ZARA INTRODUCTION

What is unique about Zaras business model compared to more traditional fashion
retailers?

In order for a business to stand above the rest of its competition, its important that they
develop a strong business model. Without a strong business model, companies fail to
gain market share and fall behind. A business model that stands out compared to the rest
of the competition will also gain more market share as they are operating differently then
the rest of the companies. Zara, as introduced above in Dianes short article, is one of the
largest international fashion companies. It belongs to Inditex, one of the worlds largest
distribution groups. (Company). Zaras business model is distinctive compared to
more traditional fashion retailers because the company has several strategies that other
fashion retailers dont do. Firstly, Zara stocks clothing in scanty quantities. When a
clothing design runs out, it runs out. They dont order more stock in. Theyve trained
consumers not to wait for it to go on sale, says Don Huber. (Bryan September 06,
2012). Secondly, Zaras factories are based in Europe, so new designs can get into stores
in as little as two weeks. Other retailers are faced with the disadvantage of having their
products shipped from China and facing a lag time of more than two months. Now, Im
going to discuss why these two strategies are an advantage for Zara compared to other
fashion retailers. Considering the fact that Zara will not order new merchandise after a
line is sold out, it forces customers to purchase the product right away and not wait for
discounts. The European fashion is an important aspect of society. Everyone is always
dressed fashionably and what they are wearing is important to them. They understand
that if they dont purchase the product when they see it, they may never get the
opportunity to again. This also works to the advantage for many customers that want to
distinguish themselves from others. With the limited stock, there will not be as many
people wearing the product if they only carry a small amount of inventory. This is
important for actresses/actors as they try to be different than the rest of society. The next
advantage that Zara holds compared to other retailers is having their factories in Europe
compared to China. With the distribution center being close to the retailers, the cost of
distribution is lower and the merchandise can reach the stores in a lot less time. This will
allow Zara to only order what they are going to sell because if they want to put in a new
order, they know they will not have to wait two months for new inventory. Other
retailers have to order enough inventory to be able to get them through two months. If
they cant sell these items, they have to put them on sale, and this is when the majority of
customers purchase the product.

Zara, Company. Accessed September 26,

2012.http://www.zara.com/webapp/wcs/stores/servlet/category/ca/en/zara-
W2012/11112/Company.

Bryan, Borzykowski. Canadian Business, Zara escapes economic recession in Spain.

Last modified September 06, 2012. Accessed September 26, 2012.
http://citationmachine.net/index2.php?
reqstyleid=10&mode=form&reqsrcid=ChicagoWebsite.

How does Zara create value to customers?

Zara creates value to its customers in a number of ways. A few ways were discussed
above in the previous question. The first way that Zara creates value to their customers is
by being able to provide them with the newest and most up to date fashions. Zaras
distribution center is out of Europe and therefore the wait time is at most two weeks
compared to Chinas of two months. The customers of Zara are able to wear the newest
fashions as they enter the market. People are always trying to find a way to be the first
one representing the newest fashion. With Zara making this possible, they have
established a strong customer loyalty to the ones that always want to be the first one
wearing a new coat or shirt. Another way that Zara creates value to its customers is by
pricing clothes differently depending on the location. The cost of clothing from Zara is
cheaper in Europe and more expensive in Asia and North America because the North
American and Asian countries are able to afford the latest clothing designs compared to
Europe. This allows Zara to accommodate all customers in every country. It doesnt limit
the company to one country. The customer base can range all over the world. The
company has also cut costs on advertising and in other areas of the company in order to
maintain their high quality and low cost fashion designs. If a company can produce a
product at low cots and sell to all potential buyers, they will generate a lot more revenue
than a company that produces a product at high cost and is forced to sell the product at a
high cost.

What do you consider Zaras Competitive advantages to be?

 I think Zaras competitive advantage is the fact that they are fresh. They have a fast
production and distribution strategy that allows them to offer the latest fashions in less
than two weeks. Also, with them being able to produce and distribute new fashions in a
short amount of time, it allows Zara to change over 75% of the merchandise on display
every 3 or 4 weeks. This increases the frequency of customer visits. (Zara).

SlideShare, Zara. Accessed September 26, 2012.

http://www.slideshare.net/mericarla/zara1.

What about its online strategy?

After doing some research, it appears that Zara also has a strong online appearance in
the market. They have over six million facebooks friends that describe the company as
possibly the most innovative and devastating retailer in the world. Zaras online strategy
is the same as the stores. Its possibly even better as shoppers can purchase products
24/7. They expect on-line retail to grow $144 billion in Western Europe by 2014. Zara is
hoping to see a 10% rise in revenue linked to its online store, theyve even released an
iPad & iPhone apps. (Don 03/09/2010). This demonstrates a great understanding of
societys use in communication and technology devices. Zara is truly the innovator of
fashion retailers.

