price. It’s an extension of the group’s offer to the higher end of the price spectrum in the fashion industry. It’s also the only Inditex chain brand that advertises regularly.

Stradivarius  was the second acquired brand, with the purchase being a defensive move. The chain shares the same target group with Bershka, making it, to this day, a direct competitor.

Oysho  started as an underwear and lingerie company. Its product lines evolved to include comfortable night and homewear along with swimwear and a very young children’s line. The brand’s strategy was aggressive from its conception, opening 286 stores in its first six years of existence.

Zara Home  is the youngest brand in the Group and the only one outside the clothing sector, though still in the fashion industry. It was launched with the least confidence and with immense prior research. An experiment to extend the Zara brand beyond clothing, it was based on the conservative view that Zara could extend its product categories only to textile items for the home. But it turned out that customers were more accepting of Zara Home selling a wide variety of domestic items. So the brand made a successful strategic pivot.

Key Takeaway #2: The right people are more important than the best strategy

It might not be obvious in the story, but a key reason for Zara's and Inditex’s success has been the people behind them.

For example, a vast number of people in various positions from inside the group claim that Inditex cannot be understood without Amancio Ortega. Additionally, major projects like the development of Zara’s logistics systems and the group's international expansion had such a success precisely because of the people in charge of them.

Zara’s radically different model was a breakthrough because:

• Its leadership had a clear vision and a real strategy to execute it.
• People with a deep understanding of the company’s philosophy led Its largest projects.

Sustainability: Zara’s strategy to make fast fashion sustainable

Building a sustainable business in the fast fashion industry is a tough nut to crack.

To achieve it, Inditex has made sustainability a cornerstone of its business model. Its strategy revolves around the values of  collaboration ,  transparency,  and  innovation . The group’s ambition is to make a positive impact with a vision of prosperity for the planet and its people by transforming its value chain and industry.

Inditex’s sustainability commitments and strategy to achieve them

Inditex has developed a sustainability roadmap that extends up to 2040 with ambitious goals. Specifically, it has committed to

• 100% consumption of renewable energy in all of its facilities by 2022 (report pending).
• 100% of its cotton to originate from more sustainable sources by 2023.
• 100% of its man-made cellulosic fibers to originate from more sustainable sources by 2023.
• Zero waste from its facilities by 2023.
• 100% elimination of single-use plastic for customers by 2023.
• 100% collection of packaging material for recycling or reuse by 2023.
• 100% of its polyester to originate from more sustainable sources by 2025.
• 100% of its linen to originate from sustainable sources by 2025.
• 25% reduction of water consumption in its supply chain by 2025.
• Net zero emissions by 2040.

The group’s commitments extend beyond environmental issues to how its  manufacturing and supplying partners conduct their business . To bring its strategy to fruition, it has set up a new governance and management structure.

The Board of Directors is responsible for approving Inditex’s sustainability strategy. The  Sustainability Committee  oversees and controls all the proposals around the social, environmental, health, and safety impact of the group’s products, while the  Ethics Committee  makes sure operations are compliant with the rules of conduct. There is also a  Social Advisory Board  that includes external independent experts that advises Inditex on sustainability issues.

Finally, Javier Losada, previously the group’s Chief Sustainability Officer and now promoted to Chief Operations Officer, will be leading the sustainability transformation of the group. Javier Losada first joined Inditex back in 1993 and ascended its rank to reach the C-suite.

Inditex is dedicated to its commitment to reducing its environmental impact and seems to be headed in the right direction. The only question is whether it’s fast enough.

Key Takeaway #3: Integrating sustainability with business strategy is a present-day necessity

Governments and international bodies around the world are implementing more stringent environmental regulations, forcing companies to commit to ambitious goals and developing a realistic strategy to achieve them.

The companies that are impacted the least are those that always had sustainability as a  high priority .

From the companies that require significant changes in their operations to comply with the new regulations, only those who  integrate  sustainability into their business strategy and model will succeed.

