1. ZARA: IT for Fast Fashion
Önder BARLAS
Executive MBA Student
Boğaziçi University, Istanbul
Abstract:
In 2003 Zara faced a problem whether to upgrade the operating system they used for their point-of-sale
(POS) to a new Windows based one, or to continue using the stable and old one. This report aims to analyze
the problem by conducting a SWOT analysis and offering a solution path best suited on Zara’s strategic
position in the clothing industry.
that likes and is sensitive to fashion. As it has
1. Brief Information about Inditex and Zara become globally standardized due to advances
in communication, Zara uses this to their
Inditex is a global specialty retailer that designs, advantage by offering the latest in apparel on
manufactures, and sells apparel, footwear, and time. For that reason, 80- 85% of the garments
accessories for women, men and children that Zara offers globally are relative
through its chains around the world. Inditex standardized fashionables. This is due to the fact
owns Zara, Massimo Dutti, Pull & Bear, that Zara’s marketing teams believe that a
Bershka, Stradivarius, and Oysho. Over 80% of product that sells well in a fashion capital such
Inditex’s total employees are part of the retail as New York will most likely sell well in
sales force and 8.5% are in manufacturing, another such as Milan, Sao Paulo or Madrid
design, logistics, and distribution. The since fashion has become more globally
remaining 11.5% are part of the corporate accessible.
headquarters.
Zara’s main competitors are multinational
Zara is the most profitable brand of Inditex. It clothing retailers such as H&M, Gap, and
has opened his first store in 1975 in La Coruna Benetton. Zara is different from its competitors
in Spain. Today, La Coruna has become the in three ways:
central headquarters for Zara. The group is
present in all continents: Europe, America, Asia  Zara does virtually no advertising (twice-
and Africa. At the beginning of 2003, Zara yearly ad promotion on sales and opening
operated 531 stores around the world. new store announcement). Thus, Zara’s
marketing expenditures averaged 0.3% of
2. Description of Zara’s Business Model
revenue, instead of the 3% to 4% for
Zara sells clothing for men, women and competitors.
children. Zara’s target market is very broad  Zara only sells trendy clothes and not try to
because they do not define their target by produce “classic” clothes which would
segmenting ages and lifestyles as traditional always be in style. Zara’s clothes have fairly
retailers do. Zara targets young, educated people short life spans. About 75% of the
Management Information Systems Page 1 of 4 ZARA: IT for Fast Fashion

2. merchandise changes over every three to All finished garments are sent to Zara facility
four weeks. The shoppers do not expect where they are ironed, inspected, given a
Zara garments to be highly durable. machine readable tag, and sent to a distribution
 Zara introduces substantially new design center.
collections throughout the year. Other
competitors introduce new design Ordering:
collections at the start of the fall/winter and Every major section of a Zara store (man,
spring/summer. women, children) has to place order quantities
 Zara has empowered its employees: They to headquarter twice a week with strict
decide what clothes should be in stores, the deadlines. As there is no inventory in store
designed the garments by pairs for a specific computers managers need to conduct a walk-
collection. Their role is to create clothes not around to check the stock for each section.
to be sold for a long time but only for a short Managers can see the newly available garments
period in appropriateness with the current by using a PDA that is linked each night via dial
trend. up modem to main IS in La Coruna.
3. Zara’s Value Chain Fulfillment:
Fulfillment or shipping clothes to stores involve
Design: other commercials. They determine which store
has to be supplied depending on the stock level.
Commercials decide which clothes will be They work with product manager to determine
designed and produced. The team usually future production for each SKU. Items that
consists of two designers and two managers, stores didn’t order can also be sent.
who purchase material, place production orders
with factories, and set prices. Another group of 4. SWOT Analyses of current IT Processes
commercials called store product managers sit
in close proximity to the product teams and Strengths:
serve as Zara main interface with Zara stores  DOS, which runs on mainframe, is a
around the world. They can initiate store to store very stable operating system
transfers if some products are not popular in  Data transfer periods are short
some areas.  No license costs exist
 DOS application is a in-house developed
Manufacturing one, it is a tailored fit development, so
Zara introduces approximately 11 000 new IT people have extensive experience
items each year much more than its competitors. how to quickly solve problems without
Zara manufacturing is vertically integrated. the need of a supplier.