Don, Tercio. AQNB, Zara bites the internet. Last modified 03/09/2010. Accessed
September 26, 2012.http://www.aqnb.com/2010/09/03/zara-bites-the-internet/.
Reply
Zachary Brandt says:
September 27, 2012 at 2:04 pm

What is unique about Zaras business model compared to more traditional fashion
retailers?

In order for a business to stand above the rest of its competition, its important that they
develop a strong business model. Without a strong business model, companies fail to
gain market share and fall behind. A business model that stands out compared to the rest
of the competition will also gain more market share as they are operating differently then
the rest of the companies. Zara, as introduced above in Dianes short article, is one of the
largest international fashion companies. It belongs to Inditex, one of the worlds largest
distribution groups. (Company). Zaras business model is distinctive compared to
more traditional fashion retailers because the company has several strategies that other
fashion retailers dont do. Firstly, Zara stocks clothing in scanty quantities. When a
clothing design runs out, it runs out. They dont order more stock in. Theyve trained
consumers not to wait for it to go on sale, says Don Huber. (Bryan September 06,
2012). Secondly, Zaras factories are based in Europe, so new designs can get into stores
in as little as two weeks. Other retailers are faced with the disadvantage of having their
products shipped from China and facing a lag time of more than two months. Now, Im
going to discuss why these two strategies are an advantage for Zara compared to other
fashion retailers. Considering the fact that Zara will not order new merchandise after a
line is sold out, it forces customers to purchase the product right away and not wait for
discounts. The European fashion is an important aspect of society. Everyone is always
dressed fashionably and what they are wearing is important to them. They understand
that if they dont purchase the product when they see it, they may never get the
opportunity to again. This also works to the advantage for many customers that want to
distinguish themselves from others. With the limited stock, there will not be as many
people wearing the product if they only carry a small amount of inventory. This is
important for actresses/actors as they try to be different than the rest of society. The next
advantage that Zara holds compared to other retailers is having their factories in Europe
compared to China. With the distribution center being close to the retailers, the cost of
distribution is lower and the merchandise can reach the stores in a lot less time. This will
allow Zara to only order what they are going to sell because if they want to put in a new
order, they know they will not have to wait two months for new inventory. Other
retailers have to order enough inventory to be able to get them through two months. If
they cant sell these items, they have to put them on sale, and this is when the majority of
customers purchase the product.

Zara, Company. Accessed September 26,

2012.http://www.zara.com/webapp/wcs/stores/servlet/category/ca/en/zara-
W2012/11112/Company.

Bryan, Borzykowski. Canadian Business, Zara escapes economic recession in Spain.

Last modified September 06, 2012. Accessed September 26, 2012.
http://citationmachine.net/index2.php?
reqstyleid=10&mode=form&reqsrcid=ChicagoWebsite.

How does Zara create value to customers?

 Zara creates value to its customers in a number of ways. A few ways were discussed
above in the previous question. The first way that Zara creates value to their customers is
by being able to provide them with the newest and most up to date fashions. Zaras
distribution center is out of Europe and therefore the wait time is at most two weeks
compared to Chinas of two months. The customers of Zara are able to wear the newest
fashions as they enter the market. People are always trying to find a way to be the first
one representing the newest fashion. With Zara making this possible, they have
established a strong customer loyalty to the ones that always want to be the first one
wearing a new coat or shirt. Another way that Zara creates value to its customers is by
pricing clothes differently depending on the location. The cost of clothing from Zara is
cheaper in Europe and more expensive in Asia and North America because the North
American and Asian countries are able to afford the latest clothing designs compared to
Europe. This allows Zara to accommodate all customers in every country. It doesnt limit
the company to one country. The customer base can range all over the world. The
company has also cut costs on advertising and in other areas of the company in order to
maintain their high quality and low cost fashion designs. If a company can produce a
product at low cots and sell to all potential buyers, they will generate a lot more revenue
than a company that produces a product at high cost and is forced to sell the product at a
high cost.

What do you consider Zaras Competitive advantages to be?

I think Zaras competitive advantage is the fact that they are fresh. They have a fast
production and distribution strategy that allows them to offer the latest fashions in less
than two weeks. Also, with them being able to produce and distribute new fashions in a
short amount of time, it allows Zara to change over 75% of the merchandise on display
every 3 or 4 weeks. This increases the frequency of customer visits. (Zara).

SlideShare, Zara. Accessed September 26, 2012.

http://www.slideshare.net/mericarla/zara1.

What about its online strategy?

After doing some research, it appears that Zara also has a strong online appearance in
the market. They have over six million facebooks friends that describe the company as
possibly the most innovative and devastating retailer in the world. Zaras online strategy
is the same as the stores. Its possibly even better as shoppers can purchase products
24/7. They expect on-line retail to grow $144 billion in Western Europe by 2014. Zara is
hoping to see a 10% rise in revenue linked to its online store, theyve even released an
iPad & iPhone apps. (Don 03/09/2010). This demonstrates a great understanding of
societys use in communication and technology devices. Zara is truly the innovator of
fashion retailers.