Why is Zara so successful?

Zara is the biggest Spanish clothing retailer in the world based on sales value. Its success is due to its fast fashion strategy that is based on a strong supply chain and quick market feedback loops.

Zara's customer-centric approach places a strong emphasis on understanding and responding to customer needs and preferences. This is reflected in the company's product design, marketing, and customer service strategies.

Zara made fashionable clothes accessible to the middle class.

Zara’s vision guides its future

Zara's vision, as part of the Inditex Group, is to create a sustainable fashion industry by promoting responsible consumption and production, respecting the environment and people, and contributing to the communities in which it operates.

The company aims to offer the latest fashion trends to its customers at accessible prices while continuously innovating and improving its operations and processes.

Growth by numbers (Inditex)

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Home » Management Case Studies » Case Study: The International Growth of Zara

Case Study: The International Growth of Zara

The emergence of global fashion has transformed the way fashion is perceived in the contemporary world. In the recent years, there has been a surge of global fashion brands; triggered by the intensive involvement of internationalization processes in the fashion industry. Large retailers in search of sustained growth increasingly decide to expand overseas, responding and contributing to the globalization process .

Operating internationally is an increasingly common option for organisational growth . The process becomes a necessity when the domestic market shows increasing levels of competition and commercial saturation. Incidentally, there are increasing numbers of born-global companies deciding to internationalize their businesses from the beginning of their activities, regardless of the domestic market situations. The desire to benefit from the exposure of exclusive brands to foreign markets was one of the key motive for internationalization . Notwithstanding, internationalization strategies differ across retailers and also their results.

During the initiation of an internationalization strategy, fashion retailers should reflect upon the congruence of their product ranges and brand images within the context of the prevalent cultural and trading conditions of the foreign markets. The Spanish fashion retail chain ZARA is one of the most prominent international Spanish brands and one of the most successful amongst fashion retailers, thus is a prime representation of global expansion.

Zara – Introduction

Founded in 1975, ZARA, a Spanish clothing and accessories retailer was originally the brainchild of the Inditex Group owned by Amancio Ortega . Headquartered in A Coruña, Galicia, Spain, Inditex is the world’s largest fashion retailer with ZARA as its international flagship chain store. Beginning with the single store in Spain to the recent launch into Australia, ZARA currently has over 1,700 stores in 78 countries providing exclusive fashion worldwide. ZARA, alone accounted for 64.6% of the Inditex group turnover in 2010. Over time, it has become one of the notable leaders amongst the fashion brands. ZARA was described by Louis Vuitton fashion director, Daniel Piette as “possibly the most innovative and devastating retailer in the world” and CNN described the brand as a “Spanish’s success story”.

The secret of ZARA’s success is in its speed (four weeks for a new fashion idea to hit the retail stores and two weeks for modification of current models) and the feedbacks obtained by store managers are presented to head office, thus enabling it to fine-tune its ideas. There is also firm control from Spain; the sole logistics hub. While 34% of Inditex’s manufacturing is outsourced to Asia, and 14% to parts of Europe including Turkey, those tend to be the more basic items. The high-fashion items which accounts for 49% of what it retails, is cut and finished in Spain though some sewing is done elsewhere.

Business Model of Zara

The core concept of ZARA’s business model is to provide medium quality fashion clothing to the masses at affordable prices. The key to this is vertical integration and quick response.

ZARA’s business model is characterized by a high degree of vertical integration . Time was the main critical factor for consideration, beyond production costs. The vertically integrated structure allowed ZARA to achieve great flexibility and shorten turnaround times; reducing stock to minimum and diminishing fashion risk. Furthermore, vertical integration helped reduce the “ bullwhip effect “, the tendency for fluctuations in final demand to get amplified as they were transmitted back up the supply chain.

The business system covers all phases of the fashion process; designing, sourcing and manufacturing, distribution, and retailing. It has a flexible structure and a strong customer focus in all aspects of its business areas.

