Zara was founded in 1975 by Amancio Ortgeo in La Coruna, Spain and is a leading retail outlet today. Zara’s sales make up 64.8% of its parent company Inditex group revenue and has stores in more than 86 countries. Because of its responsive and unique supply chain sales had increased by 10.1% from 2011 to 2012 fiscal year end. Zara has grown rapidly with a strategy to be highly responsive to changing trends while keeping prices affordable.
Zara’s success is because of its responsive supply chain designed around customer needs based on real-time feedback received from store managers. This enables designs to be created or altered to meet customer trends. Zara manufactures in small batches, manages all functions in-house, holds retail stores to strict timetables, ships items on racks with price tags, leaves large areas empty in expensive stores, and allows occasional stock-outs. Zara has total control over design, warehousing, and distribution functions that allows the company to manufacture and have an item ready for display in 15 days normally this process takes design houses months to complete therefore higher net margin on sales than competitors. Zara keeps at least 50% of production in-house and outsources only labor intensive jobs, such as sewing to a select few suppliers, this goes against the industry norm, but it gives Zara control over the entire supply chain. This prevents supplier delays and results in the product reaching the customer faster.
Zara’s designers are young, ambitious, and energetic individuals who produce about 40,000 new designs per year of which approximately 10,000 goes to production. This allows Zara to provide customers with a large variety of designs and can compete with high-end couture retailers by having the same type of products, made from cheaper materials but more cost effective.
