Zara has more than 2,000 stores worldwide and its shops are located in prime retail areas where human traffic is high Zara’s strategy is to adapt its offer to the different markets. Zara adapts its items in each country according to client’s needs, fashion trends and store sales. This flexibility is Zara’s secret to success and lies in the extensive network of shoppers with feedback given from a wide range of people from different cultures and generations. Therefore, Zara is very reactive with drawing designs if they’re largely unpopular with 1000 designs a month zara often updates its collections according to sales reported to Spain.
This quick turn over helps to continuously provide new designs by making them available in stores through shipments every two weeks, attracting customers to often visit the shop. Zara has very little inventory because of its demand based production pushing customers to hurry to the shops before they run out of stock. This also allows Zara to have a cost-effective production by lowering its storage cost through vertical integration Zara can operate a fast distribution of products thanks to its own efficient supply chain.
Finally, Zara copies new styles that are trendy and fashionable inspired by luxury brands but that remain at an affordable price. Zara is fast – then its competitors in terms of interpreting trends that are on the runway from higher end designers thanks to the right teams of professional designers. All this is because of its business model which includes an everlasting circle of design sourcing and manufacturing distribution and retailing let’s discuss each of the fronts individually.
Zara’s designers don’t work in silos they are in constant touch with the customers they’ve designed nearly 40,000 products out of which 12,000 designs reach the store, this is the key to fast fashion. 80 to 90 percent of the production takes place in Europe out of which around 50% is produced at the Q La Coruna the headquarters the fabrics are mainly sourced from Italy France and Spain.
Computer-aided design and CNC cutting soft parts are used for optimum fabric utilization designing and cutting is done in-house whereas a major part of stitching is done by subcontractors in their workshops. The stitched garments are received back at the headquarters where a final quality check is undertaken with each lock being checked.
After quality check the garments are sent for packaging the entire packaging process is performed with the help of state of art machinery with minimal human intervention. The garments received at the warehouse are matched with the requirements placed by the store’s encoded respectively folded clothes are packed via carousel a conveyor belt machine is specially designed for.
Zara whereas the dangling clothes are packed by matching the batch codes with the garment codes the pack consents are strategically clubbed depending on the geographies to economize on the cost this technology integration helps in expedition of the logistic process.
Zara has a unique philosophy in retailing though its garments carry an affordable price tag but its store are as brand-new as any other brand they have stores in the most premium places in the world which are very well maintained and controlled.
Zara even has a prototype store at the headquarters marine they test the placements of garments and then replicate the same all around the globe they place complementary Goods together to help customers decide on a combination this high level of standardization and unique philosophy of retailing allows them to serve its customer well you The fashion industry might seem small and unimportant, especially in today’s world when clothes couldn’t be cheaper and more available.
But make no mistake, there is money in fashion, so much so that the second wealthiest man in the world made his fortune in this industry. That’s why the topic of this week’s video is the world’s largest clothes retailer, Zara.
Our story starts in Spain in 1950. In the northwestern part of the country lies La Coruña, a small but beautiful coastal city. Amancio Ortega, who was barely fourteen years old back then, had just gotten his first job as an errand boy, delivering fabrics for a local clothing retail store.
The young Ortega excelled at his work and as he grew older he started dealing with the store’s customers and suppliers, eventually becoming senior manager in 1960. When not at work Amancio would develop his own designs out of his sister’s house. He practiced reproducing popular designs using the less expensive materials left over from the retail store, while adding his own modifications and improvements. Amancio would frequently design nightgowns and lingerie, which he would then sell atthe retail store.
In 1963 he felt confident enough to leave his managerial job and to start his own company. Working out of his own home, Amancio established Confecciones Goa with a meager $25 of initial capital. He got his brother, sister and wife to work alongside him, and before long Amancio was supplying retail stores across the city.
When there were no more family members to put to use, Amancio organized women across the province into sewing cooperatives. During the 1960s Amancio expanded to service the whole of Spain, but even then he was still only a supplier to retail stores without a brand of his own.
He was hesitant to start his own brand due to Spain’s political climate. Back then, Spain was still a dictatorship under Francisco Franco, the Nationalist general who seized power after the Spanish Civil War. Among other things, the Franco regime had very tight dress-code regulations. On top of that there were very few women participating in the workforce, which meant that most of Amancio’s clients wouldn’t have a lot of money to spend on clothes.
Luckily for Amancio, Franco died in 1975 and totalitarian Spain died along with him. The 1970s saw sweeping social and economic reforms across Spain, which revitalized the nation. These years came to be known as the Spanish miracle, and Amancio was eager to take advantage of it. He opened his first retail store in La Coruña just a few months after Franco’s death.
Amancio wanted to call his store Zorba, in honor of his favorite movie, Zorba the Greek. He had already bought the letter molds for the store when he discovered that just a few blocks down there was a big bar with the same name.
Whether out of laziness or thrift, Amancio decided to reuse the letter molds he had already bought, and thus he called his retail store Zara. The timing of Zara’s launch was perfect and Amancio’s unique approach to fashion helped kickstart the brand’s popularity.
You see, most clothing retailers even today function on a seasonal model with huge production runs, and towards the end of each season they heavily discount the clothes they didn’t manage to sell. Zara, however, could afford to develop new designs all year round and would only produce them for a brief period, thus eliminating the need for discount sales.
Zara’s customers soon learned to buy their clothes quickly before their favorite designs got sold out. These limited production runs also ensured that clients knew their clothes would be relatively unique, compared to the mass-produced designs of seasonal retailers.
This also gave people an incentive to visit the store frequently, since they knew they’d find new designs every time they visited. Because Amancio was in control of the entire production process, from his sewing cooperatives to his storefront, he could market new designs in as little as two weeks.
Zara’s model, now known as ‘fast fashion’, became a huge hit and redefined the fashion industry. Over the next decade Amancio expanded throughout Spain and built a 10,000 square meter logistics center. In 1985 he got ready to expand internationally, and so he created a holding company for his stores, called Industria de Diseño Textil, or Inditex for short.
To test the waters he opened Zara’s first international store in nearby Portugal in 1988. That turned out well enough and so Amancio ambitiously opened a store in New York in 1989 and in Paris in 1990. Over the course of the 1990s Zara opened over 550 new stores across the globe.
Amancio was eager to expand Inditex’ collection beyond Zara, and to that end he started Pull & Bear as a casual urban brand in 1991. During the same year Amancio purchased Massimo Dutti, for high-end cosmopolitan clothes. By the turn of the new millennium, Amancio had also created Bershka and bought Stradivarius.
He was already 64 years old by that point and was looking forward to retiring, so in 2001 he took Inditex public by selling 20% of his shares, which made him the wealthiest man in Spain. By 2004 Inditex had created two new brands, Oysho and Zara Home, and had opened store #2,000 in Hong Kong.
Since then Inditex has been opening more than one new store every single day. In 2008 they created the fashion accessories brand Uterqüe and they blew past H&M and the GAP to become the largest clothes retailer in the world. The financial crisis barely slowed Inditex down, and in 2010 they inaugurated store #5,000 in Rome.
Today, Inditex has a total of 7,292 stores spread across 93 countries and Amancio is the second wealthiest man in the world, worth $67 billion. He officially retired in 2011, but even after his departure Inditex has continued to dominate the fashion industry. Many brands are adopting Zara’s fast fashion model today to attract customers.