zara case study strategy

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

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.

File:HK CH 中環 Central 國際金融中心商場 IFC mall shop ZARA Clothing store April 2022 Px3 04.jpg

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.

File:Barcelona (Passeig de Gràcia - Gran Via de les Corts Catalanes). Zara Building, formerly “Banco Rural y Mediterráneo”. 1953. Agustí Borrell Sensat, architect (25905793406).jpg

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)


	$12,5 billion	$27,72 billion
	100,138	165,042
	5,044	6,477
	$46.44 billion	$98.10 billion (Feb, 2023)

How Zara became the undisputed king of fast fashion?

Zara is one of the biggest international apparel brands. Zara invites customers from around 93 markets to its organization of 2000+ stores in upscale markets on the planet’s biggest urban communities. With these stores, Zara generates 18 billion Euros annually.

The brand has been fruitful in keeping up its central goal to give quick and reasonable designs in the world of fashion. Zara’s way to deal with configuration is firmly connected to its clients. This story is about how Zara became the undisputed king of Fast fashion.

Fashion is the imitation of a given example and satisfies the demand for social adaptation. . . . The more an article becomes subject to rapid changes of fashion, the greater the demand for cheap products of its kind. — Georg Simmel, “Fashion” (1904)

History of Zara: The Long Story Cut Short

Amancio Ortega launched the first Zara store in 1975 in Central Street in downtown A Coruna, Galicia, Spain. The main Store included low-value look-a-like designs of famous and better-quality dress styles. The store ended up being a triumph and Ortega Began opening more Zara stores throughout Spain.

During the 1980s, Ortega began changing the plan, assembling and dissemination cycle to diminish lead times and respond to new patterns in a snappier manner in what they called “Moment Fashions”.

In 1980 the company started its international expansion through Porto, Portugal in the 1990s, with Mexico in 1992. Since then Ortega has continued to grow and create brands such as Pull & Bear, Bershka , and Oysho . It has acquired groups like Massimo Dutti and Stradivarius . Even though these brands have been contributors to their parent group Inditex’s success, Zara is still the principal growth driver.

Zara’s Customer-driven Value Chain

Product line-up:.

Unlike other Inditex chains, Zara has focused on manufacturing fashion-sensitive products internally. The latest designs were continuously in production as per changing customer’s preferences. Many competitors were producing just a few thousand SKUs whereas Zara was producing several hundred of thousands of SKUs in a year. These SKUs varied as per color, size, and fabric.

Zara’s designs are not dependent on design maestros. Instead, its designers carefully observe the catwalk trends and try to implement them for the mass market. The design team continuously creates variations in a particular season. Thereafter expanding on successful designs.

Fast Supply Chain:

Zara’s flexible supply chain allows it to dispatch new ranges to shops two times per week from its central distribution center that is an approximately 400,000-square-meter facility located in Arteixo, Spain. This kind of business system called vertical integration eliminated the need for local warehouses. The strategy here was to reduce the “bullwhip effect”. Let’s see what the bullwhip effect is:

The bullwhip effect is a distribution channel phenomenon in which demand forecasts yield supply chain inefficiencies. It refers to increasing swings in inventory in response to shifts in consumer demand as one moves further up the supply chain. Wikipedia

It was a matter of a few weeks and a new design was on the shelf for the customers. Isn’t cool? These designs of clothes and accessories were quickly moved to fancy stores in prime locations but at a cheap price. This strategy has attracted a lot of fashion yet money conscious customers.

We want our customers to understand that if they like something, they must buy it now because it won’t be in the shops the following week. It is all about creating a climate of scarcity and opportunity. Luis Blanc, one of the former Inditex’s international directors

Zara’s Retailing Strategy

Zara instead of focusing on improving its manufacturing efficiency focused on improving its retail strategy. This retailing strategy was about following fashion trends quickly even it means there is an unmet demand. As was previously discussed, this also helped Zara in creating a FOMO for its products. The two components of its retailing strategy were dependent on its upstream operations: Merchandizing and Stores.

Read: The Torchbearers of Sustainable Fashion

Merchandising.

Merchandising is the promotion of goods and/or services that are available for retail sale. It includes the determination of quantities, setting prices for goods and services, creating display designs, developing marketing strategies, and establishing discounts or coupons. Investopedia

Zara placed emphasis on the freshness of its designs. It wanted to create a sense of exclusivity. It never focused on creating bulk items of one design. Zara had confidence in its fast supply chain of twice a week shipment to the store with the latest designs. Thre quarter of its merchandise gets replaced in just a month. How about that?

The success of your business is based in principle on the idea of offering the latest fashions at low prices, in turn creating a formula for cutting costs: an integrated business in which it is manufactured, distributed, and sold. Amancio Ortega

Fun Fact : An average customer visits a Zara store 17 times in a year where the number is 3-4 times for its competitors.

Zara understood the importance of store locations very well. Zara prices are not expensive but its store location and design made its products look expensive. The brand wanted its customers to have a premium feel at a reasonable price.

We invest in prime locations. We place great care in the presentation of our storefronts. That is how we project our image. We want our clients to enter a beautiful store, where they are offered the latest fashions. Luis Blanc, one of the former Inditex’s international directors

Store Operations

Zara has stores in most upscale markets and shopping centers in the world. You name it and they have a store there. Champs Elysées in Paris, Regent Street in London, and Fifth Avenue in New York to name a few. As per its latest annual report the value of these properties is valued at almost 8 billion Euros. But the way these stores are managed is a strategy to learn for all retailers.

We all love grand stores with a lot of variety. Zara has emphasized on creating a grand image of its stores. Imagine a big store at a posh location. How much impressed you would be. The average size of Zara stores has continuously increased over the years. In 2001 the average store size was 910 sq.m whereas in 2018 the size has more than doubled.

Zara’s average store size has increased by 50%: from 1,452m2 in 2012 to 2,184m2 in 2018. That growth has been driven by new store openings – larger flagship stores – as well as the fact that many of the new openings have entailed the absorption of one or more older, smaller units in the same catchment area. Inditex Annual Report

Zara has tried to standardize the in-store experience with its store window displays and interior presentations. As the season progresses, Zara consistently evolves its interior themes, color schemes, and product placements. All these ideas come from the central team in Spain and regional teams implement with necessary region-based adaptations. So much so that the uniforms of the staff were selected twice in a season by a store manager from the latest collection.

red and black motor scooter parked beside brown brick wall

Anti-Marketing Approach of Zara

Zara has able to maintain profitability ~13% whereas its major competitor like H&M is at 6% . This has been possible not only because of its efficient supply chain we discussed above but also because of its no advertising or limited advertising policy.

This is what makes Zara really one of a kind. The organization just spends about 0.3% of deals on promoting and does not have a lot of advertising to discuss. The usual trend in the industry is to spend 3.5% on advertising. Zara never shows its clothes at expensive fashion shows also. It first shows its designs at stores directly. But why does not Zara believe in advertising? There are primarily two reasons:

First, as we discussed it saves Zara a lot of money. So much so that it has now one of the highest profitability.
Second, it brings exclusivity and prevents overexposure of a design. Customers feel like if they purchase a shirt at Zara, five others won’t have that equivalent shirt at work or school.

