Zara Case Study
Amanda Lopez
March 15, 2014
Case Study #1 - Zara
Zara is known for its stylish designs, many with a resemblance to the offerings of famous Italian fashion houses and all moderately priced. Despite this very recent popularity, the novel business model of Zara has gone virtually unnoticed for over 30 years, allowing Zara’s parent company, Inditex, to grow from zero to almost $20B in revenues. Zara was founded in 1975 and its parent company, the Inditex group went public in 2001. Within the first 5 years of its founding, Amancio Ortega, the founder of Zara figured out the responsiveness and speed were key to dominance in apparel retail as opposed to costs. Zara produced in expensive locations and used expensive shipping modes to react to trends faster. Zara stores number 450 in 29 countries (220 in Spain). With new stores typically 1,200 square meters in size, the Zara stores sell 10,000 men’s, women’s and children’s apparel models created every year under Ortega’s watchful eye at Inditex at Arteixo-La Coruña.
Zara is a vertically integrated retailer. Unlike similar apparel retailers, Zara controls most of the steps on the supply-chain, designing, manufacturing, and distributing its products. Zara set up its own factory in La Coruña (a city known for its textile industry) in 1980, and upgraded to reverse milk-run-type production and distribution facilities in 1990. In order to draw masses of fashion conscious repeat customers, in prime locations, in sophisticated stores for relatively low prices, fresh assortments of cosmetics, toiletries, designer-style accessories, and garments are offered by Zara. In terms of the upstream operations, by building up significant forward order books, in compare to achieve manufacturing efficiencies, to be a very quick fashion follower, the use of backward vertical integration is emphasized by Zara, despite its tapered integration into manufacturing.
Reasonable but not excessive physical quality, relatively high
March 15, 2014
Case Study #1 - Zara
Zara is known for its stylish designs, many with a resemblance to the offerings of famous Italian fashion houses and all moderately priced. Despite this very recent popularity, the novel business model of Zara has gone virtually unnoticed for over 30 years, allowing Zara’s parent company, Inditex, to grow from zero to almost $20B in revenues. Zara was founded in 1975 and its parent company, the Inditex group went public in 2001. Within the first 5 years of its founding, Amancio Ortega, the founder of Zara figured out the responsiveness and speed were key to dominance in apparel retail as opposed to costs. Zara produced in expensive locations and used expensive shipping modes to react to trends faster. Zara stores number 450 in 29 countries (220 in Spain). With new stores typically 1,200 square meters in size, the Zara stores sell 10,000 men’s, women’s and children’s apparel models created every year under Ortega’s watchful eye at Inditex at Arteixo-La Coruña.
Zara is a vertically integrated retailer. Unlike similar apparel retailers, Zara controls most of the steps on the supply-chain, designing, manufacturing, and distributing its products. Zara set up its own factory in La Coruña (a city known for its textile industry) in 1980, and upgraded to reverse milk-run-type production and distribution facilities in 1990. In order to draw masses of fashion conscious repeat customers, in prime locations, in sophisticated stores for relatively low prices, fresh assortments of cosmetics, toiletries, designer-style accessories, and garments are offered by Zara. In terms of the upstream operations, by building up significant forward order books, in compare to achieve manufacturing efficiencies, to be a very quick fashion follower, the use of backward vertical integration is emphasized by Zara, despite its tapered integration into manufacturing.
Reasonable but not excessive physical quality, relatively high