1. Zara:
The Largest Spanish Clothing
Company Owned by Inditex
Prepared by: Shaheen Sardar
SCM Lab. Department of Industrial and Management
Engineering, Hanyang University, South Korea.
Zara, global fast-fashion retailer and largest chain in Inditex group

2. ZARA “Vision”
“ZARA is committed to
satisfying the desires of its customers.
As a result we promise
to continuously innovate our business
and
to provide new designs made from quality
materials that are affordable.”

3. ZARA “Mission Statement”
“Through its business model,
Zara aims
to contribute to the sustainable development
of society and that of the environment with
which we interact.”

4. What we know about Zara and its
history?
• Zara’s founder is the first richest person in
Spain and the third richest person in the
world (2013). This person is Amancio
Ortega (Born: March 28, 1936).
His doughter:
Marta Ortega
Inditex founder

5. What we know about Amancio Ortega?
Amancio began working as a tailor's assistant in his hometown
In 1963 he decided to start a business and
he thougt the clothing company Goa. This
business began to progress and that in
addition to selling began to distribute.
Amancio Ortega was born in La Coruna.

6. THE CHAIN’S NAME:

7. In 1975, the first Zara store was founded
in La Coruna.
In 1988 Zara’s company
opened the first store
outside Spain.
In 2010 Zara’s company opened
his first online shop.
p
o
r
t
u
g
a
l

8. Perceptual Map
Fashion Value
Price
Everyday Low quality
X
X
prices

9. Zara
Armani
Hilfiger
Design
Feedback
Cut
Production
Sale
Promotion
Display
Shipment
Outsource
None
Outsource
Outsource
Outsource
Promotion
Outsource
Outsource
Design
Outsource
Outsource
Outsource
Sale
Outsource
Display
Co-OP
CONTROL

10. Head Office &
Design lab.

11. Manufacturing

12. Logistics

13. Europe Production Asian Production
Cost: $$$$$$$$$$
Fashion Value: ZZZZZZZZZZ
Cost: $$
Fashion Value: ZZZZZ
High fashion suits & skirts Commoditized eyewear and plain shirts

14. Competitors Copying Zara Management
H&M Once a week shipments
Target Limited supply designers
Benetton Mid-season lineup adjustments
Patagonia Increased seasonal shipments

15. 0
5
10
15
2003 2004 2005 2006 2007
Zara
Gap
H&M
Benetton
Sales in Billions of $

16. Profit in millions
0
1000
2000
2003 2004 2005 2006 2007
Zara
Gap

17. More about Zara
Zara’s company is owned by Inditex group.
Inditex group contains Zara and more
different brands.

18. Zara clothing offers quality trend to an audience:
female
male
adolescent
child.
From Zara derive other shops
like:
Zara home
Zara shoes
Zara accesories

21. This chain of Spanish fashion stores has more
than 200 designers and a higher number of
models.
Zara’s collections are small and sell out
quickly.

22. Zara has no advertising, the only trade
exhibition is based on trucks
,storefronts,catalog and in the zara bag.

23. ZARA STORES:
In Zara:
customer
first
ZARA

24. • In Spain Zara’s company has:
452 stores and 131 of them with Zara kids
(2013)

25. Zara Global expansion:

26. ZARA “Production Facilities”
60%
Spain
20%
Europe 20%
Asia

27. ZARA “Summary”
Owned by Inditex
• Based in La Coruna, Spain
• 1947 stores in 87 countries
• Fast fashion strategy
• 30,000 designs per year
• 40% of designs produce in-house
• Stock updated twice a week
• Vertical Model – limited outsourcing
• Zero advertisement

28. Where are Zara stores in 2013?
• 1947 stores in 87 countries.
• 77% of stores are outside Spain.
• 166 Kiddy's Class stores out of 1947 stores.

29. Where are Zara stores in 2013?

30. Where are Zara stores in 2013?

31. Where are Zara stores in 2013?

32. • Zara’s consumers are young, highly
sensitive to latest fashion trends .
• Zara sells apparel, footwear and
accessories for women, men and
children .
• Zara offers fashion at affordable price
by following the most up to date fashion
trends .
Zara Target & price

33. Inditex
• Founder: Amancio Ortega Gaona
• He Thought:
Consumer would regard clothes
as a perishable commodity just like yoghurt,
bread or fish to be consumed quickly,
rather than
stored in cupboards, and he has gone about
building a retail business that provides “Freshly
Baked Clothes.”