Read: Viral Marketing over the Long-Haul ft. Burger King

Zara is a perfect case study to learn the perfect operations strategy, perfect marketing strategy, perfect pricing strategy, and whatnot. It’s all strategies are so perfect. It is also a perfect example to understand how a traditional brand is evolving itself with time to stay relevant.

As per its annual report , In 2018, Zara launched its global online store, marking a milestone in its commitment to having all of its brands available online worldwide by 2020. Zara continued to earn global accolades for its collections and initiatives, its integrated shopping experience, and its commitment to sustainability, with over 90 million garments put on sale under the Join Life label.

Zara is just not a brand of fast fashion. Its much more than that now. And that’s why it’s actually the true king of fast fashion.

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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-


	Zorba
	Retail
	1975
	Amancio Ortega, Rosalia Mera
	Arteixo (Galicia, Spain)
	2,007
	Worldwide
	Clothing
	€23.9 billion
	Inditex
	Forever 21, Mango, Gap, Marks & spencer

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 was founded by Amancio Ortega in A Coruña, Spain, initially named ‘Zorba’ but later changed to ‘Zara’ due to a nearby bar with a similar name.
	Ortega transforms Zara’s design, manufacturing, and distribution process, emphasizing “instant fashions” using information technology and collaborative design groups.
	Zara opens its first international store in Porto, Portugal.
	Expansion into the United States, followed by entry into France in 1990.
	Further expansion to Mexico (1992), Greece, Belgium, Sweden (1993), and Israel (1997).
	Zara expands globally, entering Brazil (2000), Japan, Singapore (2002), Ireland, Venezuela, Russia, Malaysia (2003), China, Morocco, Estonia, Hungary, Romania (2004), Philippines, Costa Rica, Indonesia (2005), South Korea (2008), India (2010), Taiwan, South Africa, Australia (2011), and Peru (2012).
	Zara launched its online boutique, initially in Jordan.
	Zara Online extends services to Austria, Ireland, Netherlands, Belgium, and Luxembourg.
	Online stores commence operations in the United States.
	Zara introduces RFID technology in stores, using chips in security tags for inventory management.
	Zara ranks #30 on Interbrand’s list of best global brands.
	Zara updated its logo, designed by the French agency Baron & Baron. Despite a global decline in textile commerce, Zara’s business has risen by 2.17%. CEO Persson mentions plans to cut retail locations in Europe due to global rent considerations.
	Zara exits Russia, selling its business and rebranding to Maag.
	Zara operates nearly 3000 stores in over 96 countries, including kids and home stores, continuing its global expansion.

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-


	It keeps up with the latest trends, ensuring that its collections are always fresh and relevant.
	Despite being affordable, Zara maintains high-quality standards in its clothing and accessories.
	Zara strikes a balance between style and price, making it accessible to a wide range of consumers.
	Leveraging primary information technology, Zara swiftly replicates fashion trends.
	Teams of designers collaborate on products, enhancing productivity.
	Zara uses affordable materials without compromising quality.
	Outsourcing production to countries with cost-effective labor.

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-


	At the core of Zara’s business model is its commitment to fast fashion. Unlike traditional retailers, Zara rapidly responds to the latest trends, ensuring that new designs hit the shelves at record speed. This approach allows you, the customer, to access the most current styles without the typical delays in the fashion industry.
	Zara takes control of every step in the production process, from design to manufacturing and distribution. By keeping everything in-house, Zara maintains a high level of flexibility, enabling quick adjustments based on customer feedback and emerging trends. This vertical integration contributes to the brand’s agility in the ever-evolving fashion landscape.
	Zara deliberately produces limited quantities of each design. This intentional scarcity creates a sense of exclusivity, driving demand. As a result, you encounter a frequently changing inventory, enhancing the allure of finding unique and in-demand pieces during every visit.
	The “just-in-time” manufacturing approach ensures that Zara produces items only when there’s demand. This minimizes excess inventory and reduces the need for heavy markdowns, allowing you to enjoy reasonable pricing for trendy fashion items.
	Zara leverages data and customer feedback to inform its design and production decisions. By closely monitoring what resonates with you, the brand tailors its offerings to match your preferences, creating a more personalized and customer-centric shopping experience.
	Zara synchronizes its operations globally, ensuring that the latest trends reach stores worldwide simultaneously. This synchronized approach reinforces the brand’s image of offering cutting-edge fashion on a global scale, catering to diverse customer tastes and preferences.

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-


	Zara rakes in a substantial portion of its revenue through the operation of a whopping 2,007 stores spread across 96 countries. This massive retail network allows customers worldwide to access and purchase Zara’s trendy offerings.
	Zara doesn’t limit itself to physical stores. The brand has a robust online presence, catering to a global audience through its e-commerce platform. This avenue expands Zara’s reach, enabling customers to shop conveniently from anywhere
	Zara is under the ownership of Inditex, the world’s largest fast-fashion group. This means that Zara is part of a significant player in the global fashion industry, benefiting from shared resources and expertise within the Inditex umbrella.
	In 2020, Inditex, Zara’s parent company, held a market capitalization of an impressive $73.7 billion. This substantial valuation highlights Inditex’s influential position in the market.
	As of 2022, Zara’s value soared to nearly $13 billion. This showcases the brand’s standalone worth within the larger Inditex portfolio, emphasizing its contribution to the group’s overall success.

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


	23.9	19.7
	4.0	2.8
	31	25
	24.8	23.6
	2,312	2,489
	13	12

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-


		Launched the Join Life movement to enhance sustainability.
		Set goals for 2030, focusing on areas like water conservation and reducing waste in landfills
		Actively working to ban harmful chemicals* from production processes.
		Transparency score of 14%.
		Parent company Inditex shares supply chain traceability reports and conducts safety audits.
		Zara-specific details are often linked to Inditex, making it challenging to find specific information. Factory lists and audit results are not publicly available.
		15/33
		While progress has been made in improving working conditions, the size and profitability of Zara should allow for better results.
		Enforces a solid code of conduct and conducts audits to ensure compliance.
		Scores below 50% for environmental sustainability.
		It includes achieving net-zero emissions by 2040, adopting sustainable procurement for materials like cellulose fibers, cotton, and linen, and actively working on reducing waste in landfills.

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 embraces its fast fashion model but faces challenges in managing production speed. To address this, the brand invests in robust data analytics to predict trends accurately and streamline production processes, ensuring agility without compromising quality.
	Zara manages a vertically integrated supply chain. By owning and controlling every aspect, from design to manufacturing and distribution, Zara ensures flexibility and responsiveness, mitigating challenges related to external suppliers and logistics.
	Zara’s global expansion poses challenges in understanding diverse market preferences. To address this, the brand tailors its offerings to local tastes, engages in community events, and actively listens to customer feedback, ensuring relevance and resonance in varied markets.
	The rise of online retail intensifies competition. Zara counters this by investing in a robust online presence, regularly updating social media platforms, and collaborating with influencers to amplify reach and engage a digitally savvy audience.
	Growing expectations for ethical fashion practices pose challenges. Zara addresses this by incorporating a code of conduct, conducting audits, and continuously improving working conditions. The brand actively communicates its efforts to enhance transparency and traceability, aligning with evolving consumer expectations.
	Zara faces the challenge of balancing sustainability goals with profitability. The brand addresses this by setting clear sustainability objectives, such as achieving net-zero emissions by 2040 and sustainable procurement, while also investing in technology and innovation to ensure long-term financial viability.

