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Zara; the inditex group
 

Zara; the inditex group

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  • ExplanationTraditional Model – product ,factory, store, consumerInditex Model – Consumer, store, product, factory.Source Inditex.

Zara; the inditex group Zara; the inditex group Presentation Transcript

  • Zara: The Largest Spanish Clothing Company Owned by Inditex Prepared by: Shaheen Sardar SCM Lab. Department of Industrial and Management Engineering, Hanyang University, South Korea. Zara, global fast-fashion retailer and largest chain in Inditex group
  • ZARA “Vision” “ZARA is committed to satisfying the desires of its customers. As a result we promise to continuously innovate our business and to provide new designs made from quality materials that are affordable.”
  • ZARA “Mission Statement​” “Through its business model, Zara aims to contribute to the sustainable development of society and that of the environment with which we interact.”
  • What we know about Zara and its history? • Zara’s founder is the first richest person in Spain and the third richest person in the world (2013). This person is Amancio Ortega (Born: March 28, 1936). Inditex founder His doughter: Marta Ortega
  • What we know about Amancio Ortega? Amancio Ortega was born in La Coruna. Amancio began working as a tailor's assistant in his hometown In 1963 he decided to start a business and he thougt the clothing company Goa. This business began to progress and that in addition to selling began to distribute.
  • THE CHAIN’S NAME:
  • In 1975, the first Zara store was founded in La Coruna. In 1988 Zara’s company opened the first store outside Spain. p o r t u g a l In 2010 Zara’s company opened his first online shop.
  • Price Perceptual Map X X prices Everyday Low quality Fashion Value
  • Sale Feedback Promotion Design Zara Display CONTROL Cut Production Shipment Sale Outsource Outsource Design Armani Display Co-OP Outsource Outsource Outsource None Promotion Outsource Hilfiger Outsource Outsource Outsource Outsource
  • Head Office & Design lab.
  • Manufacturing
  • Logistics
  • Europe Production Cost: $$$$$$$$$$ Fashion Value: ZZZZZZZZZZ High fashion suits & skirts Asian Production Cost: $$ Fashion Value: ZZZZZ Commoditized eyewear and plain shirts
  • Competitors Copying Zara Management H&M Once a week shipments Target Limited supply designers Benetton Mid-season lineup adjustments Patagonia Increased seasonal shipments
  • 15 10 5 0 2003 2004 Sales in 2005 Billions 2006 of $ 2007 Zara Gap H&M Benetton
  • Zara Gap 2000 Profit in millions 1000 0 2003 2004 2005 2006 2007
  • More about Zara Zara’s company is owned by Inditex group. Inditex group contains Zara and more different brands.
  • Zara clothing offers quality trend to an audience: female male adolescent child. From Zara derive other shops like: Zara home Zara shoes Zara accesories
  • This chain of Spanish fashion stores has more than 200 designers and a higher number of models. Zara’s collections are small and sell out quickly.
  • Zara has no advertising, the only trade exhibition is based on trucks ,storefronts,catalog and in the zara bag.
  • ZARA STORES: In Zara: customer first ZARA
  • • In Spain Zara’s company has: 452 stores and 131 of them with Zara kids (2013)
  • Zara Global expansion:
  • 60% Spain 20% Europe ZARA “Production Facilities” 20% Asia
  • ZARA “Summary” Owned by Inditex • • • • • • • • Based in La Coruna, Spain 1947 stores in 87 countries Fast fashion strategy 30,000 designs per year 40% of designs produce in-house Stock updated twice a week Vertical Model – limited outsourcing Zero advertisement
  • Where are Zara stores in 2013? • 1947 stores in 87 countries. • 77% of stores are outside Spain. • 166 Kiddy's Class stores out of 1947 stores.
  • Where are Zara stores in 2013?
  • Where are Zara stores in 2013?
  • Where are Zara stores in 2013?
  • Zara Target & price • Zara’s consumers are young, highly sensitive to latest fashion trends . • Zara sells apparel, footwear and accessories for women, men and children . • Zara offers fashion at affordable price by following the most up to date fashion trends .
  • Inditex • Founder: Amancio Ortega Gaona • He Thought: Consumer would regard clothes as a perishable commodity just like yoghurt, bread or fish to be consumed quickly, rather than stored in cupboards, and he has gone about building a retail business that provides “Freshly Baked Clothes.”
  • Inditex Companies 1. Zara 2. Pull and Bear 3. Massimo Dutti 4. Bershka 5. Stradivarius 6. Oysho 7. Zara Kids (Kiddy's Class) 8. Zara Home 9. Uterque Total Stores (2013) Number of Stores (2013) 1781 825 634 910 816 533 166 363 87 6115 Year of Creation 1975 1991 1995 1998 1999 2001 2001 2003 2008
  • INDITEX 2012 Revenue 13.79 billion Operating income 2.522 billion Profit 1.932 billion Total Assets 10.95 billion Total equity 7.455 billion Employees 120,000