• Design – ZARA manufactured its most fashion-sensitive products internally. Designers continuously track customer preferences and place orders with internal and external suppliers. Every year, about 11,000 distinct items are produced compared with 2,000 to 4,000 for key competitors. Production took place in small batches, with vertical integration into the manufacture of the most time-sensitive items. Predictable styles are outsourced to Asia for manufacturing. ZARA is able to design and have finished goods in stores within four to five weeks, and two weeks for modifications or restocking of existing items.
• Sourcing & Manufacturing – Comditel, a Inditex subsidiary does the purchasing of fabric for ZARA. Around half of the fabric purchased was “gray”, undyed to facilitate in-season updating with flexibility in manufacturing a variety of colours and patterns. This process cycle took one week for fabric to be completed. ZARA manufacture its most fashion-sensitive products internally and produce in small batches for the most time-sensitive ones.
• Distribution – ZARA has a centralized distribution system that minimises the lead-time of their goods. Products are received at either the central facility in Arteixo, Spain, or through satellite sites located in Argentina, Brazil and Mexico; where they are distributed simultaneously to all the stores worldwide on a highly frequent and constant basis; Shipped directly from the central distribution centre to retail stores twice a week, eliminating the need for warehouses and keeping inventories low.
• Retail – the store is not the end of the process but rather its restart, as the stores act as market information gathering terminals, providing feedback to the design teams and reporting the trends demanded by customers. Additionally, ZARA provides very limited volumes of new items in the most fashionable of ZARA’s stores and then uses the results of those sales to decide whether the items should also be sold in other locations. The limited volume and short available time successfully created a sense of ‘scarcity’ in consumer’s perception.

Internationalization of Zara

After opening its first store in La Coruña in 1975, ZARA expanded within the domestic market during the 1980s. International expansion started with the opening of a store in Oporto, Portugal in 1988. Currently, ZARA is already operating over the five continents with over 1,700 stores. International sales accounted close to 70% of its total turnover, with Europe being its largest market by far.

ZARA has been identified as a trans-national retailer. On the surface, this may appear as a peculiar classification since they appear committed to a highly standardized operating formula which provides little opportunity for market responsiveness. Analysis of ZARA’s internationalization strategy would indicate otherwise. While the brand image is highly standardized, its product development and merchandising strategy are very flexible and allows for the integration of pan-national fashion trends as soon as it emerges. This is evident by its approach to trading in the British market. ZARA recognizes the appeal that their Spanish origin provided for its brand and clearly understood the distinctive positioning they had within the United Kingdom as a fashion forward retailer. The company therefore focused upon the more fashionable lines within their British stores. Pricing policy within the United Kingdom has been more upscale than their home market in order to exploit their advantages within the British market.

The ‘oil stain’ strategy as described by its management is the pattern of ZARA’s international expansion. It begins with the opening of a flagship store in a major city. After developing and gaining experience to operate locally in the country, they then proceed to have stores in adjoining areas. An example is the flagship store in Paris anchoring a patterning of regional and then national expansion to encompass 67 stores in France by 2002.

Market Selection

One of the key decisions in the internationalization of a firm is the selection of a right country market. Then again, the attitudes of the management can decide where it chooses to expand. The concept of psychic distance, after much revision has been defined as the subjectively perceived distance to a given foreign country. Many factors affect this concept which includes ‘language, business practices, political and legal systems, education, economic development, marketing infrastructure, industry structure, and culture’. These factors form the basis of uncertainty of the management have with foreign markets.

The degree of uncertainty about foreign markets or psychic distance has been proved to be a critical aspect in deciding the direction of its international expansion. Consequently, psychic distance can be a significant deterrent, particularly to the early stages of overseas expansion. As firms become more internationally active, the influence of psychic distance on its market selection decisions diminish; overcoming the psychological barrier. This can be seen in the case of ZARA’s international expansion.