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!

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

Contact Info: Axponent Media Pvt Ltd, 706-707 , 7th Floor Tower A , Iris Tech Park, Sector 48, Sohna Road, Gurugram, India, Pin - 122018

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International Edition

Zara's Secret for Fast Fashion

by Kasra Ferdows, Michael A. Lewis and Jose A.D. Machuca

Editor's note: With some 650 stores in 50 countries, Spanish clothing retailer Zara has hit on a formula for supply chain success that works by defying conventional wisdom. This excerpt from a recent Harvard Business Review profile zeros in on how Zara's supply chain communicates, allowing it to design, produce, and deliver a garment in fifteen days.

In Zara stores, customers can always find new products—but they're in limited supply. There is a sense of tantalizing exclusivity, since only a few items are on display even though stores are spacious (the average size is around 1,000 square meters). A customer thinks, "This green shirt fits me, and there is one on the rack. If I don't buy it now, I'll lose my chance."

Such a retail concept depends on the regular creation and rapid replenishment of small batches of new goods. Zara's designers create approximately 40,000 new designs annually, from which 10,000 are selected for production. Some of them resemble the latest couture creations. But Zara often beats the high-fashion houses to the market and offers almost the same products, made with less expensive fabric, at much lower prices. Since most garments come in five to six colors and five to seven sizes, Zara's system has to deal with something in the realm of 300,000 new stock-keeping units (SKUs), on average, every year.

This "fast fashion" system depends on a constant exchange of information throughout every part of Zara's supply chain—from customers to store managers, from store managers to market specialists and designers, from designers to production staff, from buyers to subcontractors, from warehouse managers to distributors, and so on. Most companies insert layers of bureaucracy that can bog down communication between departments. But Zara's organization, operational procedures, performance measures, and even its office layouts are all designed to make information transfer easy.

Zara's single, centralized design and production center is attached to Inditex (Zara's parent company) headquarters in La CoruÃ±a. It consists of three spacious halls—one for women's clothing lines, one for men's, and one for children's. Unlike most companies, which try to excise redundant labor to cut costs, Zara makes a point of running three parallel, but operationally distinct, product families. Accordingly, separate design, sales, and procurement and production-planning staffs are dedicated to each clothing line. A store may receive three different calls from La CoruÃ±a in one week from a market specialist in each channel; a factory making shirts may deal simultaneously with two Zara managers, one for men's shirts and another for children's shirts. Though it's more expensive to operate three channels, the information flow for each channel is fast, direct, and unencumbered by problems in other channels—making the overall supply chain more responsive.

Zara's cadre of 200 designers sits right in the midst of the production process.

In each hall, floor to ceiling windows overlooking the Spanish countryside reinforce a sense of cheery informality and openness. Unlike companies that sequester their design staffs, Zara's cadre of 200 designers sits right in the midst of the production process. Split among the three lines, these mostly twentysomething designers—hired because of their enthusiasm and talent, no prima donnas allowed—work next to the market specialists and procurement and production planners. Large circular tables play host to impromptu meetings. Racks of the latest fashion magazines and catalogs fill the walls. A small prototype shop has been set up in the corner of each hall, which encourages everyone to comment on new garments as they evolve.

The physical and organizational proximity of the three groups increases both the speed and the quality of the design process. Designers can quickly and informally check initial sketches with colleagues. Market specialists, who are in constant touch with store managers (and many of whom have been store managers themselves), provide quick feedback about the look of the new designs (style, color, fabric, and so on) and suggest possible market price points. Procurement and production planners make preliminary, but crucial, estimates of manufacturing costs and available capacity. The cross-functional teams can examine prototypes in the hall, choose a design, and commit resources for its production and introduction in a few hours, if necessary.

Zara is careful about the way it deploys the latest information technology tools to facilitate these informal exchanges. Customized handheld computers support the connection between the retail stores and La CoruÃ±a. These PDAs augment regular (often weekly) phone conversations between the store managers and the market specialists assigned to them. Through the PDAs and telephone conversations, stores transmit all kinds of information to La CoruÃ±a—such hard data as orders and sales trends and such soft data as customer reactions and the "buzz" around a new style. While any company can use PDAs to communicate, Zara's flat organization ensures that important conversations don't fall through the bureaucratic cracks.

Once the team selects a prototype for production, the designers refine colors and textures on a computer-aided design system. If the item is to be made in one of Zara's factories, they transmit the specs directly to the relevant cutting machines and other systems in that factory. Bar codes track the cut pieces as they are converted into garments through the various steps involved in production (including sewing operations usually done by subcontractors), distribution, and delivery to the stores, where the communication cycle began.

The constant flow of updated data mitigates the so-called bullwhip effect—the tendency of supply chains (and all open-loop information systems) to amplify small disturbances. A small change in retail orders, for example, can result in wide fluctuations in factory orders after it's transmitted through wholesalers and distributors. In an industry that traditionally allows retailers to change a maximum of 20 percent of their orders once the season has started, Zara lets them adjust 40 percent to 50 percent. In this way, Zara avoids costly overproduction and the subsequent sales and discounting prevalent in the industry.

Excerpted with permission from "Rapid-Fire Fulfillment," Harvard Business Review , Vol. 82, No.11, November 2004.

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Kasra Ferdows is the Heisley Family Professor of Global Manufacturing at Georgetown University's McDonough School of Business in Washington DC.

Michael A. Lewis is a professor of operations and supply management at the University of Bath School of Management in the UK.

Jose A.D. Machuca is a professor of operations management at the University of Seville in Spain.

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ZARA: Fast Fashion

Format: Print
| Pages: 35

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ZARA: Fast Fashion By: Pankaj Ghemawat and Jose Luis Nueno

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Assignment: Data and Analytics as…

ZARA: Achieving the “Fast” in Fast Fashion through Analytics

How does fast fashion make any business sense? Zara uses intensive data and analytics to manage a tight supply chain and give customers exactly what they want.

Introduction

Zara’s parent company Inditex has managed to thrive in the last decade while several other fashion retailers have faced declining sales or stagnant growth. Inditex has grown over 220% in annual revenue since 2004, more than its key competitors like H&M, Gap, or Banana Republic (1).

The value of a fast fashion brand is to bring the latest designs and “trendiest trends” into the market as quickly as possible, preferably as soon as they became hot on the catwalk, and to provide these at a reasonable price. The traditional fashion industry is not well equipped to provide such value as it operates on a bi-annual or seasonal basis, with long production lead times due to outsourced manufacturing to low cost-centers. Zara has turned the industry on its head by using data and analytics to track demand on a real-time, localized basis and push new inventory in response to customer pull. This enables them to manage one of the most efficient supply chains in the fashion industry, and to create the fast fashion category as a market leader.