34. Inditex Companies
Number of
Stores (2013)
Year of
Creation
1. Zara 1781 1975
2. Pull and Bear 825 1991
3. Massimo Dutti 634 1995
4. Bershka 910 1998
5. Stradivarius 816 1999
6. Oysho 533 2001
7. Zara Kids (Kiddy's Class) 166 2001
8. Zara Home 363 2003
9. Uterque 87 2008
Total Stores (2013) 6115

35. INDITEX
2012
Revenue 13.79 billion
Operating income 2.522 billion
Profit 1.932 billion
Total Assets 10.95 billion
Total equity 7.455 billion
Employees 120,000

36. INDITEX “Growth”
Fiscal Year 2012 2011 12/11
Net sales (millions of euros) 15,946 13,793 16%
Net profit (millions of euros) 2,361 1,932 22%
No of stores 6,009 5,527 482
No of markets 86 82 4
Employees 120,314 109,512 10,802
Total Stores (2013) 6115
Fiscal Year 2013 2012 13/12
Net sales (millions of euros) 7,655 7,239 6%
Gross profit (millions of euros) 4,486 4,313 4%
Net income (millions of euros) 951 944 1%

37. INDITEX “Gross margin and Operating expenses”
% on sales 2013 2012 2011
Gross margin 58.6% 59.6% 58.4%
Gross profit growth of 4% or € 4.5 billion
Millions of euros 2013 2012 13/12
Operating expenses 2,861 2,690 6%

38. INDITEX “Strong Growth”

39. INDITEX “Strong Growth”
(millions of euros)

40. INDITEX “Net profit”
(millions of euros)

41. INDITEX “Sales by geographical area”
(%age)

42. INDITEX “Employees by Geographical
area 2011-12”
Employees 2012

43. INDITEX “Employees by Gender
2011-12”

44. INDITEX “Employees by Gender 2012”

45. Waste Management

46. Garments released on the market VS
total industrial waste

47. INDITEX “Number of Employees”

48. INDITEX “Results”
(millions of euros)

49. INDITEX “Stores”

50. INDITEX “Markets”

51. INDITEX “Sales by Concept”
Concept Name 2013 13/12
CAGR
(2 year)
1. Zara 5,004 4% 11%
2. Pull & Bear 530 13% 13%
3. Massimo Dutti 575 17% 12%
4. Bershka 702 5% 8%
5. Stradivarius 463 2% 8%
6. Oysho 152 6% 4%
7. Zara Home 196 30% 21%
8. Uterque 33 - 3%
CAGR = Compound Annual Growth Rate

52. INDITEX “Global Sales Platform”
Store sales (%) 2013 2012
Europe excluding-Spain 45% 44%
Asia & RoW (Rest of World) 22% 20%
Spain 19% 22%
Americas 14% 14%

53. INDITEX “Zara Sales”

54. INDITEX “Global Online Sales”
• Europe
• US
• China
• Japan
• Russian Federation
• Canada

55. INDITEX “Supply Chain Management”
Clusters of suppliers
Morocco
Spain
Portugal
Argentina
Brazil
Turkey
Bangladesh
China
India
87% of Inditex's total production

56. INDITEX “Supply Chain Management”

57. “Geographical Distribution of
Suppliers to the Inditex Group” 2012

58. Inditex's Supply Chain in 2012-13

59. INDITEX “Principal Indicators”
Principal indicators
in 2012
ZARA
Pull &
Bear
Massimo
Dutti
Bershka Stradivarius Oysho
Zara
Home
Uterque
Net sales
(in millions of euros)
10,541 1,086 1,134 1,485 961 314 350 74
Number of stores 1,925 816 630 885 780 524 357 92
Net openings 120 69 57 74 96 41 47 3
Markets 86 59 60 62 52 35 35 18
New markets in 2012 5 11 10 6 7 4 5 1
ZARA “Sales”
• Zara sales increased by 18% in 2012, up to
€10,541 million

