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Volume 65 Number 1

Zara: a fast-paced powerhouse on the rise

by Kylie Bronchick - 2014-10-09


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In 1963, Amancio Ortega started a business making housecoats and robes in La Coruña, Spain. He went on to open his first store in 1975 called Zorba, which would later be known as Zara and become the global dominator of fast-fashion, whose warehouse has grown to nine times the size of Amazon’s. Today, Ortega owns the retailer Inditex, controlling almost 100 companies, valuing him at $57.5 billion.

What sets Zara apart from its competitors is its impressively fast-paced and technologically advanced approach to fast-fashion. Zara has a completely different business model from its competitors.

Drawing from his manufacturing roots, Ortega has only three or four of each product stocked in stores, which causes very little stock to be leftover, yet store managers are able to request more of certain products if they see something is selling well.

Zara manufactures more than half of its products either in its own factories or reasonably close to its headquarters. The greatest result of the brands’ in-house production has been the extraordinarily short time from design to production to shipment to stores: two to three weeks.

Such short production time has revolutionized fast-fashion and put Zara on top as the No. 1 fashion retailer with H&M placed at second, trailing way far behind. Zara delivers new merchandise to each of its stores every two weeks, and with such limited stock, its stores experience a complete turnover of merchandise.

Zara becomes a completely different store every two weeks, which means that it’s now or never for consumers to buy something, for in less than two weeks, none of the products will be the same.

For Zara’s relatively low prices, many consumers don’t have to think twice before making a purchase.

Most traditional retailers will send designs from the West over to Asia to be manufactured for low costs. At the start of the fall and spring seasons, the clothes are shipped back to be stocked in stores followed by smaller shipments throughout the year.

Oftentimes, a significant amount of stock that didn’t sell will be left over and marked down in price, losing the company money. Zara’s limited amount of leftover stock doesn’t make it necessary to have many sales, allowing it to sell a vast majority of its clothing at full price.

Further contributing to the brand’s success is the unusually involved role that store employees have in the company. Store managers are responsible for reporting to headquarters which styles are and not selling, which is in part influenced by the sale clerks, who are trained to draw information out of customers such as whether or not they like zippers on the sides of their pants, or the length of dresses they prefer.

Interestingly enough, Zara only spends 3-4% of its revenue on advertisements, and most of that 3-4% goes toward paying for paper shopping bags with Zara’s logo given to customers with a purchase.

Zara’s actually spends a much more significant amount of its income on real estate, placing its stores near luxury brands. You’ll often find a Zara located right next to a Gucci or a Prada. In 2011, Zara spent $324 million on a space in New York City on Fifth Avenue, the most expensive building ever sold in Manhattan.

It’s no wonder that Zara has jumped to the top of the list of the biggest and most successful retailers in the world, yet the constantly churning cycle of fast-fashion continues to face the more and more imminent threat of the disastrous environmental effects and a limited supply of resources.

Although fast-fashion may be the retailing trend of the past few decades, the industry may realize that such a business model will become unsustainable in the future.



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Article Keywords:

store, zara, fastfashion, retailer, product, stock, weeks, such, most

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