Pathways to a Just Digital Future

How Zara Uses Data

Inditex is a mammoth retailer, producing over 840 million garments in a year, the majority of which are sold by Zara (2). Every item of clothing is tagged with an RFID microchip before it leaves a centralized warehouse, which enables them to track that piece of inventory until it is sold to a customer (3). The data about the sale of each SKU, inventory levels in each store, and the speed at which a particular SKU moves from the shelf to the POS is sent on a real time basis to Inditex’s central data processing center (see picture below). This center is open 24 hours a day and collects information from all 6000+ Inditex stores across 80+ countries and is used by teams for inventory management, distribution, design and customer service improvements (4).

Zara’s Data Processing Center receives real-time data from around the world (4).

When the apparel arrives in store, RFID enables the stockist to determine which items need replenishing and where they are located, which has made their inventory and stock takes 80% faster than before (3). If a customer needs a particular SKU, salespeople are able to serve them better by locating it immediately in store or at a nearby location. Moreover, every Zara location receives inventory replenishments twice a week, which is tailored to that stores real-time updates on SKU-level inventory data.

The sales tracking data is critical in enabling Zara to serve its customers with trends that they actually want, and eliminate designs that don’t have customer pull. Zara’s design team is an egalitarian team of over 350 designers that use inspiration from the catwalk to design apparel on daily basis. Every morning, they dive through the sales data from stores across the world to determine what items are selling and accordingly tailor their designs that day. They also receive qualitative feedback from empowered sales employees that send in feedback and customer sentiment on a daily basis to the central HQ e.g., “customers don’t like the zipper” or “she wishes it was longer” (1).

At the start of the planning process, Zara orders very small batches of any given design from their manufacturers (even just 4-6 of a shirt per store). The majority of Zara’s factories are located proximally in Europe and North Africa, enabling them to manufacture new designs close to home and ship them to their stores within 2-3 weeks. They then test these designs in store, and if the data suggests the designs take off, Zara can quickly order more inventory in the right sizes, in the locations that demanded it. Such store-level data allows Zara to be hyper-local in serving their customer’s needs – as tastes can vary on a neighborhood level. As Inditex’s communication director told the New York Times,

“ Neighborhoods share trends more than countries do. For example, the store on Fifth Avenue in Midtown New York is more similar to the store in Ginza, Tokyo, which is an elegant area that’s also touristic. And SoHo is closer to Shibuya, which is very trendy and young.” (5)

Unlike other retailers that may order inventory based on their hypotheses about tastes at a regional level, Zara is tailors its collections based on the exact zip code and demographic that a given location serves (5).

Zara’s Results vs. Competitors

Zara sells over 11,000 distinct items per year versus its competitors that carry 2,000 to 4,000. However Zara also boasts the lowest year-end inventory levels in the fashion industry. This lean working capital management offsets their higher production costs and enables them to boast rapid sales turnover rates.

At Zara, only 15% to 25% of a line is designed ahead of the season, and over 50% of items are designed and manufactured in the middle of a season based on what becomes popular (2). This is in direct contrast to a close competitor like H&M where 80% of designs are made ahead of the season, and 20% is done in real-time during the season (6). Most other retailers commit 100% of their designs ahead of a season, and are often left with excess inventory that they then have to discount heavily at season-end. Instead, Zara’s quick replenishment cycles create a sense of scarcity which might actually generate more demand:

“With Zara, you know that if you don’t buy it, right then and there, within 11 days the entire stock will change. You buy it now or never.” (5)

https://www.bloomberg.com/news/articles/2016-11-23/zara-s-recipe-for-success-more-data-fewer-bosses
http://www.digitalistmag.com/digital-supply-networks/2016/03/30/zaras-agile-supply-chain-is-source-of-competitive-advantage-04083335
http://static.inditex.com/annual_report_2015/en/our-priorities/innovation-in-customer-services.php
http://www.refinery29.com/2016/02/102423/zara-facts?utm_campaign=160322-zara-secrets&utm_content=everywhere&utm_medium=editorial&utm_source=email#slide-11
http://www.nytimes.com/2012/11/11/magazine/how-zara-grew-into-the-worlds-largest-fashion-retailer.html?pagewanted=all
https://erply.com/in-the-success-stories-of-hm-zara-ikea-and-walmart-luck-is-not-a-key-factor/

Student comments on ZARA: Achieving the “Fast” in Fast Fashion through Analytics

Great post Ravneet – I had never read about Zara’s extremely quick supply chain or hyper-local testing. I have a question for you about fast fashion in general, but especially for Zara since it produces and sells more distinct items than its competitors: it seems that many designers are not fond of the “runway-inspired” fashions sold at these stores and some have even sued stores for copying their designs. Do you think Zara and other brands like it are doing anything wrong, and if not, what recourse do designers have for “imitations” of their work?

Thanks for the post Ravneet. Zara and H&M are beacons of hope for a mostly distressed industry. Do you think Zara’s advantage could be sustained in the event of a full-on assault by the Amazons of the world?

INDITEX, fashion leader case study of ZARA in the transformation era:

The superiority in Inditex's Digital Transformation strategy started in 2012 by building an integrated store system with an online sales platform. Underscored in the past 2020, Inditex has been able to maintain its leadership and generate new growth.

Spanish multinational retailer INDITEX, one of the world's largest fashion retailers has eight brands: Zara, Pull&Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home, and Uterqüe.

Sold in 216 markets through an online platform. with 6,654 stores in 96 countries.

Founded in 1963, based on “customer at the center of everything we do” from scratch with a different business model called ‘Fit to Demand’, revolutionizing the fashion industry with Fast Fashion presentation.

In 1988, Inditex kicked off a fashion revolution where other players focused on mass production for a cost advantage. Instead, Zara focused on its so-called “ﬁt to demand” business model that produced a small number of products but there are various designs and fast production to meet the needs of consumers quickly and at an affordable price.

Zara's business model also allows it to bring more products to market, with Zara launching up to 20 new collections per year. This is in contrast to other apparel brands that are bound by the seasonal calendar The new collection may only be released four times a year.

Zara's success has enabled new competitors to copy Zara's business model, eventually designing and producing products faster and cheaper than Zara with its Ultra Fast Fashion concept. These companies include Shein, Boohoo, Fashion Nova and ASOS

Inditex’s challenges is how to stay ahead as a FAST FASHION LEADER in this transformative era?

Inditex has been innovating its digital transformation strategy since 2012 by building an integrated store system with an online sales platform by focusing on the customer as the center of recognizing and delivering what customers really want no matter where the customer is. Inditex pays close attention to detail and creates technological innovations and cutting-edge logistics investments in every part of the value chain whether they design, manufacture, or distribute products. Inditex also develops ways to improve operations and customer service and the quality of the customer experience which helps to identify and meet customer needs and also always improves the store and develops the online platform with new designs.

Starting from a change in operations which was previously tracked by consumer behavior data from sales data and fashion trends collected by store managers around the world every two weeks.

To Track products from the production process, delivery to the sale of every piece around the world instantly with the introduction of an RFID chip system on every product in 2014, Zara was able to as well as collect data from every product from both physical stores and online sales channels to create a more efﬁcient customer shopping experience than ever before.