Don, Tercio. AQNB, Zara bites the internet. Last modified 03/09/2010. Accessed
September 26, 2012.http://www.aqnb.com/2010/09/03/zara-bites-the-internet/.
Reply
Andrew Newton says:
September 30, 2012 at 2:19 pm

Zaras business model is focused around maintaining a design, production and

distribution process that enables Zara to adjust simultaneously with shifts in consumer
demands. By keeping production in-house and only strategically partnering with
manufacturers near Zaras headquarters Zara has ensured fast and efficient delivery. This
creates flexibility that is necessary in constantly designing and producing over 12,000
new products every year (123HelpMe 2012).

One of the main differentiators against Zaras competitors is that, compared to many low
customer cost and high production costs, Zara is able to sell products at a low cost to
consumers and still keep production costs low (Borzykowski 2012). Zaras success in
implementing this skill can be seen through the companys growth in 2012, providing
value to stakeholders and making it a high and well preforming company. The company
grew from 65-share value to 96.63 in the past year (stock market watch)

Compared to other retailers and fashion, Zara stocks clothing in limited quantity. With its
high turnover of styles, customers dont wait for items to go on sale, rather they purchase
when its available, ensuring high profit margins (Borzykowski 2012). Since factories
are based in Europe, all new styles are available in stores much faster than its
competitors, ensuring that Zara is always ahead of the fashion curve. This is compared to
companys manufacturing in China who faces a two-month lag period before designs are
seen in stores. This provides maximum customer value.

Included in their business model, and what I personally consider to be Zaras main
competitive edge, is its pricing model. Zara will price its styles based on location. It
tends to be more expensive in the Americas and in Asia compared to Europe. In doing
so, all markets are being reached. In Europe there is still hard financial times, therefore
having access to more affordable and still trendy, good quality and fashionable clothing,
Zaras customers are still being satisfied. In the U.S. market, there is more free income
for clothing therefore higher prices are justifiable. According to an analyst at
Morningstar when you can move inventory through like they do, you can react very
quickly to what buyers want, Jaime Katz, adding to their competitive edge
(Borzykowski 2012).

Zara produces their clothing to have a short wear span (10 wears) forcing consumers to
need to purchase more designs sooner. This ensures a high competitive edge for Zara in
product development, strategic partnership and advertising and marketing. In doing so,
Zara has become much more efficient and is able to better serve their clientele in
providing additional value and profitability to the company (Borzykowski 2012). Having
a quick distribution time of 3-4 weeks, a design team of 200 people (compared to
competitors who have significantly smaller design teams) there are more options for new
clothing lines and more efficient manufacturing times. This also gives more options to
store managers, who have more autonomy than their competitors do, in what to stock,
what to put on sale as well as store design and layout. This allows managers to better
serve customers who are more aware and are listening to customer needs than the CEO
and designers in the company who are not always surrounded by customers (123HelpMe
2012).

Zaras online strategy is lagging behind other fashion retailers (Kenna 2011). In the
article found in the Bloomberg Businessweek, it states that Zaras move to the online
retail world was long over-due, although it is a great strategy for the company, as it is
much more cost effective for the company to launch a web-service as opposed to
opening and investing in 50 more malls in the U.S. (Kenna 2011). According to Jesus
Echevarria, a spokesperson for Zara, they will be effectively managing and operating an
online presence, however the company is not rushed, as there is no need to rush
expansion. Zaras strategic online presence will help in expansion and to trump rival
H&M in the U.S. market (Kenna, 2011).

References:

123HelpMe.com, 2012. Zaras Business Model, Information and Communication

Technologies, and Competitive Analysis. [Accessed September 28 2012]
Borzykowski, Bryan, 2012. Zara Eludes the Pain in Spain. Canadian Business 85,
no.14, p67: (September),http://web.ebscohost.com.proxy.library.carleton.ca/bsi/detail?
vid=3&hid=111&sid=4afece85-a31b-48ef-baa1-
7ad7eb57d193%40sessionmgr104&bdata=JnNpdGU9YnNpLWxpdmU
%3d#db=bth&AN=78584873.
Kenna, Armorel, 2011. Zara Plays Catch-Up with Online Shoppers. Bloomberg
Businessweek (August),http://www.businessweek.com/magazine/zara-plays-catchup-
with-online-shoppers-08252011.html.
Reply
Matt MacDougall says:
October 1, 2012 at 10:28 am

