{"id":7405,"date":"2015-12-09T23:22:41","date_gmt":"2015-12-10T04:22:41","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/zara-a-better-fashion-business-model\/"},"modified":"2015-12-09T23:22:41","modified_gmt":"2015-12-10T04:22:41","slug":"zara-a-better-fashion-business-model","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/zara-a-better-fashion-business-model\/","title":{"rendered":"Zara: A Better Fashion Business Model"},"content":{"rendered":"

When we think of the fashion industry, we tend to think of long lead times and two annual designer lines or collections: Spring\/Summer and Fall\/Winter. Designing each of these lines often takes place a full year before launch. Thus, if a retailer misidentifies customer demands and has a \u201cmiss\u201d with its designs, it would lose sales, face markdowns and miss targets.<\/p>\n

Zara is a small clothes manufacturer in the north west of Spain and a pioneer of the \u201cFast Fashion\u201d business model which eliminates \u201cfashion misses\u201d risk. The company’s strategy involves stocking very little inventory and updating collections often to deliver the latest emerging fashion trends. This means fast manufacturing, fast shipment, and thus fast purchase; the fast delivery and turnover of apparel creating a sense of scarcity and urgency. Customers understand that most items will be sold-out or replaced within a week or two so they are confronted with quick buying decisions and are encouraged to visit stores often. Case in point, Zara customers visit its store 17 times per year in contrast to The Gap whose customers visit just four times (Fashion: A better business model, 2014). The limited supply of merchandise thus allows Zara to achieve quick sales, no markdowns and limited wastage.<\/p>\n

To effectively deliver on its business strategy and differentiate itself from other retailers, Zara has invested heavily in its IT infrastructure and has succeeded in implementing\u00a0a nimble supply chain. Its operating model covers all stages of the fashion retail process: stores, design, manufacturing,\u00a0and distribution.<\/p>\n

 <\/p>\n

Figure <\/strong>1<\/strong>. \u00a0Zara\u2019s Operating Model Components<\/p>\n

\"Screen<\/a><\/p>\n

Source: Company Website, http:\/\/www.inditex.com\/en\/our_group\/business_model<\/a>, accessed December 2015<\/em><\/p>\n

 <\/p>\n

Design and Stores<\/em><\/p>\n

Instead of designing a collection long ahead of its release, Zara tries to continuously recognize emerging fashion and incorporate them in its designs and products. Through sales data capture and shopper anecdotal feedback, store managers daily report tens of thousands of customer reactions to design teams. Sale trends are analyzed along to runway releases and quickly incorporated into the next line of production, creating a cycle of iteration and innovation.\u00a0Once designed, new fashions are produced in relatively small quantities, so \u201cmisses\u201d can be quickly identified and discontinued and \u201chits\u201d built-upon and re-released.<\/p>\n

 <\/p>\n

Manufacturing<\/em><\/p>\n

One of Zara\u2019s core competencies is its ability to apply \u201cjust in time\u201d manufacturing to fashion production. Most of manufacturing is done close to its home base, in and around the Iberian Peninsula. Garment making is subcontracted to specialists whose automated factories constantly create unfinished colorless (\u201cgreige\u201d) goods. As soon as Zara decides on a new design, the \u201cgreige\u201d goods are sent into Zara\u2019s own finishing shops where they are turned into marketable products. High European manufacturing costs are offset with cost savings associated with fast turnarounds (e.g. less inventory in warehouses, less discounts and markdowns, etc.)<\/p>\n

Logistics<\/em><\/p>\n

Distribution takes place twice a week to ensure store inventories are constantly kept fresh and unique. \u00a0The logistics system, based on proprietary software, ensures that the time between receiving an order at the distribution center to the worldwide delivery of the goods in the store is between 24 and 48 hours. Zara adopts a centralized distribution system with every single item of clothing coming through its distribution center in Spain, ensuring consolidation of orders to individual stores.<\/p>\n

 <\/p>\n

Zara has thus far been extremely successful, with sales growing approximately 10% year on year and reaching $19.7 Bn. in fiscal 2014. Its performance puts it ahead of other \u201cfast fashion\u201d retailers such as Uniqlo and Gap and only second to H&M (Zara leads in fast fashion, 2015). Part of this success comes from its rapid growth in emerging markets (over\u00a0the past few years, 50% \u2013 60% per cent of new store openings were in China, Russia, Poland, Mexico and a few other\u00a0markets (Fashion: A better business model, 2014)). It will be interesting to see whether its winning centralized operating model will stand the strain\u00a0of its global expansion.<\/p>\n

 <\/p>\n

 <\/p>\n

 <\/p>\n

\u00a0<\/strong><\/p>\n

Bibliography<\/h1>\n

Fashion: A better business model<\/em>. (2014, June 18). Retrieved from Financial Times: http:\/\/www.ft.com\/intl\/cms\/s\/2\/a7008958-f2f3-11e3-a3f8-00144feabdc0.html#slide0<\/p>\n

Zara leads in fast fashion<\/em>. (2015, March 30). Retrieved from Forbes: http:\/\/www.forbes.com\/sites\/walterloeb\/2015\/03\/30\/zara-leads-in-fast-fashion\/<\/p>\n

