When it comes to high street fashion, there is only one name that we associate to it – Zara. This Spanish retailer approximately possesses 2100 shops in 88 countries worldwide, and what is the most fascinating fact, they have constructed a model to create, produce, and deliver their clothing items within just 15 days.
The founder of the Zara company, Amancio Ortega is nowadays considered to be one of the wealthiest people in the world. He is the owner of Zara, and ever since it has been opened, it just grows. From 1991 to 2015, Inditex’s selling in which 70 percent of it comes from Zara, records an extreme growth-more than 50 times, from 367 million € to 20,9 billion €. So, where is Zara’s secret of success?
Zara Clothing Store, Los Angeles California, 6/2015, by Mike Mozart of TheToyChannel and JeepersMedia on YouTube
Selling philosophy
Zara’s selling philosophy is rather simple – they control the product before it reaches the customer. They have constructed a special model of 15 days in which they design, produce, and deliver the item to the stores worldwide. Such a tempo is extraordinary since the majority of designers spend months creating their new products. Zara is able to do everything far faster than anybody on the market which enables them collecting 85 percent of the full price of the clothes in its clothing retail, while others receive 60-70 percent. As a result, they achieve net profit margin higher than their competitors. Just to compare, in 2001, Inditex had 10,5 % of net profit margin, while Benetton had just 7%, H&M 9,5%, and Gap’s was close to zero.
Logistics and distribution
What also contributes to the massive success of this Spanish retailer, is the fact that they preserve the majority of their production at home, while their competitors move everything to China. By this, they are deliberately leaving space for the additional capacity when it comes to storage. They produce and export their products in small series, do not rely on external partners, but they manage the design, storage, distribution, and logistics on their own. Furthermore, they put price labels on their products even before they reach the store.
Through the course of time, Zara remained consistent with their business planning and strategies. They are mainly constructed in accordance with the following principles: communicate with the aim to avoid misunderstandings, keep the same pace across the entire retail chain (this mainly refers to velocity and synchronization), and leverage your capital assets to increase supply chain flexibility.
[1] Internet: https://hbr.org/2004/11/rapid-fire-fulfillment [Accessed 26-02-2019]