To come to a decision for the selection of markets, ZARA sends a team from headquarters to conduct both macro and micro analysis of the new market to analyse new market opportunities. Macro analysis focusing on the local macroeconomics variables and the likely future evolution, in terms of how it would affect the prospects for their stores; such as property prices, salaries, legal costs, taxes and tariffs. Where else micro analysis focusing on industry specific information concerning local demand, competitors, channels, and store locations availability. The competitive information gathered included data on levels of concentration, the formats that would compete most directly with ZARA, and their potential political or legal ability to resist its entry, as well as local pricing levels.

As mentioned earlier, psychic distance discourages the foreign expansion of firms. This spreading pattern, based on the concept of psychic distance, mirrors the stages approach to internationalization. There is a three stage model of expansion in geographical presence over time. Retailers passed through stages of reluctance, caution and ambition, as they became more pro-active in their response to international market opportunities and experience curve effects influenced managerial perceptions of risk. This is seen in ZARA’s international expansion, as it clearly divides into the three stages.

• Reluctance – 1975 to 1988 it focused expansion in its domestic market. The maturity of the market in Spain led ZARA to look for opportunities through foreign market for corporate growth.
• Cautious – Between 1988 and 1997 they had a more cautious approach, entering about one country per year. In this early stage new to the international environment, ZARA enters geographically and culturally close markets that resembled the Spanish market. For instance in 1990, ZARA started operation in France, Paris a geographically contiguous country and a fashion capital. Further in 1992, Mexico was added; though geographically distant, but is culturally close to Spain.
• Ambition – Experiential learning encouraged the retailer to become more ambitious in their international aspirations. As ZARA gain more international experience, overcoming the psychological barrier; they took an aggressive and rapid global expansion from 1998. This was regardless of cultural or geographical proximity. For example, stores were opened in 16 countries from 1998 to 1999. These countries include Canada, Great Britain, Middle East, Japan, and many more, which differs greatly in practices and culture.

Market Entry

Foreign entry-mode choice is one of a firm’s most important strategic choices. It influences the firm’s degree of control, resource commitment, investment risks, and share of profits. Choosing greenfield and acquisition entry mode would entail for a full control and ownership, whereas a joint venture provides a shared control and ownership. These full-equity entry modes are more susceptible to environmental uncertainties and involve greater exposure to economic and political risk. Furthermore, it requires a greater resource commitment with full-control entry modes with exception to management service contracts. It demands the deployment of assets that cannot be easily redeployed without incurring sunk costs.

On the other hand, the use of shared-control entry modes would gain access to knowledge which local partners have of competitors, markets, and governmental policies. Joint venture characterized by a relatively lower investment and hence provides risk, return, and control commensurate with the extent of the investment firm’s equity participation. It not only entails ownership and control sharing but minimizes country risk. This however may raise issues of managing a partner whose interests may diverge over time. Lastly, in non-equity modes, such as franchising, the foreign firm serves the host market thorough arm’s-length contractual agreements.

ZARA’s business model requires a great control and flexibility, and hence has always tried to keep the maximum control over its operations; wholly owned subsidiaries. The rest of the strategies are carried out when the legal policies or political situation of the country or another intrinsic attributes of the market does not allow them this option. Mainly three different strategies are used for its international expansion, entering into new markets. They adopted different entry modes for different countries, depending on the situation of the target country.