The middle aged mother buys clothes at Zara chain because they are cheap, while her
daughter aged in the mid 20s buys Zara clothing because its fashionable. Cleary, Zara is
riding two of the winning retails ends, being in fashion and low prices which make a
very effective combination out of it. (Dutta, Third Eyesight).
1. Most retailers outsource production to low cost Asian countries, where as Zara is
vertically integrated with the majority of production carried out in owned and controlled
facilities in Spain. This allows a lot more flexibility and speed. Zara is able to identify
trends and have the clothes in the store within 30 days. Zara will catch fashion while it is
hot to attract more sales at full prices and fewer discounts. Most retailers try and forecast
what customers might buy in later months while Zara supplies its consumers on demand.
Trend identification comes with constant research, thats why Zaras machinery can react
to the reports of modification within 30 days. Zara can offer more choices in more
current fashion than its competitors because it delivers products to its stores twice a
week.
2. Zaras business is all about reducing response time, fashion stock is like food. It goes
bad quickly. Zara value proposition is concentrates on three winnings aspects.
-Short lead time= More fashionable clothes
Zara is continuously keeping up with fashion and ensuring consumers get what they
want. By keeping open dialogue with purchaser to receive a sense of what they want,
along with staying in line with latest trends.
-Lower quantities=Scare supply
Zara reduce quantity manufactured, to create a scare for its product and in fashion the
less availability, the more desirable. Also lower quantities create less risk if a style does
not work well because less will be exposed to its purchasers.
-More styles= More choice and more chances of getting it right
Zara produces more styles then more quantities per style on the bases that if one sells out
there are another style waiting to replace it. Fresh produce thats moving in step with
fashion trend and updated frequently will keep consumers happy.
3. Zaras competitive advantage is its ability to react to change in a short period of time,
rather than concentrating on forecasting for later seasons or trends. The only forecasting
efforts Zara implies is towards the kind and amount of fabric it will buy. There is less
risk and margins lost on fabrics than finished goods errors. Furthermore, Zara has such
flexibility which its production that some fabric are semi-processed or un-coloured for
any immediate product needs.
4. Information and communication technology is the heart of Zaras business. Zaras
success is based on collecting information on consumers needs, trends flows and feeding
the information to the database at head office for quick transitions. The online strategy
allows the warehouses to receive product information, to prepare quick and accurate
designs. Also, the distribution process does not waste time waiting for human sorting, it
ensure each orders reaches its right destination immediately.
http://thirdeyesight.in/articles/ImagesFashion_Zara_Part_I.pdf
http://www.inditex.com/en/who_we_are/concepts/zara
http://www.123helpme.com/view.asp?id=97642
http://www.businessmodelalchemist.com/2005/06/zaras-business-model.html
Reply
Sara Faisal says:
October 1, 2012 at 11:12 am

1) Zara uses short supply chain business strategy that controls the steps on the supply
chain from designing, manufacturing, to distributing its products. Zara business model is
vertically integrated compared to their competitors business models. The company has a
flexible structure, strong customer focus in all its business areas, and is able to adapt and
offer customer what they want in a short period of time.

The short supply chain business applied by Zara is an innovative strategy that suits
businesses with short product cycle that are sensitive to consumers preferences when
demands change quickly. I believe that one of the things that differentiates Zara business
model from other competitors is the companys ability to identify and bring out their
customers needs at a fast pace. Other fashion chains simply cannot keep up with Zara.

2) High Fashion, affordable clothes: Zara keeps up with styles that are in, and brings
out the latest styles in the stores immediately. Zara identifies a trend and has it ready for
sale within 30 days whereas most retailers take 4-12 month and they are able to do this
by controlling most of the supply chain from design to retail.
Large choice of styles: new fashion trends reach the Zara stores quickly because Zara
produces 11,000-12,000 styles per year compared to a typical retailer that averages about
3000 styles per year.

Prime locations: Zara does not spend much on advertising (0.3% of revenue) compared
to traditional retailers (up to 5%), Zara reachs its target market by locating their stores in
busy locations.

3) Besides the fact that Zara is a high fashion affordable company, Zara targets the
young audiences, who are sensitive to the latest fashion trends and price. Zara sells three
lines of items, for women, men, and children. This company has an advantage over other
retailers because they dont define their target by grouping ages or lifestyle, due to that
Zara is able to target a broader market.

Zara tends to meet consumer likings and react to new trends in a quicker way compared
to competitors. The company can design a new product and have the finished goods for
sell in its stores in less than five weeks. Zara studies its customers demand in the stores
and tries to instantly deliver and this is why they are leading the way and leaving their
competitors behind.

4) Inditex is relying on e-commerce instead of physically expanding Zara stores, in order

to drive US sales and defeat competitors such as H&M. The company is only now
beginning to use the online channel to gain the competitive edge. Last September,
Inditex launched out a Zara online web for Spain, UK, and Germany. Zaras move online
in the United States was late but now running. As stated on one of the articles the Web
is a great strategy for them. Its much cheaper with their nationally recognized Zara
brand to launch a Web store than to invest in real estate in 50 more malls in the U.S.