60. INDITEX (Business Structure)
• Name: Industria de Diseno Textil, S.A.
(Inditex)
• Inditex Group: Inditex and its subsidiaries
• Centralized management: Applying policies
and strategies at group level

61. INDITEX (Business Structure)
Head office: La Coruna (Spain)
• Sets Inditex strategy
• Co-ordinates brands
• Provides centralized IT, HR, Logistics, design
and real estate functions

62. Textile Sourcing
Comditel S.A (La Coruna)
Tempe S.A. (Alicante)
Nikole S.A (La Coruna)
Zara Asia Ltd (Hong Kong)
ITX Trading S.A (Freiburg,
CH)
Uterque S.A (La Coruna)
Lefties Espana (La Coruna)
E-commerce
ITX Fashions Ltd
100% (Ireland)
Manufacturing
Internal
Choolet SA,
Confecciones Fios,
Gonfecciones Goa,
Denlio, Hampston,
Jema Creacione
Infantiles, Samlor,
Stear, Trisko, Zintura,
Glencare, Indipunt
(all based in La
Coruna)
External
Inditex works with
around 1,500 external
suppliers around the
world.
Logistics (Zara)
Zara Logistica SA (La
Coruna, Spain) - 50%
of Zara women and
menswear, serving
Iberia, Americas and
Middle East
Plataforma Europa SA
(Zaragoza, Spain) -
50% of Zara women
and menswear, serving
non-Iberian Europe,
Russia and Asia
Plataforma Logistica
Leon SA (Leon, Spain)
Zara Home and Zara
distribution
Plataforma Logistica
Meco SA (Madrid,
Spain) manages Zara
childrenswear
Tempe, Inditex’s
footwear company is
only 50% consolidated
at corporate level, but is
solely responsible for
sourcing,
manufacturing and
distributing footwear
for the group.
Brand Divisions
Zara
Oysho
Stradivarius
Pull & Bear
Bershka
Massimo Dutti
Zara Home
Uterque
Each Inditex brand is
managed
independently with
its own logistics and
production facilities.
INDITEX (Business Structure)

63. Traditional model
Design
Sourcing
Store
Customer
Inditex model
 Opposite of traditional clothing
cycles
 Pull type production process
 Quick response
 Real-time sales information from
its stores
 Small batch quantities allow the
retailer to see what items are
working with shopper
 A central distribution centre in
Arteixo, with strong IT systems
developed by Inditex and third
parties, supports its supply chain
model
 All items are shipped back to
Spain where they are then shipped
out to stores around the world
Sourcing
Design
Store
Customer
INDITEX (Business Structure)

64. INDITEX'S “Waste Management”
ZNormativa: Set of rules
and regulations common
to all suppliers to optimize
• Packaging process
• Waste management
• Distribution and logistics
Good Waste Management Practices:
Methodology of work used to manage
waste to
• Reduce content of packaging material
• Improve waste separation and storage
• Facilitate recycling

65. ZARA “Business Model”
1. Develop system that requires short lead
times
2. Decrease quantities produced to decrease
inventory risk
3. Increase the number of available styles
and/or choice

66. ZARA “Competitive Advantage”
Cost Leadership
Fashionable (quality) at reasonable price
1. Based on Product Positioning:
“ZARA is cheaper price than Benetton and GAP, and still being
fashionable”
Fast Production
1. Ability to Design and get finish goods in stores
within 4 to 5 weeks
2. Very quick to get designer-influenced
products into their stores
Product Variation
1. Ability of ZARA to launch new trends, design and variation of product
2. Low Level of Inventory
3. Efficient Distribution System
4. Turnover of Product is High

67. ZARA “Objectives”
Maximize Profit:
• Maintain an ability to go further fashionable
(quality) at reasonable price
 ZARA positioning
ZARA fashion
Price
Fashion
ZARA
(New)
-
+
--
+
-
Before
Transform
Objective/Expectation
+ Price
+

