:from FAST FASHION to the

“FUTURE OF FASHION”

…LOOKING BEYOND
 Background of the Study
Zara is the flagship brand of Inditex SA, a Spanish retail group. Its first store was
established in 1975 in La Coruña, Spain though the founder, Amancio Ortega Gaona, began his
business activity wayback 1963. It was formerly known as Zorba but was later changed to Zara.
It gained popularity within and outside Spain, thus, in just 17 years from its launch, Indetex was
able to open more than 1,000 Zara stores in different countries though most of them are in
Europe.
Zara’s overriding principle is that the key to success as a fashion retailer was to link
fashion design to manufacturing and distribution in a way that allowed for rapid response to
the finicky, and often changing, needs of the customers. Ortega also believe in a bottom-up
decision-making approach as an ingredient to success, that is why he put critical processes of
product design, manufacturing and distribution decisions in the hands of his employees across
the company.

The Unique Business Model

Zara is built on the mindset that customers would regard clothes as a perishable
commodity and it should be consumed quickly. Therefore, Zara is providing “freshly baked
clothes” in the style customer wants and at the time they still want it.
Uncanny Formulae to Profit (Retail at the Speed of Fashion, 2002)

 Short Lead Times: Keeping Up with Fashion

Zara can move from identifying a trend to having clothes just within 30 days. By having
quick response time, the company can provide immediately what customer wants at
that moment. Thus, they can catch bigger profit by having more sales happening at full
prices at fewer discounts.

Regional Design Team Store Managers

Commercials Commercials
Select the inventory
Responsible for Decides on the style, they believed would
knowing what fabric, volume and sell in their stores
customer wants pricing
  Reducing Risk: Less Supply, More Demand
In fashion, the lesser the supply is, the more it becomes desirable, especially when you
are a first mover in the game. Accordingly, Zara creates artificial scarcity and indirectly
forces its shoppers to buy the thing they want knowing that they will not be able to
purchase them after some time. This reduces the risk in relation to having to dispose
much or having it needed to be sold during a sale especially if the design is not that
appealing. Zara discounts only about 18% of its product, roughly half the levels of its
competitors.

 Leadership in Number: Less Supply, More Style

Zara produces roughly 12,000 styles a year, offering much more choices than its
competitors. With this, they can always go with the fashion trend and deliver its
promise of “freshly baked clothes”

Statement of the Problem

How will Inditex reinvent its business model once again to enable its flagship brand,
Zara, effectively compete in the global arena in its rapidly-changing industry and take
advantage of the expected industry growth?
General Objectives:
 To establish a marketing plan enabling Zara to be more competitive today and exploit
the favorable market situations today and in the future.
Specific Objectives:
 To establish a short-term strategic plan to counter intensified competition in the
industry.
 To establish a long-term strategic plan to get the best out of the expected growth and
development in the business.
 Areas of Consideration
STRENGTHS
1. Quick response time (“fast fashion”)
2. Less supply creates artificial scarcity
which increases demand
3. Ability to provide more styles
4. Uses decentralized decision making, i.e,
bottom- up approach.
5. Highly vertically integrated giving the
manufacturing flexibility
6. Heavy investments in automated
manufacturing
7. Centralized and automated distribution
in
La Coruña
8. Stores look and feel high-end
9. Very little advertising cost
10. Lower price than competitors S W
1. The industry is positively affec-
ted by the worlds changing demo- O T
graphics (esp. population growth) and its
urbaniza-
tion.
2. Growing market on plus-size categories
in developed countries.
OPPORTUNITIES
WEAKNESSES
1. Manufactures half of its own product in a
high cost labor market in Europe.
2. Cost inefficiency in introducing styles
frequently
3. Being highly centralized makes it difficult
for them to expand and relocate to other
countries
1. The competitive landscape is
changing by the birth of new
fashion giants
2. Numerous new upstart and copycats
infiltrated the market
3. Customer behavior is hard to predict and
influence and its taste change often
4. Apparel industry moves hand-in-hand
with fluctuations in the global economy.
5. Price of oil, consequently transport cost,
is highly volatile
6. Natural calamity in its manufacturing
center may have a pervasive physical and
financial impact to the company
THREATS
 Alternative Courses of Action
STRENGTH WEAKNESSES
1. Quick response time (“fast fashion”) 1. Manufactures half of its own product
2. Less supply creates artificial scarcity in a high cost labor market in Europe.
which increases demand 2. Cost inefficiency in introducing styles
3. Ability to provide more styles frequently
4. Uses decentralized decision making, i.e, 3. Being highly centralized makes it
bottom- up approach. difficult for them to expand and relocate
5. Highly vertically integrated giving the to other countries
manufacturing flexibility
6. Heavy investments in automated
manufacturing
7. Centralized and automated distribution
in La Coruña
8. Stores look and feel high-end
9. Very little advertising cost
10. Lower price than competitors

OPPORTUNITIES Open new product lines to cater Penetrate the markets in Asia,
1. The industry is positively new market segments (ex. plus-size Australia and North America (O1,
affected by the worlds changing
demographics (esp. population
and 40s and above) (O2, S1, S3, S5) T1)
growth) and its urbaniza-
tion.
2. Growing market on plus-size
categories in developed countries.