Zara be able to gain more understanding of what customers want and can meet their needs better , seamlessly from the data obtained. This allows Inditex's 700+ designers to create 60,000 different works. Merchants around the world receive two collections per week and this makes Zara's "ﬁt to demand" capabilities faster and more stable and able to get ahead of competitors.

In 2017, Zara also launched a new pop-up store, fused with an online ordering service.

Along with the Smart Mirrors service that can present and display the size of hair and jewelry that is suitable for each person including the return or replacement service to the customer as well as other services that will create a better shopping experience for customers.

Not only that, but in June 2020 Zara also announced plans for Digital Transformation.

In the next two years, Zara plans to invest up to 1 billion Euros (about 38 billion Baht) in online business development, and another 1.7 billion Euros (about 65 billion Baht) will be investments to upgrade a platform to connect both online and storefront systems.

This allows shoppers to have a great experience with Zara on any device, anywhere, anytime.

Isla Pablo, Inditex's CEO

" Storefront will continue to play a key role in Inditex's strategy and will play a greater role in improving online sales. Due to our digitization and ability to reach customers from the best locations around the world, overall, our overriding goal between 2020 and 2022 is to accelerate the full implementation of our integrated store concept. This is driven by the idea of being able to serve our customers without interruption, wherever our customers are, on any device and at any time of the day."

S ource: www.inditex.com , Inditex Annual Report 2020 , Mahadeva Matt Mani and Paul Leinwand (2021) [Beyond Digital: How Great Leaders Transform Their Organizations and Shape the Future]

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Zara: fast fashion description.

Focuses on Inditex, an apparel retailer from Spain, which has set up an extremely quick response system for its ZARA chain. Instead of predicting months before a season starts what women will want to wear, ZARA observes what's selling and what's not and continuously adjusts what it produces and merchandises on that basis. Powered by ZARA's success, Inditex has expanded into 39 countries, making it one of the most global retailers in the world. But in 2002, it faces important questions concerning its future growth.

Case Description ZARA: Fast Fashion

Strategic managment tools used in case study analysis of zara: fast fashion, step 1. problem identification in zara: fast fashion case study, step 2. external environment analysis - pestel / pest / step analysis of zara: fast fashion case study, step 3. industry specific / porter five forces analysis of zara: fast fashion case study, step 4. evaluating alternatives / swot analysis of zara: fast fashion case study, step 5. porter value chain analysis / vrio / vrin analysis zara: fast fashion case study, step 6. recommendations zara: fast fashion case study, step 7. basis of recommendations for zara: fast fashion case study, quality & on time delivery.

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Case Analysis of ZARA: Fast Fashion

ZARA: Fast Fashion is a Harvard Business (HBR) Case Study on Strategy & Execution , Texas Business School provides HBR case study assignment help for just $9. Texas Business School(TBS) case study solution is based on HBR Case Study Method framework, TBS expertise & global insights. ZARA: Fast Fashion is designed and drafted in a manner to allow the HBR case study reader to analyze a real-world problem by putting reader into the position of the decision maker. ZARA: Fast Fashion case study will help professionals, MBA, EMBA, and leaders to develop a broad and clear understanding of casecategory challenges. ZARA: Fast Fashion will also provide insight into areas such as – wordlist , strategy, leadership, sales and marketing, and negotiations.

Case Study Solutions Background Work

ZARA: Fast Fashion case study solution is focused on solving the strategic and operational challenges the protagonist of the case is facing. The challenges involve – evaluation of strategic options, key role of Strategy & Execution, leadership qualities of the protagonist, and dynamics of the external environment. The challenge in front of the protagonist, of ZARA: Fast Fashion, is to not only build a competitive position of the organization but also to sustain it over a period of time.

Strategic Management Tools Used in Case Study Solution

The ZARA: Fast Fashion case study solution requires the MBA, EMBA, executive, professional to have a deep understanding of various strategic management tools such as SWOT Analysis, PESTEL Analysis / PEST Analysis / STEP Analysis, Porter Five Forces Analysis, Go To Market Strategy, BCG Matrix Analysis, Porter Value Chain Analysis, Ansoff Matrix Analysis, VRIO / VRIN and Marketing Mix Analysis.

Texas Business School Approach to Strategy & Execution Solutions

In the Texas Business School, ZARA: Fast Fashion case study solution – following strategic tools are used - SWOT Analysis, PESTEL Analysis / PEST Analysis / STEP Analysis, Porter Five Forces Analysis, Go To Market Strategy, BCG Matrix Analysis, Porter Value Chain Analysis, Ansoff Matrix Analysis, VRIO / VRIN and Marketing Mix Analysis. We have additionally used the concept of supply chain management and leadership framework to build a comprehensive case study solution for the case – ZARA: Fast Fashion

Step 1 – Problem Identification of ZARA: Fast Fashion - Harvard Business School Case Study

The first step to solve HBR ZARA: Fast Fashion case study solution is to identify the problem present in the case. The problem statement of the case is provided in the beginning of the case where the protagonist is contemplating various options in the face of numerous challenges that Zara Inditex is facing right now. Even though the problem statement is essentially – “Strategy & Execution” challenge but it has impacted by others factors such as communication in the organization, uncertainty in the external environment, leadership in Zara Inditex, style of leadership and organization structure, marketing and sales, organizational behavior, strategy, internal politics, stakeholders priorities and more.

Step 2 – External Environment Analysis

Texas Business School approach of case study analysis – Conclusion, Reasons, Evidences - provides a framework to analyze every HBR case study. It requires conducting robust external environmental analysis to decipher evidences for the reasons presented in the ZARA: Fast Fashion. The external environment analysis of ZARA: Fast Fashion will ensure that we are keeping a tab on the macro-environment factors that are directly and indirectly impacting the business of the firm.

What is PESTEL Analysis? Briefly Explained

PESTEL stands for political, economic, social, technological, environmental and legal factors that impact the external environment of firm in ZARA: Fast Fashion case study. PESTEL analysis of " ZARA: Fast Fashion" can help us understand why the organization is performing badly, what are the factors in the external environment that are impacting the performance of the organization, and how the organization can either manage or mitigate the impact of these external factors.

How to do PESTEL / PEST / STEP Analysis? What are the components of PESTEL Analysis?

As mentioned above PESTEL Analysis has six elements – political, economic, social, technological, environmental, and legal. All the six elements are explained in context with ZARA: Fast Fashion macro-environment and how it impacts the businesses of the firm.

How to do PESTEL Analysis for ZARA: Fast Fashion

To do comprehensive PESTEL analysis of case study – ZARA: Fast Fashion , we have researched numerous components under the six factors of PESTEL analysis.

Political Factors that Impact ZARA: Fast Fashion

Political factors impact seven key decision making areas – economic environment, socio-cultural environment, rate of innovation & investment in research & development, environmental laws, legal requirements, and acceptance of new technologies.

Government policies have significant impact on the business environment of any country. The firm in “ ZARA: Fast Fashion ” needs to navigate these policy decisions to create either an edge for itself or reduce the negative impact of the policy as far as possible.