Reference list:
Kale, Neha, 2011. Online Sales Central to Zaras US Growth Strategy. Power retail.
[Accessed September 28, 2012].
http://www.powerretail.com.au/multichannel/online-sales-central-to-zaras-us-growth-
strategy/

Dishman, Lydia. 2012. The Strategic Retail Genius behind Zara. Forbes.
[Accessed September 28, 2012].
http://www.forbes.com/sites/lydiadishman/2012/03/23/the-strategic-retail-genius-behind-
zara/

Harbott, Arif. 2011. Analyzing Zaras business model. Business thoughts.

[Accessed September 28, 2012]
http://www.harbott.com/2011/03/03/analysing-zaras-business-model/

Burgen, Stephen. 2012. Fashion chain Zara helps Inditex lift first quarter profits by 30%.
The guardian.
[Accessed September 28, 2012].
http://www.guardian.co.uk/business/2012/aug/17/zara-inditex-profits

Kenna, Armorel. 2011. Zara plays catch-up with online shoppers. Bloom berg business
week magazine.
[Accessed September 29, 2012].
http://www.businessweek.com/magazine/zara-plays-catchup-with-online-shoppers-
08252011.html
Reply
Conor Nisbet says:
October 1, 2012 at 7:31 pm

Zara is considered one of the worlds largest fashion companies, and operated under the
multi-national distribution group Inditex. Part of the reason that Zara has become so
successful is due to their unique business model, which puts the consumer at the heart of
the company in relation to aspects such as deign, production, distribution and sales
(Zara, 2012). One of the main factors in the Zara business model is the speed at which
they can get the newest fashion to market. Zara operates on a small but frequent shipping
system, where a store could receive two separate deliveries in the same week. This
results in each store having few, but select choices of items that give the consumer a new
and different experience each time they visit a store. Most of the companys competitors
receive a shipment 5 7 months after the order has been placed, however Zara has
managed to cut that time down to just 2 2- months. Some other factors that
contribute to the uniqueness of Zaras business model are:

Only 0.3% sales profits are spent on advertising.

Zara operate a counterintuitive strategy by sourcing more than half its goods (60%)
from its home country as well as neighboring Portugal and Morocco.
Empowered retail managers inform head office of what their consumers and buying
and what items they prefer.
Zara operate their own dying plants, and do the majority of sewing themselves.
Collections are designed by young creative teams and not solely by groups of
designers.
Clothing is cheaper than competitor, but in no way poorer quality.

With the unique business model that Zara operate with, it is clear that they have some
certain competitive advantages in the marketplace. One of the main points being that
they are able to differentiate their product line faster than any other close competitor. As
Charles Darwin once said, it is not the strongest of the species that survive, nor the most
intelligent, but the one most responsive to change. However, without a doubt Zaras
main competitive advantage is the fact that they have completely fine-tuned their supply
chain. The majority of the aspects listed above that add to Zaras business model are due
to the fact that the company uses its supply chain as more than just a strategic tool, but as
a fundamental aspect of their company. Zara have shown that in todays competitive
environment, it is essential to do more than simply go for the cheapest options. The
supply chain has shown that if managed correctly, then it can provide sustainable
competitive differentiation and positioning, whilst also reducing operating expenses and
increasing throughput.

In terms of Zaras online strategy, they only began to sell their products over the Internet
in North America in September 2011. For a long time, the website was only used for the
promotion of their brand unlike their main competitors who were receiving the main
share of online sales. What is interesting about the strategy of Zara is that when
implementing the new online store, they sold to markets in Britain, Spain, Portugal,
France, Italy and Germany. These are places where the competitor Gap was not shipping
or ready to launch yet (Tercio, 2010). Zara also has a large Social media following, and
their Facebook page (with 14,738,872 likes as of 01/10/12) is one of the most followed
clothing brands online. The Zara brand has created more of an online community, and
part of the reason that consumers shop at Zara is for the enjoyment f seeing what clothes
they have in stock. If a customer purchases something that they believe not many others
have, then it gives them the sense of individuality. It is quite clear that Zara are to
continue having their main focus on their key competitive advantages in their retail
outlets rather than putting to much emphasis on online sales.

References:

Don Trecio, 2010.