There is a network with specialized facilities
 Due to the quick and convenient
that quickly produces and delivers the required
installation process of POS software, no
goods. Zara owns a group of factories in and
external IT effort was needed, when
around La Coruna to do the capital intensive
opening a new store.
initial production steps dyeing and cutting cloth.
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3. Weaknesses:  Competitors, who use a modern
 System runs DOS which Microsoft does technology, can gain a competitive
not support anymore. advantage due to the information
 Lack of shared information between exchange opportunities.
systems creates an environment where  Employee turnover rate has an impact on
the correctness of the data is dependent the system, as most of the decisions are
on the personal feedback. Store based on personal experience -
managers could not look up their decentralized decision-making.
inventory balances on any in-store
computer. They have to conduct 5. Recommendations for IT Transformation
walkarounds, in which they ask
salespeople and count garments to As already discussed Zara’s its main strategy is
determine the stock level. the ability to give a quick answer to target
 No online connection between the POS, customers’ demand and its capacity to anticipate
PDAs and IS in La Coruna exists. the customers’ trends. Therefore “Business
Upgrades are retrieved by a dial up Continuity” is more important than the overall
modem each night. As there is one IT transformation costs. Therefore unless the
terminal POS in a store, salespeople new system eliminates the weaknesses of the
need to record the sales on floppy discs old one without compromising from the
and insert it to the modem equipped strengths, an investment in IT will not be
terminal POS for sending sales data. required. Therefore the new system should be as
 No formal IT strategy and follows:
documentation such as cost/benefit
analyses exist to justify IT efforts.  Windows based POS terminals, with
 No information exchange between PDA porting ability and online connection to
devices within a store exists. IS which integrates manufacturing,
 As stores cannot see each other’s stock distribution centers, and commercials at
levels, store personnel need to call the HQ on a high-speed network and
nearest stores one by another, if a decreases reaction time (upgrades to
garment is needed. PDAs are delivered online, no floppy
disc needed, demand is tracked in real
Opportunities: time)
Using the current system offers no opportunities  POS functionality that includes, accurate
for the future inventory balances in real time, instant
linkage of customer demand with
Threads: manufacturing which will reduce total
 Any hardware change in the POS cycle time
terminal will not be compatible with the  PDA’s will change information within
current POS software. the stores and each store can look at
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4. others stores inventory if a specific Programming costs:
garment is needed 20000 hours of programming time (if work hour
per day is 8) = 2,500 days
Projected cost of the new system is given 2500 days x €450 per day = €1.125.000
below:
Training/Installation Costs3:
Hardware costs: Cost per day = €2000
1. €5,000 for 5 terminals per store x 531 stores Overall costs = €2000 x 531 stores = €1.062.000
= €2.655.000
2. €180 for wireless router per store x 531 Total Implementation Costs = €5.649.120
stores = €95.580 Total Implementation Costs with %10 cost
3. €250 for 5 Ethernet cards per store x 531 increase as buffer4 = €6.214.032
stores = €132.750
Total Hardware Costs = €2.883.330 It is recommended that Zara upgrades its current
systems. Although by upgrading, Zara puts
Connection Costs: itself at a financial risk with potential loss of
€240 for connection per store x 531 stores = sales due to installation delays, increase in
€127.440 overhead (additional IT staff) and adding
complexity to a relatively simple operation, the
Initial Operating System Costs: benefits of the system will be “priceless” as
1. Windows 1 Zara’s main core competence “the ability to
One time license cost per terminal = €140 give a quick answer to target customers’
Annual maintenance fee per terminal = €30 demand and its capacity to anticipate the
Cost per store = 5 terminals x €170 = €850 customers’ trends” will be enhanced. Modern
2. Unix operating systems and internet connections are
One time license cost per terminal = €160 no longer luxuries, but prerequisites for growth.
Annual maintenance fee per terminal = €25
Cost per store = 5 terminals x €185 = €925
3. Linux2
One time license cost per terminal = €0
Annual maintenance fee per terminal = €150
Cost per store = 5 terminals x €150 = €300
Total operating system costs = €850 x 531 =
€451.350
1 3
Windows is selected as operating system as this removes It is assumed that there are two work shifts in place: 07-
the risk of the system becoming obsolete and no longer 15 and 15-23. Stores will not be closed during
compatible with vendor’s machine upgrade to windows. installation. Opportunity costs are neglected.
2 4
Depends on the IT staffs experience with Linux. It is The risk in 10% increase in costs are taken in account as
assumed that the IT staff is novice in Linux. safety buffer
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