Data safety laws – The countries in which Zara Inditex is operating, firms are required to store customer data within the premises of the country. Zara Inditex needs to restructure its IT policies to accommodate these changes. In the EU countries, firms are required to make special provision for privacy issues and other laws.

Competition Regulations – Numerous countries have strong competition laws both regarding the monopoly conditions and day to day fair business practices. ZARA: Fast Fashion has numerous instances where the competition regulations aspects can be scrutinized.

Import restrictions on products – Before entering the new market, Zara Inditex in case study ZARA: Fast Fashion" should look into the import restrictions that may be present in the prospective market.

Export restrictions on products – Apart from direct product export restrictions in field of technology and agriculture, a number of countries also have capital controls. Zara Inditex in case study “ ZARA: Fast Fashion ” should look into these export restrictions policies.

Foreign Direct Investment Policies – Government policies favors local companies over international policies, Zara Inditex in case study “ ZARA: Fast Fashion ” should understand in minute details regarding the Foreign Direct Investment policies of the prospective market.

Corporate Taxes – The rate of taxes is often used by governments to lure foreign direct investments or increase domestic investment in a certain sector. Corporate taxation can be divided into two categories – taxes on profits and taxes on operations. Taxes on profits number is important for companies that already have a sustainable business model, while taxes on operations is far more significant for companies that are looking to set up new plants or operations.

Tariffs – Chekout how much tariffs the firm needs to pay in the “ ZARA: Fast Fashion ” case study. The level of tariffs will determine the viability of the business model that the firm is contemplating. If the tariffs are high then it will be extremely difficult to compete with the local competitors. But if the tariffs are between 5-10% then Zara Inditex can compete against other competitors.

Research and Development Subsidies and Policies – Governments often provide tax breaks and other incentives for companies to innovate in various sectors of priority. Managers at ZARA: Fast Fashion case study have to assess whether their business can benefit from such government assistance and subsidies.

Consumer protection – Different countries have different consumer protection laws. Managers need to clarify not only the consumer protection laws in advance but also legal implications if the firm fails to meet any of them.

Political System and Its Implications – Different political systems have different approach to free market and entrepreneurship. Managers need to assess these factors even before entering the market.

Freedom of Press is critical for fair trade and transparency. Countries where freedom of press is not prevalent there are high chances of both political and commercial corruption.

Corruption level – Zara Inditex needs to assess the level of corruptions both at the official level and at the market level, even before entering a new market. To tackle the menace of corruption – a firm should have a clear SOP that provides managers at each level what to do when they encounter instances of either systematic corruption or bureaucrats looking to take bribes from the firm.

Independence of judiciary – It is critical for fair business practices. If a country doesn’t have independent judiciary then there is no point entry into such a country for business.

Government attitude towards trade unions – Different political systems and government have different attitude towards trade unions and collective bargaining. The firm needs to assess – its comfort dealing with the unions and regulations regarding unions in a given market or industry. If both are on the same page then it makes sense to enter, otherwise it doesn’t.

Economic Factors that Impact ZARA: Fast Fashion

Social factors that impact zara: fast fashion, technological factors that impact zara: fast fashion, environmental factors that impact zara: fast fashion, legal factors that impact zara: fast fashion, step 3 – industry specific analysis, what is porter five forces analysis, step 4 – swot analysis / internal environment analysis, step 5 – porter value chain / vrio / vrin analysis, step 6 – evaluating alternatives & recommendations, step 7 – basis for recommendations, references :: zara: fast fashion case study solution.

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Operations Transformation & Decentralization: ZARA Case Study

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Introduction

Identification, analysis and evaluation, recommendations, works cited.

Zara is a global retail brand that designs and sells clothes, shoes, and accessories for men, women, and children. The brand is a part of Inditex, a retail corporation that also features other clothing brands, such as Pull and Bear, Stradivarius, and Massimo Dutti. Zara was initially developed as an affordable brand with a strong focus on fashion. Most of its operations, such as production and distribution are based in Spain and the nearby European countries.

However, as the brand has developed a strong presence in the global research market, it might be beneficial to transform operations and allow for a significant degree of decentralization. The present paper will seek to provide an analysis of the case study by identifying and assessing the key issues affecting Zara, as well as providing recommendations for future development.

Zara was created in Spain, which remains the principal location of its operations. However, the company has also developed a truly global image, with thousands of stores all over the globe. The retailer operates both online and offline and has a robust supply chain with well-established suppliers. The company’s main strategy is to remain flexible in its operations, promote sustainability, and deliver excellent value to customers all over the globe. However, the implementation of this strategy is affected by several important issues.

Zara has three large distribution centers in Spain, which arrange for shipments to other locations. The production of the brand, however, is decentralized, with factories in a variety of European countries. The different levels of centralization in production and distribution are the main issue faced by the company, as they contribute to transportation costs while also contradicting the brand’s sustainability strategy.

Given that the three distribution centers in Spain serve all of Zara’s stores, including its online stores, the complex transportation chain also creates a risk of delivery delays and stock-outs, thus impacting its global sales and revenues. Another problem that was identified based on the information from the case is that Zara’s online store does not offer any significant benefits compared to other brands’ stores, thus relying on customers who are already familiar with the brand. This problem could affect the future of Zara’s online sales and thus needs to be addressed by the management.

In order to judge the brand’s financial performance, it is critical to perform a ratio analysis. Zara’s financials are included in Inditex’s consolidated financial statements; however, as the brand constitutes a vast part of the parent company’s operations, it is possible to evaluate the general financial health of Zara based on Inditex’s performance. As seen in Table 1, Inditex had a gross profit margin of 58.3% in 2014 compared to 59.3% in the previous year. Similarly, other ratios are stable and do not indicate any significant solvency, profitability, or liquidity problems. Hence, the overall financial health of Inditex is good, and there are no threats to the company’s profitability.

Table 1. Ratio Analysis of Inditex.


Inventory turnover	Cost of goods sold/average inventory	FY2014 7,547,637/1,859,516=4.06 FY2013 6,801,507/1,676,879=4.05
Quick ratio	(Cash + short-term marketable securities + accounts receivable)/current liabilities	FY2014 (3,797,930+222,259+861,811)/3,748,828=1.30 FY2013 (3,846,726+212,890+815,227)/3,462,293=1.41
Debt-to-assets ratio	Total liabilities/total assets	FY2014 (3,748,828+1,159,471)/15,377,000=0.32 (32%) FY2013 (3,462,293+1,015,605)/13,756,261=0.33 (33%)
Gross profit margin	Gross income/net revenue	FY2014 10,568,897/18,116,534=0.583 (58.3%) FY2013 9,922,932/16,724,439=0.593 (59.3%)
Return on assets (ROA)	Net income/total assets	FY2014 2,510,151/15,377,000=0.16 (16%) FY2013 2,381,565/13,756,261=0.17 (17%)

The financial information of Inditex also shows that the company’s capital structure relies predominantly on equity, although it also uses a significant share of current liabilities, mainly trade and other payables (Inditex 189). The share of non-current liabilities in the capital structure is low, which shows reduced reliance on financial debt and reduces the long-term financial risk for Inditex.