Zara Bites the Internet
http://www.aqnb.com/2010/09/03/zara-bites-the-internet/
Accessed 01/10/12

Lydia Dishman, 2012

The Strategic Retail Genius Behind Zara, Forbes
http://www.forbes.com/sites/lydiadishman/2012/03/23/the-strategic-retail-genius-behind-
zara/
Accessed 01/10/12

Andrew Pearson, UBS

The Story Of Zara The Speeding Bullet
http://www.uniquebusinessstrategies.co.uk/pdfs/case
%20studies/zarathespeedingbullet.pdf
Accessed 29/09/12
Reply
Brian Zhangda Yang says:
October 1, 2012 at 8:30 pm

1. What is unique about Zaras business model compared to more traditional fashion
retailers?
Zaras business model is characterized by a higher degree of vertical integration compare
by the other traditional fashion retailers. It covers all the phases of the fashion process
cycle, which conations: design, sale, manufacture and distribution to its own retail
store.
The key to this model is the ability to satisfied customer desired in the shortest possible
time. Time is the main considering factor in Zaras business operation. The vertical
integration helped them to shorten turnaround time and achieve the greater flexibility,
reducing stock risk and get greatest profit.
Zara sells three lines of items, women, men and children. Each of their product lines has
its own independent creative team who carries out the fashion proposals for each
fashion campaigns.
The key parent of Zara fashion Retailer Company will be their team of designers. Zara
has more than 200 professional designers, who are continuously assessing the customers
preferences. Furthermore, Both in-house manufactured and those purchasing from
external suppliers, will shift their garments to hubs Zara in Spain, wherefrom they are
dispatched to their worldwide stores.

2. How does Zara create value to customers?

The key valued that Zara created to customers is the ability to adapt the offer to customer
desires in the shortest time. Zaras designer team will continuously assessing the
customers preference, wishes and demands. They are offering 12000 different models
for sale in its store each year.

Zara has three target customers: Women, men and children. Each of them has its own
designing line. This is the key reason for why their customers may loyalties to Zara
store. And also people can find Zara in most of the major stopping streets of more than
500 cities in the world, which created a high quality fashion proposal into account for the
latest trends at a reasonable price. Also Zara has the ability to have the manufacture
goods for sale in store worldwide with in 2 weeks of shipping.

3. What do you consider Zaras competitive advantages to be?

Most of their factories owned by the company, together with a wide range of highly
experience external suppliers who have a solid commercial relation with the format,
which allow Zara to manufacture a model and to have it for sale in its stores within the
average of two weeks.

Zaras business is characterized by their vertical integration. The vertical integration

enables their shorter turnaround times and gains greater flexibility while reducing their
stock risk. Time will be their important factor for their decision-making, and this helps
them controlled their production costs.

The team of designers will be another advantage for Zara compare with other fashion
retailers. The three lines of items help Zara achieve their different target market.

What about its online strategy?

Zaras online strategy helps them to shorter their turnaround time and increase their
flexibility. Also the online store helps Zara to create a high-virtualized sales network. On
the other hands, the online store will help them to deliver the new item information to
their customer in a shortest time.

Also the online store will enable the communication between Zara and customers
including the existing customers and future customer. The online strategy will let people
know Zaras latest news and status, and also people can find the newest fashion item
online and purchasing through online. Furthermore, the online store will also help Zara
to reduce their stock risk and increasing the freshness of their items.
Reply
Nick Sevenhuysen says:
October 1, 2012 at 8:59 pm

1.) Zaras business model is unique to traditional fashion retailers because they do not
imitate trends but instead create their own. Uniquely Zara does not market or advertise
themselves largely but instead focus on the growth and creation of new stores. Zara truly
cares and strives to understand what customers want and then produce and deliver them
in unmatched time. Their secret to success is a completely integrated and mostly local
supply chain that can have an entirely new collection in stores in little as two weeks. Due
to the adaptability and flexibility of the stores merchandise, items are only produced in
limited quantities which allow for a much greater selection in the store compared to
rivals. These limited quantities also encourage buyers not to wait because the unique
item usually only has a shelf life of four weeks before it is gone.

2.) Zara creates value to its customers by anticipating and reacting to their ever-
changing tastes and preferences. Zaras staff members are well trained to not only
provide great service in shop but also in determining which items are selling and which
are not. Items usually have a one week test period which they can then be promptly
replaced if need be. By carrying limited quantities of particular designs allows for more
unique designs in store compared to competitors. Zara has retail locations in 84 different
countries and the company adapts each design collection to suit the regional tastes. This
combination produces unique and distinct items all for relatively fair prices.

3.) Zaras competitive advantage is their extremely flexible and responsive supply chain.
In comparison to other retailers, most of Zaras suppliers are local European
establishments. By having 50% of manufacturers in Spain, 25% in Europe and 25% in
Asia, the company can have changes in merchandise in unparalleled speed. Another
major competitive advantage is in an area with unprecedented financial uncertainty, Zara
gains local support based on their local supply of jobs to the community. To enhance this
further, prices are different based on the location and Zara has kept Europe prices low in
comparison to Asia and North America. Zara refrains from advertising and instead
focuses its capital on the creation of new stores. This in turn is almost the best
advertising as it places the brand in not just any ordinary mainstream context.