THREATS Intensify the customer behavior Expand manufacturing process to

1. The competitive landscape analysis of regional commercials to other countries especially those
changing by the birth of new
fashion giants
not only determine the current with low cost on labor and other
2. Numerous new upstart and market wants but to predict or aspect of operationa then add
copycats infiltrated the market initiate the future trends distribution channels. (T1, T2, T6,
3. Customer behavior is hard to (T2,S1,S3,S4) W1)
predict and influence and its taste
change often
4. Apparel industry moves hand-in-
hand with fluctuations in the global
economy.
5. Price of oil, consequently
transport cost, is highly volatile
6. Natural calamity in its
manufacturing center may have a
pervasive physical and financial
impact to the company
 Alternative
1. New Product Line
2. Increased presence in
Asian, American and other
markets outside Europe
3. Expand manufacturing
process to other countries
especially those with low
cost on labor and other
aspect of operationa then
add distribution channels.
4. Intensify the customer
behavior analysis of regional
commercials to not only
determine the current
market wants but to predict
or initiate the future trends
Implementation and Recommendation
SHORT- Increase Global Presence
TERM
LONG-
TERM
ZARA from Fast Fashion to FUTURE OF FASHION
Pros
 Gives a competitive edge
 Market is ready
 Reduced independence in
the European market
 Probability to
counterattack global
competitors in their home
markets
 Possible increase in Sales
and income
 Lower cost
 Faster response to markets
outside europe
 Might bring Zara back to
its position as the number
one in retail fashion
industry.
 Uses the current strengths
of Zara
Add Manufacturing and Distribution
Open new Product Line
Cons
 Need to study the market
preference
 Additional are to focus
 Need to adopt to culture
and preference
 Acceptability is not
guaranteed
 Need of new human
resources with
international experience
 Political and legal
restrictions
 Requires huge capital
investments
 Brand identity might be
hurt
Customers behavior and
preferences is hard to predict
Several factors affect the
acceptability and success of a
fashion style
Centers
 The firsts step is to introduce new product lines (for
plus sized women, 40 and beyond mean and women
and maybe, if viable, for Muslim women since not
much of retailers are dedicated to catering them) in
1 its current markets. Zara shall assign regional
commercials specifically to determine the
preferences of the target market of these product
lines. Constantly adjust and develop these product
line until Zara become the best at providing them.

The next step is to identify states as new markets to

enter or penetrate further. Ideally, this should be
developing or developed countries like United States,
South Africa, Australia, India, Russia, South Korea,
Indonesia and Philippines. They can also infiltrate the
Middle-East as in relation to Step 1, they will be
2 catering Muslim women’s apparel necessities.

As to the cost of exporting and the actual distribution

of product within each nation, they can enter into
joint ventures with local credible distributors.

The third step is to identify countries ideal for having

an extension of its manufacturing and distribution.
Having this will not only decrease the operating cost of
Zara but will more importantly offer more functional
flexibility and quicker response to non-European
countries identified in relation to step number 2.
3 Phillippines is ideal for Asia and Australia operations
and any state in Atlantic cost of North America.
Philippines is strategically located in between Asia and
Australia and also has low labor cost. Why not China
even if Zara has a large market base in this country?
Because manufacturing in this country though
financially viable, might affect companies brand
identity and value.
 “ZARA : The FUTURE of FASHION”

Lastly, Zara should change its position from “fast

fashion” to “FUTURE of FASHION” by not only knowing …LOOKING BEYOND
what the customers want in the present but initiating
and influencing what they would want in the future.

Though, customer’s behavior and preference are hard

4 to predict, online platforms and data analytics software
enable companies today to study thoroughly their
individual customer, determining their patterns and are
even used to influence their thinking. (As manifested by
the issue of Trump’s success in his candidacy campaign)

Especially with an online selling platform, Zara can

achieve this. Their mobile app maybe installed with
features where customers can even suggest designs and
Conclusion
colors to further generate ideas.
Therefore, Inditex will reinvent its business model once again to enable its flagship
brand, Zara, effectively compete in the global arena in its rapidly-changing industry and take
advantage of the expected industry growth using its current by changing how they make their
product. Using their biggest strength which is their ability to respond quickly and the set of
people making this possible for them, instead of simply knowing the current wants of their
customers, they must be the one which will make their customers want something. In other
words, they must be few steps ahead by “looking beyond” today.
The marketing plan to enable Zara to be more competitive today and exploit the
favorable market situations at the present and in the future is to offer new product line like for
plus-sized, and for the middle-aged, men and women. They might also cater Muslim men and
women since not yet a lot of retailers are serving them. Being able to offer differentiated
products at 15% lower than its major competitors, they truly have a potential to lead in these
segments.
It can also expand its presence and business in the global market. Though they have
outlets across different nations, still it is not as much as they could take advantage of. With
their ability and offerings, they can easily lead the industry in several locations.
If they are already in the way of winning these global markets, they can then choose
where to put up their additional manufacturing and distribution plants in order to serve better
and fully penetrate the global arena. This will enable them to maintain its ability to respond
quickly and our goal for them to be one step ahead when they have channels in more than one
area.
References
Retail at the Speed of Fashion (2002) by Devangshu Dutta from
https://thirdeyesight.in/articles/ImagesFashion_Zara_Part_I.pdf
The Secret of Zara’s Success: A Culture of Customer Co-creation by Martin Roll
https://martinroll.com/resources/articles/strategy/the-secret-of-zaras-success-a-culture-of-
customer-co-creation/