68. ZARA “Objectives”
Analysis map of Zara
Adapted from the Survey.

69. ZARA “Objectives”
• Continuous design, production and distribution
Creative Departments:
Staff = 200+
Sewing: Cut fabric is
shipped to workshops
to be stitched
Samples: Prototypes
made in-house and
by suppliers
Spreading: Material
for garments laid out
in layers and marked
Cutting: A machine
cuts the fabric according
to the patterns
Finishing: Garments
are pressed, dressed
and quality checked
Shipping: From
Logistics centres to
stores, road and air
Delivery: Garments
arrive in store within
48 hours of ordering
Design, Product
and market Cycle;
1. Final design : 1 day
2. Manufacture : 3-8 days
3. Transport : 1 day
4. Selling : 17-20 days
TOTAL : 22-30 days

70. ZARA “Strategies”
Objectives
MIS
Marketing
Design
Production
&
distribution

71. ZARA “Strategies”
Production & distribution
• Maintain quality
• Cost leadership
• High bargaining power to suppliers
• Fast distribution system
Design
• Coordinate with R & D and stores to get the
new trends
• Ability to produce new trends

72. ZARA “Strategies”
MIS
• Product distribution system
• Improving inventory system
• Order information flow  stores ordering system
Marketing
• R & D
• Market penetration
• Market , location of stores , consumer behavior
analysis

73. ZARA “Value Chain”
Production :
Factory & distributor
Store Store
Store Store
Store
Marketing :
Market Research
and Analysis
Design
Inventory
Check the
Material availability
then deciding
How much this
product will be
Produce
MIS
MIS
MIS
Close watch
On trend and
Buying Behaviors
MIS
Commercial Team
& designer

74. Strengths
• Ability to recreate fashion
• Owned 1947 stores and Active use of stores
• Cost leadership strategy
• Differentiated in high price fast fashion
industry
• Dedicated supply chain process
• Vertical systematization of production process
• Efficient distribution and High turnover.

75. Weaknesses
• Centralized distribution system
• Doesn't spend much money on advertising
• Lack of online stores in many countries
• Repeated sales of out-of-stocks
• Low quality

76. Opportunities
• Growth of fashion market
• Diverse cultural area
• Constant use of social media marketing
strategy
• Online marketing strategy
• Global market penetration
• Distribution center in US
• Expanding into potential new market e.g.
China, Australia

77. Threats
• Emerging new comers
• Local and Global competitors
• Cheaper alternatives may be available in
economic downturn
• Zara based in Spain and has a great no of
stores in Europe will dent in revenues
• Limitation of design copies
• Product Cannibalism

78. ZARA “International Strategy”
• Combined Strategy:
1. Cost Leadership is usualy captured in mass production
(mass product, less differentiation)  Standardization
2. Differentiation Strategy is ussualy captured to produce
goods that are more value added  fashionable, fast
delivery  customization
• Good Consideration:
1. Market selection
2. Marketing approach
3. Market entry

79. ZARA “International Strategy”
Market Selection
Marketing
Approach
Market
Entry
International
Strategy

80. Market Selection:
ZARA “International Strategy”

81. Market Selection:
ZARA “International Strategy”

82. Market Selection:
• Consideration
• Characteristic or behavior of Consumers
ZARA “International Strategy”
Country Character of Consumers
French More Fashionable (Quality Oriented)
German Price Sensitive
Italian More Fashionable
USA Less Trend
Japan More Trendy
British Stores Based on Social Affinity

83. Market Entry:
ZARA “International Strategy”
Barriers Factors
Market Entry
Consideration
Economics Factor
Market Entry Government

84. Market Entry:
• Consideration
• Economics
• Macroeconomics Factor :
• tax, political condition, export tariff
• Microeconomics Factor :
• Local Competitors
• Demand
• Location of Store
• Government
• Regulation from Government
• Barriers
• Local producers protection issues
ZARA “International Strategy”

85. ZARA “International Strategy”
Marketing Approach:
• Consideration
• 4 P consideration  Product, Price, Promotion
and Placement. Each Country has different
marketing approach.
• Product  local preferences, design, trends
• Price  different pricing strategy for each
country. For example: Italy and Paris has no
problem for price but quality-oriented, but
German has sensitive price.
• Promotion  different promotion strategy
for each country
• Placement  efficient distribution, location
of stores

86. ZARA “Financial Position as
Compared with Competitors”
GAP H & M Benetton Inditex
Net Margin -0.06% 9.60% 7.05% 10.46%
Asset Turnover 1.82 1.96 0.74 1.25
ROA -0.11% 18.78% 5.25% 13.05%
ROE -0.27% 24.85% 11.93% 22.88%

87. ZARA “Inventory Management”
• Focus on reducing
response time
• Approximately
11,000 new items
per year, compared
with 2,000-4,000 for
H&M and Gap.