How Zara became the world\u2019s biggest fashion retailer <\/em>(2014, October 20). Retreived from The Telegraph:<\/p>\n

http:\/\/www.telegraph.co.uk\/finance\/newsbysector\/retailandconsumer\/11172562\/How-Inditex-became-the-worlds-biggest-fashion-retailer.html<\/a><\/p>\n

The future of fashion retailing revisited (2015, July 23).<\/em> Retrieved from Forbes:<\/p>\n

http:\/\/www.forbes.com\/sites\/gregpetro\/2015\/07\/23\/the-future-of-fashion-retailing-revisited-part-2-zara\/<\/a> \u00a0\u00a0\u00a0 <\/strong><\/em><\/p>\n

 <\/p>\n

 <\/p>\n

 <\/p>\n

 <\/p>\n

 <\/p>\n

 <\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Zara has the formula to fashion retail success: fast fashion through supply chain innovation.<\/p>\n","protected":false},"author":986,"featured_media":7406,"comment_status":"open","ping_status":"closed","template":"","categories":[597,578],"class_list":["post-7405","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-fast-fashion-uncategorized","category-tom-winner"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/the-tom-challenge-tom-winners-and-losers-assignment\/","yoast_head":"\nZara: A Better Fashion Business Model - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/zara-a-better-fashion-business-model\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Zara: A Better Fashion Business Model - Technology and Operations Management\" \/>\n<meta property=\"og:description\" content=\"Zara has the formula to fashion retail success: fast fashion through supply chain innovation.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/zara-a-better-fashion-business-model\/\" \/>\n<meta property=\"og:site_name\" content=\"Technology and Operations Management\" \/>\n<meta property=\"og:image\" content=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/zara.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1050\" \/>\n\t<meta property=\"og:image:height\" content=\"750\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/zara-a-better-fashion-business-model\\\/\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/zara-a-better-fashion-business-model\\\/\",\"name\":\"Zara: A Better Fashion Business Model - Technology and Operations Management\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/zara-a-better-fashion-business-model\\\/#primaryimage\"},\"image\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/zara-a-better-fashion-business-model\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2015\\\/12\\\/zara.jpg\",\"datePublished\":\"2015-12-10T04:22:41+00:00\",\"breadcrumb\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/zara-a-better-fashion-business-model\\\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/zara-a-better-fashion-business-model\\\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/zara-a-better-fashion-business-model\\\/#primaryimage\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2015\\\/12\\\/zara.jpg\",\"contentUrl\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2015\\\/12\\\/zara.jpg\",\"width\":1050,\"height\":750},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/zara-a-better-fashion-business-model\\\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Submissions\",\"item\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"Zara: A Better Fashion Business Model\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/#website\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/\",\"name\":\"Technology and Operations Management\",\"description\":\"MBA Student Perspectives\",\"potentialAction\":[{\"@type\":\"性视界Action\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Zara: A Better Fashion Business Model - Technology and Operations Management","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/zara-a-better-fashion-business-model\/","og_locale":"en_US","og_type":"article","og_title":"Zara: A Better Fashion Business Model - Technology and Operations Management","og_description":"Zara has the formula to fashion retail success: fast fashion through supply chain innovation.","og_url":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/zara-a-better-fashion-business-model\/","og_site_name":"Technology and Operations Management","og_image":[{"width":1050,"height":750,"url":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/zara.jpg","type":"image\/jpeg"}],"twitter_card":"summary_large_image","twitter_misc":{"Est. reading time":"4 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/zara-a-better-fashion-business-model\/","url":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/zara-a-better-fashion-business-model\/","name":"Zara: A Better Fashion Business Model - Technology and Operations Management","isPartOf":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/#website"},"primaryImageOfPage":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/zara-a-better-fashion-business-model\/#primaryimage"},"image":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/zara-a-better-fashion-business-model\/#primaryimage"},"thumbnailUrl":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/zara.jpg","datePublished":"2015-12-10T04:22:41+00:00","breadcrumb":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/zara-a-better-fashion-business-model\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/d3.harvard.edu\/platform-rctom\/submission\/zara-a-better-fashion-business-model\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/zara-a-better-fashion-business-model\/#primaryimage","url":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/zara.jpg","contentUrl":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/zara.jpg","width":1050,"height":750},{"@type":"BreadcrumbList","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/zara-a-better-fashion-business-model\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/d3.harvard.edu\/platform-rctom\/"},{"@type":"ListItem","position":2,"name":"Submissions","item":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/"},{"@type":"ListItem","position":3,"name":"Zara: A Better Fashion Business Model"}]},{"@type":"WebSite","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/#website","url":"https:\/\/d3.harvard.edu\/platform-rctom\/","name":"Technology and Operations Management","description":"MBA Student Perspectives","potentialAction":[{"@type":"性视界Action","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/d3.harvard.edu\/platform-rctom\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"}]}},"_links":{"self":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission\/7405","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission"}],"about":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/types\/hck-submission"}],"author":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/users\/986"}],"replies":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/comments?post=7405"}],"version-history":[{"count":0,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission\/7405\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/media\/7406"}],"wp:attachment":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/media?parent=7405"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/categories?post=7405"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}