Based on the information in the case and the financial information available, the key strengths of Zara are its established position on the global scene and excellent supply chain management. The case shows that Zara fosters long-term relationships with most of its suppliers and has an extensive network of reliable supplies of products and raw materials. Nevertheless, stability in financial results despite opening new stores also indicates that the brand’s competitive position is not improving. Enhancing operations, promoting sustainability, and increasing the volume of online sales would help Zara to strengthen its competitive position.

There are two main recommendations that can help Zara to resolve its key problems. First of all, it would be helpful for Zara to improve distribution by opening regional distribution channels that would receive products straight from production facilities instead of the three main distribution centers in Spain. The proposed action plan here is to open regional distribution centers in North America and Asia and establish transportation of products from production facilities in Europe.

Secondly, Zara would benefit from improving its online sales by distinguishing itself from the key competitors. In order to do so, the brand should conduct market research to determine the type of unique selling point that would attract more customers to use its online stores. Examples of unique selling points in online clothing stores are next-day or same-day delivery, fitting services, and free online stylist consultations. These features would help Zara to increase the volume of online sales.

The two proposed developments would be useful for the brand in overcoming its main problems. For example, opening regional distribution centers that are directly connected to production facilities would decrease operations time, thus preventing delivery delays and stock-outs. It would also enhance the online shopping experience by allowing for faster delivery. In addition, reduced transportation would contribute to Zara’s sustainability goals.

Creating a unique selling point for Zara’s online store could help to attract more customers, thus boosting sales volume and achieving growth. Both parts of the action plan are feasible given Zara’s capital structure and will likely be accepted by the management due to their anticipated effects on the business. Based on the scale of Zara’s current operations and its experience in global distribution and sales, it is also evident that the brand has the competence to implement them and that there will be no constraints to implementation.

All in all, Zara is a profitable global brand that has a stable financial position. Nevertheless, the competitive environment of the market requires the brand to undertake new activities in order to develop further. The recommended options that should be applied by Zara are to improve distribution by opening regional distribution centers and to achieve increased online sales volume by creating a unique selling point. Using these recommendations, the brand will be able to attract more customers and increase net sales, thus enhancing its profitability.

Indetex. Annual Report 2014 . 2015. Web.

Snap, Inc. Form 10-K . 2018. Web.

The Change Foundation. Annual Report 2005/2006 . 2006. Web.

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Zara needs no introduction as it dominates the fashion world and is one of the most prominent international fashion brands. With more than 2000 stores in the upscale market, Zara caters to approximately 93 markets in the world’s urban communities. With these many stores, Zara manages to hit 18 billion Euros of surplus annually.

The renowned fashion brand has successfully maintained its central goal of delivering quick, elegant, and reasonable designs in the fashion industry. Zara’s approach of configuration dealing is firmly associated with the clients. This case study is all about Zara and how it became the phoenix of the fast-fashion world.

“Fashion is nothing but an emulation of any given example and meets the demand of social adaptation. The more the article becomes subject to rapid fashion changes, the more will be the demand for cheaper products of the same kind.”

- Georg Simmel, on ‘Fashion’ in 1904.

Zara’s History: Excerpts of a Long Tale

The first Zara store was launched by Amancio Ortega in 1975 in Central Street, Galicia, Spain. The first store stocked low-price look-alike designs of popular and rich-quality dress styles.

The store soon became a hit, and Ortega opened more Zara stores all around Spain. It was the 80s (1980) when Ortega had a change of plan. He began assembling and distributing cycles to decline the lead times and react to new patterns in a snappy and concise manner, what they popularly called ‘Moment Fashions.’

The same year, Ortega and his company took their first step toward international expansion. Their international entries were made through Porto, Portugal, in the 1990s and Mexico in 1992. This international expansion was the turning point for both Ortega and Zara. Ortega continued to grow with new brands like Bershka, Pull & Bear, and Oysho and acquired groups such as Stradivarius and Massimo Dutti. These brands have been the key contributors to the success of the parent group - Inditex. Zara still boasts of being the primary growth driver.

Zara - The Undisputed Fashion Brand: Customer-Driven Value Chain

For Product Line-Up:

Unlike the other chains of Inditex, Zara focuses on manufacturing and delivering fashion-sensitive products. Following the changing customer preferences, its latest designs stay in production continuously.

When several competitors were focused on creating only a few thousand store-keeping units (SKUs), Zara ensured producing hundreds of thousands of stock-keeping units in only a year. However, these SKUs varied largely depending on the fabric, size, and color.

Zara and its products are not dependent on the design experts. Rather, its designers cautiously observe the latest trends and try blending and implementing them for the market. The designer groups keep on creating variations in a specific season, leading to expansion to successful designs.

For Fast Supply Chain:

Zara ensures a flexible supply chain, which enables it to deliver new ranges to store outlets two times a week from its central distribution center, which is a 400,000 sq m facility situated in Arteixo, Spain. This is a type of business system called ‘ vertical integration ’ that Zara adapted to eliminate the need for local warehouses. Here, Zara’s marketing strategy was reducing the ‘ bullwhip effect .’

Zara: Retailing Strategy

Instead of just enhancing manufacturing efficiency, Zara paid close attention to its retail strategy. It adopted the retailing strategy that would help it follow the fashion trends as quickly as possible, even if it involves some unmet demands.

Also, this helped Zara to create a FOMO for its products. However, the two significant components of Zara’s retailing strategy rely on its upstream operations: Stores and Merchandising.

Zara’s Anti-Marketing Approach

Zara successfully retained a profit of 13%, whereas its significant competitors like H&M have only 6% of profitability. Apart from the efficient supply chain management, it was possible due to the no-advertising or limited marketing policy that Zara follows.

This is what makes Zara one of a kind in the fashion industry. The brand spends only 0.3% of its budget on promotion and advertising. The typical trend in the fashion industry is to spend about 3.5% on marketing and promotion. The brand doesn’t believe in marketing as it saves them a lot of money and helps them with exclusivity.

Through this article, you’ll get valuable insights into the journey of Zara - one of the biggest international apparel brands. You’ll learn all about its history, retailing strategy, value chain, and more. Zara is the ideal case study for those who want to start their own apparel brand. Success is a ladder, and you have to take every step patiently and efficiently. However, if you’re planning to build something as colossal as Zara, you must source your clothing appropriately from the right manufacturer. For instance, top fashion brands trust the Fashinza platform to connect with clothing fabric manufacturers for their needs. Connect with Fashinza today!

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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 CoruÃ±a, 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 CoruÃ±a 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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The power of empathy: leveraging emotional intelligence for more effective marketing campaigns.

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Leslie Poston: Media Psychologist, Marketing Executive, Communications Professional, Educator, Researcher • Ever.Ag Data Labs • FGU

In marketing's dynamic landscape, emotional intelligence (EI) is a critical driver of success. EI goes beyond mere transactional relationships to create genuine, lasting connections with audiences. By recognizing and responding to the emotional dynamics of their audience, marketers can foster a deeper rapport and drive engagement.

The surge of EI in marketing reflects a broader shift toward consumer-centric approaches that prioritize emotional connection over straightforward sales pitches. This focus on emotional resonance helps brands differentiate themselves in a crowded market, turning casual interactions into lasting relationships.