4.) Zara launched the first online boutique on September 6, 2010. I was in some senses
late to the game but they wanted to ensure a strong online demand before initializing it.
The online service matches the level of service and quality that the real stores posses.
The site offers all the same selection as the stores and all at the same prices. Free pick-up
from the stores is available and so is paid delivery. Zara also offers the same 30 day
return policy as in-store with customer support workers accessible through email and
text. However after reading many customer reviews of Zaras online service it seems to
be very unreliable for customer service and delivery times. Zara will have to ensure that
their online quality lives up to their world wide respected success.

References
1. Kenna, Amorel. Bloomberg Businessweek, Issue 4342. Zara Plays Catch-Up with
Online Shoppers. September 29, 2011. Accessed October 1, 2012
http://web.ebscohost.com.proxy.library.carleton.ca/bsi/detail?sid=e94a2867-bcd3-469f-
aa6a-
415de93a53f7%40sessionmgr112&vid=1&hid=108&bdata=JnNpdGU9YnNpLWxpdm
U%3d#db=bth&AN=65076276

2. Speer, Jordan K, Apparel Magazine, Aug2006, Vol. 47, Issue 12. Top 5 Sourcing
Strategies. Accessed October 1, 2012.
http://web.ebscohost.com.proxy.library.carleton.ca/bsi/detail?sid=c65b5e5e-ac2e-4888-
aeaf-9cf9613153ba
%40sessionmgr115&vid=1&hid=108&bdata=JnNpdGU9YnNpLWxpdmU
%3d#db=bth&AN=22112593

3. BORZYKOWSKI, BRYAN. Canadian Business, October 17,2012, Vol. 85, Issue 14.
Zara Eludes the Pain In Spain. Accessed October 1, 2012
http://web.ebscohost.com.proxy.library.carleton.ca/bsi/detail?sid=fda2b969-43a3-4c46-
9062-3fcbd5b1caca
%40sessionmgr114&vid=3&hid=108&bdata=JnNpdGU9YnNpLWxpdmU
%3d#db=bth&AN=78584873
Reply
Andrew Glass says:
October 1, 2012 at 9:01 pm

Unlike most competitors, Zaras unique business model is cemented in it having total
control of every part of the business. It designs, produces and distributes itself
(CNN.com). In a world where sweatshop labor is a constant issue due to mistreatment
of employees, Zara is an example of a successful company that has maintained control
over their factories and gone away from the cheaper costs of outsourcing. One
competitive advantage that results from their control is their ability to adapt effortlessly
to style trend shifts. Able to design and manufacture new merchandise in a matter of
weeks gives their customers value in knowing they will be able to purchase the newest
fashion styles. In comparison, this rapid production process contrasts the usual six-
month average of most other retailers.
In addition to the successes of staying away from the common motions towards
outsourcing, Zara has also had a zero policy rule in using their revenues towards
advertising. In a fashion world where selling a style is at the forefront of most retail
company strategies, Zara uses this unorthodox approach. Amancio Ortega, Zaras
founder, has harnessed the belief that advertising is useless for the customer. Instead the
idea is that what is offered on the shelves and presented in the windows of each store on
display are more than sufficient for each customer. One could ask themselves that if a
retailer is meeting the customer needs on a timely fashion, what is the use of taking up
time on TV advertisements or using space on billboards to promote their products, right?
It is clear that if customer demand is met, and the company continues to see success,
Ortegas strategy is hard to argue with.
This company has harnessed a unique and innovative business model. Unlike most
competitors, Zara has proved to become a massive brand without the norms of
outsourcing their manufacturing sector and using a wide array of advertising. This is an
important example in showing how a high-fashion, low-cost retailer can stun investors
and analysts by using one simple yet innovative approach, or what is focusing solely on
satisfying the market need.
(I used both CNN.com and Wikipedia as my main sources of resource for this blog post)
Reply
Abdulrahman Alamoudi says:
October 1, 2012 at 11:15 pm

1. What is unique about Zaras business model compared to more traditional fashion
retailers?
Zara effectively implements a vertical marketing system (VMS), which combines
successive stages of production and distribution under single ownership. Its effective
integration makes it faster, more flexible and more efficient than most of its competitors.
Zaras success secret resides in its ability to control over almost every aspect of the
supply chain and production. It can take a new line from designing and ending by
worldwide distribution in less than a month. (Kotler et al., 2011).