88. ZARA “Inventory Management”
• Stock outs: Common
• Short shelf life: More
customers
• Inventory holding:
• ZARA: 6 days
• H&M: 52 days
• Cortefiel (Spain): 94 days

89. ZARA “Forecasting”
• Extensive market research
• Quick input and output response
• Frequent new styles
• Near-term forecasts
• Customer feedback
• Short product life cycles
 Reduce errors
 Improve current products

90. ZARA “Procurement”
• In-house production: Half
• Each clothing line: Separate staff
• Basic textiles: Global suppliers
• Simple items: Outsourced to
China.
• Difficult items: Zara factories
and domestic outsourcing
• Most suppliers: Close to
distribution centers

91. ZARA “Production Planning”
• Design & Production Centre:
Centralized
• Supply chain: Constant data flow
• Retailers: Have authority to
change 40%-50% orders
• Factories:
 Single-shift
 Change quickly according to
demands

92. ZARA “Warehousing”
• High-velocity shipping: Rapid
information flows
• Stores: Electronically connected to
headquarters
• Logistics system: Speed and
flexibility
• Products:
 Selected
 Sorted
 Routed
 Delivered
 Local distribution centers
 Retail store stockrooms

93. ZARA “Transportation”
• Distribution: 2 weeks
• Supply chain: Quick response
• Transportation network:
Effective and efficient
• Zara Promotes: Service quality
• Zara Coordinates: All aspects
of logistics

94. Production Commitment and Markdown
6-month
Pre-season Start of season In-season
Sales%
Not at full
price
Traditional
Industry
Model
45-60% 80-100% 0-20% 30-40%
Advertisement
Advertisement
+
Markdowns
Zara 15-25% 50-60% 40-50% 15-20%
Fresh items

95. Recommendations to ZARA
KEY PROBLEMS:
Emphasize on high efficiency and fast
production processes
Demotivation of workers
Quality drops
Lack of inventory tracking
Inability to check inventory within stores
Real time counts and scan must be done.

96. Recommendations to ZARA
• ZARA SEEMS TO:
 Go in the right direction
 Grow at a remarkable rate
 Show no signs of slowing down
• ZARA SHOULD:
 Expand in each district/region
 Expand into North American and Asian markets
 Continue growth throughout Europe
 Increase its production and reduce costs by
outsourcing to Asian countries

97. Recommendations to ZARA
• CHANGE THE SYSTEM
CentralizedTransform Decentralized
Build decentralized distribution & Production
in each region (Asia, Europe & America, more
is better) to
Penetrate new market & trend
Decrease the complexity of process

98. Recommendations to ZARA
INCREASE ADVERTISEMENT
• Part of marketing
• Bridge between customers and companies
INCREASE NETWORKING CAPABILITIES:
Ineffective communication between its stores
and the home office.
 Currently used POS terminals are not connected
to other store POS terminals or to corporate
headquarters.

99. Recommendations to ZARA
Improve IT Infrastructure
• Efficient for past operations
• Insufficient to deal with modern technology
• Ineffective in future as company continues to
grow and expand internationally

100. References
1. Bureau of Labor Statistics (2011). International
comparisons of hourly compensation costs in
manufacturing, 2010.
http://www.bls.gov/news.release/pdf/ichcc.pdf
2. Werner International management consultants (2012).
Comparison of the hourly labor cost in the primary textile
industry winter 2011.
3. Verlina N. Whatley (2011). Case Analysis of Zara: IT for
Fast Fashion http://www2.uhv.edu/luj/MGT6352/
Samples/Student%20Sample%202.pdf
4. http://en.wikipedia.org/wiki/Zara_(retailer)
5. http://en.wikipedia.org/wiki/Inditex
6. http://www.inditex.com

101. ANY QUESTION?