• Greenfields – this is the mostly used and preferred choice of entry by ZARA. Chief advantage of this mode is the total control over the business; the flexibility is high and its adaptation power increases, and flexibility is one ZARA’s key factor of success. It however requires a high level of resources and high degree of commitment, causing a higher level of risk in the case of exiting the market. They adopted this mode in key, high-profile countries with high growth prospects and low business risk.
• Franchising – This mode of entry is typically used in countries where FDI is not viable. They are usually markets that are small, risky, or culturally distant or subject to administrative barriers which encouraged this mode of market participation. Examples are Andorra, Iceland, Poland and Middle Eastern countries where restrictions on foreign ownership ruled out direct entry. Franchisees were generally well established and financially strong players. They are given exclusive, countrywide franchises that encompass other Inditex chains; then again ZARA always retained the right to open company-owned stores as well.
• Joint Ventures – joint ventures agreements are adopted in larger, more competitive markets where there were barriers to direct entry; mostly related to difficulty of obtaining prime retail space in city centers. For instance, ZARA formed joint ventures in Germany and Japan, with firm Otto Versand and Bigi respectively. Otto Versand is the largest German catalog-based retailer and importantly a major mall owner. Bigi a Japanese textile distributor with its knowledge of the local property market encouraged ZARA to sign the agreement to enter Japan in 1998. Bigi’s knowledge was a particularly critical factor in Japan where wide spaces are limited and expensive assets. Nevertheless due to ZARA’s business model, which was difficult to be imposed in such an entry strategy, especially in situations where they have to unify its criteria with their partner in terms of strategy and control; ZARA bought back remaining shares sometime after to dissolve the joint ventures.

Marketing Approach

In the early years of international expansion, ZARA took a very ethnocentric approach with their subsidiaries as replicas of the stores operating in Spain. Reasoning given was that if ZARA’s international segment and product mix were the same, and store management system in Spain had established good results, it would be logical to transplant the same systems.

Conversely, ethnocentric approach stumbles upon unexpected problems, due to the diverse cultural idiosyncrasies of the different countries. This led ZARA to move in the direction of a geocentric orientation, allowing the company to adopt in some cases local solutions rather than merely a replication of their home market. Be that as it may, ZARA still sells mostly homogeneous product for a global market with some adjustments in its marketing mix . For instance, the difference in customer’s size in Asian countries; laws issued in Buenos Aires, Argentina that require the availability of garments for youths in all sizes; cultural differences in countries such as Arab where some garments cannot be sold; and the seasonal differences in the southern hemisphere. Stores worldwide gather information to guide the design department on garment decisions that finally will be produced that can be sold in all markets where ZARA operates. Furthermore, each store manager would decide on specific garments that will be displayed in store to meet the customer’s taste in that area.

The ethnocentric approach encountered some managerial issues as well, with similar reason due to cultural differences in different parts of the world. For example, when the company established the first store in France, Spanish executives quickly discovered that apparently small differences in French and Spanish managerial style became significant aspects for the management of the operation. Thus, the personal relations between the store manager and the employees had to be reviewed and adapted to French idiosyncrasies. Whereas in Spanish stores, the communication flow and personal interactions between managers and employees were based on informal relationships, this did not work well with French employees who expected a formal and hierarchical relationship. The geocentric approach would allow the subsidiary to reach local sensibility without impeding the exploitation and utilization of its core competence .

Pricing was market-based. However, customers effectively bore the costs of supplying the product from Spain. For instance, prices on average as compared to Spain are 40% higher in Northern European countries 10% higher in other European countries, 70% higher in the Americas, and 100% higher in Japan. The higher prices imply a different positioning for ZARA in the international market, in particular to emerging markets. For example in Mexico where they have a lower average income, the targeted customers are from the middle to upper class. The difference in positioning affected stores in a way that ZARA’s overall image had to be presented as high-end rather than a mid-market image.

Product offerings and promotion policies varied minimally internationally. Promotional and advertising efforts were generally avoided worldwide except the biannual sales periods, in line with Western European norms. 85% to 90% of basic designs sold in stores tend to be common throughout the world. While the rest differed due to catering to physical, climate, or cultural differences, for example the smaller sizes in Japan, different seasonality in Southern hemisphere, and special women’s clothes in Arab countries. As tastes converge across national boundaries, the implementation of a rather standardized strategy had become easier over time. Residual differences permitted products that did not sell well in one market to be sold in others.

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