2. How does Zara create value to customers?

It provides them with the latest fashion trends, with quality in affordable prices for
different age segments and lifestyles. Thats not only for clothing, but for accessories
too. Zaras image is globally perceived as a luxury fashion brand, in which adds an extra
value when buying a product from this symbolic retailer. (Willems et al., 2011)

3. What do you consider Zaras competitive advantages to be?

[1] Logistically, Zaras ability to design, produce and deliver new product lines to its
stores with latest fashion trends in short period of time close to four weeks, versus an
industry average of 9 months; that is a huge advantage over its competitors. Also, Zara
doesnt have huge warehouses as other retailers, because most of its factories are
domestic and the urge to have huge warehouses is trivial in Zaras case. On the contrary,
other retailers spend a lot of money for operating their warehouses.
[2] Technological advantage through the use of a very effective and artificial information
system integrated into its stores. On a daily bases, store managers provide feedbacks to
the system about costumers behaviour and wanted styles. Thus, in-house designers have
updated information and get down to patterns quickly, those will be sent to the factory
and get produced in a short period of time.
[3] As it does not define its target by segmenting ages and lifestyles, it has an advantage
over traditional retailers by having a much broader market. It is targeting both genders,
adults and children alike; providing them with clothes, accessories and shoes. Even
broader, it has home furniture segment, where rugs and home accessories are sold.
(Harbott, 2011).

4. What about its online strategy?

As online marketing being the fastest-growing form of direct marketing. (Kotler et al.,
2011); Zara presence along with other retailers in online marketing is getting bigger and
moving fast. Zara offers different online promotions and reaching out to customers in
many places directly. Zara has many already established online stores in countries like
Spain, UK, Germany, Italy and France. It is also moving toward the U.S., even though it
is considered to be overdue. The company is counting on online sales in the U.S. more
than store expansion due to the promising potential of online sales there. (Kenna, 2011).

References:

Kotler, P., G. Armstrong, P. H. Cunningham, and V. Trifts. Principles of marketing 8th

Canadian edition. Toronto, ON: Pearson Education Inc.
Willems, Kim, Wim Janssens, Gilbert Swinnen, Malaika Brengman,
Sandra Streukens, Mark Vancauteren. From Armani to Zara: Impression formation
based on fashion store patronage. Journal of Business Research. 65.10 (2011): 1487
1494. Web. 1 Oct.
2012.http://www.sciencedirect.com.proxy.library.carleton.ca/science/article/pii/S014829
6311003596#bb0355 .
Harbott, Arif, 2011. Analysing Zaras business model. [Accessed 29/09
2012].http://www.harbott.com/2011/03/03/analysing-zaras-business-model/ .
OSTERWALDER, ALEXANDER, 2005. ZARAS BUSINESS MODEL. [Accessed
01/10 2012].http://www.businessmodelalchemist.com/2005/06/zaras-business-
model.html .
Kenna, Armorel, 2011. Zara Plays Catch-Up with Online Shoppers. [Accessed 30/09
2012].http://www.businessweek.com/magazine/zara-plays-catchup-with-online-
shoppers-08252011.html
Zara Online Store. http://www.Zara.com
Reply
Ahsan Tajammul says:
October 2, 2012 at 10:55 am

1. The unique business model which Zara follows as compared to more traditional
fashion retailer is the vertical integration of design, just in time manufacturing, delivery
and sale, flexible structure, low inventory rule, quick response policy and advanced
information technology enabling a quick response to customers changing demands.
These the are two key factors in Zaras business model, the time factor and the store as a
source of information makes them unique as compared to other fashion retailers.

2. The store acts not only as a point of sale but also influences the design and speed of
production. It is the end and starting point of the business system. Zaras production
cycle starts with customers judgment on the new designs of clothes and the information
collected by staff members who travel to fashion cities, observing people on the streets,
browsing publications and visiting the venues that are frequented by their potential
customers. Zara gets feedback from the customers at the point of sale about new
garments or new products that they are interested in. Store managers report the demands
of customers and the sales trends to the headquarters on a daily basis. Keeping up with
the daily trends is what makes them create value to its customers.

3. A completely new piece of can be designed, manufactured and delivered in less than
four weeks. Changes of an existing garment can be put on display within two weeks,
much faster than the competition. Zara internally manufactures its live collections the
friendliest garments to fashion, which accounts for almost half of its production, and
outsources those that are not subject to seasonal variation. Keeping with the fast
production and getting customer feedback on a daily basis is one the key competitive
advantages of Zara.

4. Zaras online strategy in the begging focused on the countries where e-commerce sales
from its competitors like H&M and GAP werent available. The clothes purchased
online had an option of home delivery as well as store pick-up. The overall online
strategy of Zara focused on reducing the operating cost of the stores, giving customers
freedom of shopping and due to high volume e-commerce sale in the industry Zara has
been able to keep up with its competitors by offering fast shipping at affordable prices.

Bibliography
Fan, Carmen Lopez and Ying. Internationalisation of the Spanish fashion brand Zara .
Spanish fashion brand Zara (Brunel Business School, Uxbridge, UK), 01 2009.
Kenna, Armorel. Zara Plays Catch-Up with Online Shoppers. 08 25,
2011.http://www.businessweek.com/magazine/zara-plays-catchup-with-online-shoppers-
08252011.html.
Tercio, Don. Zara bites the internet. 09 03, 2010. http://www.aqnb.com/2010/09/03/zara-
bites-the-internet/.