EI enables marketers to craft messages that not only appeal to the logical aspects of decision-making but also resonate emotionally. This dual approach is vital in today's market, where emotional engagement significantly impacts consumer behavior and brand loyalty.

The Importance Of Emotional Intelligence In Marketing

Emotional intelligence involves perceiving, evaluating and responding to emotions effectively. In marketing, this means crafting campaigns that resonate on a deeper level, enhancing consumer engagement and loyalty. Studies such as those linked above highlight EI's role in improving communication and decision-making—skills essential for effective marketing.

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Furthering the case for EI in marketing, the research underscores its role in enhancing team dynamics within marketing departments. Teams that communicate with EI foster a more collaborative and innovative work environment , leading to more effective marketing solutions. As emotional intelligence cultivates a better understanding among team members, it also leads to more cohesive and unified marketing strategies.

Moreover, EI is instrumental in crisis management. From what I've seen, brands that navigate crises with empathy are more likely to maintain consumer trust. By applying EI principles, marketers can address potential issues thoughtfully, ensuring responses align with consumer sentiments. This proactive approach mitigates potential damage to brand reputation and demonstrates a genuine commitment to customer well-being, further strengthening brand loyalty.

Empathy: Connecting On A Human Level

Empathy allows marketers to step into their customers' shoes and tailor messages that resonate personally. I once worked with a client who struggled to connect with their audience. By conducting empathy mapping exercises, we uncovered key emotional triggers that allowed us to craft a campaign that spoke directly to their customers' needs and aspirations. The result was a significant increase in engagement and customer loyalty.

Empathy extends beyond customer interactions to content creation. By employing empathetic marketing strategies, brands can create content that truly speaks to the audience, leading to higher engagement rates. This approach ensures that marketing messages are not only seen but felt for more impact.

In practice, empathy allows marketers to anticipate and respond to changes in consumer preferences and market conditions more swiftly and effectively. By staying attuned to the emotional pulse of their audience, brands can adapt their strategies to maintain relevance and resonance. This agility is particularly crucial in times of uncertainty or rapid change, where consumer needs and sentiments can shift quickly.

Integrating EI Into Marketing Strategies

To integrate EI effectively, marketers should:

1. Use data-driven insights to understand consumer behavior and preferences on an emotional level. By leveraging advanced analytics tools, marketers can uncover deeper insights into what drives their audience emotionally, enabling more targeted and effective campaigns.

2. Personalize customer experiences at scale using advanced analytics and AI-driven tools. These technologies can help identify emotional patterns and preferences, allowing marketers to tailor their outreach to individual consumers, creating a more intimate and engaging brand experience.

3. Segment audiences by understanding the emotional triggers unique to different demographics. By recognizing that different groups may respond to different emotional cues, marketers can create more nuanced and effective campaigns that resonate with specific segments of their audience.

Integrating EI into marketing strategies requires a commitment to continuous learning and adaptation. As consumer preferences and emotional landscapes evolve, marketers must remain agile and responsive, consistently refining their approach to maintain emotional resonance.

Case Studies: Emotional Intelligence In Action

1. Dove's "Real Beauty" campaign leveraged EI to challenge beauty stereotypes and engage women on issues of self-esteem. By addressing common emotional struggles, Dove created a powerful bond with its audience , leading to increased brand loyalty. The campaign's success demonstrates the power of aligning marketing messages with the deeper emotional needs of the audience.

2. IBM utilized EI by employing Watson to analyze customer service interactions for emotional content, allowing them to tailor responses to customer mood and context. This responsive strategy led to higher customer satisfaction rates, showcasing the potential of AI-driven tools in enhancing emotional intelligence in marketing.

3. Salesforce's AI models are trained to pick up on subtle cues in customer data that indicate preference and sentiment, allowing for dynamic adjustment of marketing strategies in real time. This responsiveness bolsters customer engagement and ensures alignment with clients' evolving expectations. By leveraging AI to enhance emotional intelligence, Salesforce demonstrates the potential for technology to augment and scale human empathy in marketing.

These case studies illustrate the tangible benefits of incorporating EI into marketing strategies. By prioritizing emotional connection and leveraging advanced technologies to enhance empathy at scale, these brands have achieved significant gains in customer engagement, loyalty and marketing effectiveness.

The integration of EI into marketing campaigns offers substantial benefits, from improved customer relations to enhanced campaign effectiveness. By prioritizing empathy and emotional understanding, marketers can create meaningful connections with their audience, driving both immediate engagement and long-term loyalty.

How can you start leveraging EI in your marketing efforts? Begin by actively listening to your customers and seeking to understand their emotional needs. Use this insight to inform your content creation and campaign development. Invest in technologies that can help you scale empathy and personalize experiences. And most importantly, foster a culture of emotional intelligence within your marketing team, encouraging open communication, collaboration and a deep commitment to understanding and serving your audience.

Remember, the most effective marketing doesn't just sell products—it builds relationships. In a world where consumers are increasingly seeking authentic, emotionally resonant experiences, EI is no longer a nice-to-have—it's a critical component of marketing success.

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Construction and optimization strategy of ecological security pattern in county-level cities under spatial and temporal variation of ecosystem services: case study of mianzhu, china.

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Xiang, K.; Chen, L.; Li, W.; He, Z. Construction and Optimization Strategy of Ecological Security Pattern in County-Level Cities under Spatial and Temporal Variation of Ecosystem Services: Case Study of Mianzhu, China. Land 2024 , 13 , 936. https://doi.org/10.3390/land13070936

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

Zara's market share and key statistics:

Humble beginnings: How did Zara start?

Zara’s competitive positioning strategy in its first year

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

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

Innovative logistics: how Zara’s supply chain evolved

Zara’s business strategy transcends its logistics innovations

The strategy of Zara and her Inditex sisters

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

Sustainability: Zara’s strategy to make fast fashion sustainable

Inditex’s sustainability commitments and strategy to achieve them

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

Why is Zara so successful?

Zara’s vision guides its future

Growth by numbers (Inditex)

How Zara became the undisputed king of fast fashion?

History of Zara: The Long Story Cut Short

Zara’s Customer-driven Value Chain

Fast Supply Chain:

Zara’s Retailing Strategy

Read: The Torchbearers of Sustainable Fashion

Store Operations

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

(A) Zara: A Brief Overview

(B) Zara Case Study: History & Evolution

(C) Brand Philosophy of Zara

(D) Zara Business Model: Effective Working Strategies

(D.1) Fast Fashion Model

(D.2) Product Range

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

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

(F) Zara Marketing Strategies

(F.1) Fast Fashion Strategy

(F.2) In-Store Experience

(F.3) Affordability & Differentiation

(F.4) Word of Mouth and Limited Advertising

(F.5) Social Media Marketing

(F.6) Personalization & Community Engagement

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

(H) Challenges Faced by Zara

(I) Summing Up: Zara Case Study

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How extreme agility put Zara ahead in fast fashion

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INDITEX, fashion leader case study of ZARA in the transformation era:

Inditex’s challenges is how to stay ahead as a FAST FASHION LEADER in this transformative era?

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