  • INDITEX “Growth” Fiscal Year 2012 2011 12/11 Net sales (millions of euros) Net profit (millions of euros) No of stores No of markets Employees Total Stores (2013) 15,946 2,361 6,009 86 120,314 6115 13,793 1,932 5,527 82 109,512 16% 22% 482 4 10,802 Fiscal Year Net sales (millions of euros) Gross profit (millions of euros) Net income (millions of euros) 2013 7,655 4,486 951 2012 7,239 4,313 944 13/12 6% 4% 1%
  • INDITEX “Gross margin and Operating expenses” % on sales Gross margin 2013 58.6% 2012 59.6% 2011 58.4% Gross profit growth of 4% or € 4.5 billion Millions of euros Operating expenses 2013 2,861 2012 2,690 13/12 6%
  • INDITEX “Strong Growth”
  • INDITEX “Strong Growth” (millions of euros)
  • INDITEX “Net profit” (millions of euros)
  • INDITEX “Sales by geographical area” (%age)
  • INDITEX “Employees by Geographical area 2011-12” Employees 2012
  • INDITEX “Employees by Gender 2011-12”
  • INDITEX “Employees by Gender 2012”
  • Waste Management
  • Garments released on the market VS total industrial waste
  • INDITEX “Number of Employees”
  • INDITEX “Results” (millions of euros)
  • INDITEX “Stores”
  • INDITEX “Markets”
  • INDITEX “Sales by Concept” Concept Name 2013 13/12 1. Zara 5,004 2. Pull & Bear 530 3. Massimo Dutti 575 4. Bershka 702 5. Stradivarius 463 6. Oysho 152 7. Zara Home 196 8. Uterque 33 4% 13% 17% 5% 2% 6% 30% - CAGR (2 year) 11% 13% 12% 8% 8% 4% 21% 3% CAGR = Compound Annual Growth Rate
  • INDITEX “Global Sales Platform” Store sales (%) Europe excluding-Spain Asia & RoW (Rest of World) Spain Americas 2013 45% 22% 19% 14% 2012 44% 20% 22% 14%
  • INDITEX “Zara Sales”
  • INDITEX “Global Online Sales” • • • • • • Europe US China Japan Russian Federation Canada
  • INDITEX “Supply Chain Management” Clusters of suppliers Spain Portugal 87% of Inditex's total production Morocco Argentina Brazil Turkey Bangladesh China India
  • INDITEX “Supply Chain Management”
  • “Geographical Distribution of Suppliers to the Inditex Group” 2012
  • Inditex's Supply Chain in 2012-13
  • INDITEX “Principal Indicators” Principal indicators Pull & Massimo Zara ZARA Bershka Stradivarius Oysho Uterque in 2012 Bear Dutti Home Net sales 10,541 1,086 1,134 1,485 961 314 350 74 (in millions of euros) Number of stores 1,925 816 630 885 780 524 357 92 Net openings 120 69 57 74 96 41 47 3 Markets 86 59 60 62 52 35 35 18 New markets in 2012 5 11 10 6 7 4 5 1 ZARA “Sales” • Zara sales increased by 18% in 2012, up to €10,541 million
  • INDITEX (Business Structure) • Name: Industria de Diseno Textil, S.A. (Inditex) • Inditex Group: Inditex and its subsidiaries • Centralized management: Applying policies and strategies at group level
  • INDITEX (Business Structure) Head office: La Coruna (Spain) • Sets Inditex strategy • Co-ordinates brands • Provides centralized IT, HR, Logistics, design and real estate functions
  • INDITEX (Business Structure) Textile Sourcing Manufacturing Brand Divisions Logistics (Zara) Comditel S.A (La Coruna) Internal Choolet SA, Confecciones Fios, Gonfecciones Goa, Denlio, Hampston, Jema Creacione Infantiles, Samlor, Stear, Trisko, Zintura, Glencare, Indipunt (all based in La Coruna) Zara Zara Logistica SA (La Coruna, Spain) - 50% of Zara women and menswear, serving Iberia, Americas and Middle East Zara Asia Ltd (Hong Kong) Nikole S.A (La Coruna) ITX Trading S.A (Freiburg, CH) Uterque S.A (La Coruna) Lefties Espana (La Coruna) Tempe S.A. (Alicante) Tempe, Inditex’s footwear company is only 50% consolidated at corporate level, but is solely responsible for sourcing, manufacturin g and distributing footwear for the group. External Inditex works with around 1,500 external suppliers around the world. E-commerce ITX Fashions Ltd 100% (Ireland) Pull & Bear Massimo Dutti Bershka Stradivarius Oysho Uterque Zara Home Each Inditex brand is managed independently with its own logistics and production facilities. Plataforma Europa SA (Zaragoza, Spain) 50% of Zara women and menswear, serving non-Iberian Europe, Russia and Asia Plataforma Logistica Leon SA (Leon, Spain) Zara Home and Zara distribution Plataforma Logistica Meco SA (Madrid, Spain) manages Zara childrenswear
  • INDITEX (Business Structure) Traditional model  Opposite of traditional clothing cycles  Pull type production process  Quick response Design  Real-time sales information from its stores  Small batch quantities allow the retailer to see what items are Sourcing working with shopper  A central distribution centre in Arteixo, with strong IT systems developed by Inditex and third Store parties, supports its supply chain model  All items are shipped back to Spain where they are then shipped Customer out to stores around the world Inditex model Customer Store Design Sourcing
  • INDITEX'S “Waste Management” ZNormativa: Set of rules and regulations common to all suppliers to optimize • Packaging process • Waste management • Distribution and logistics Good Waste Management Practices: Methodology of work used to manage waste to • Reduce content of packaging material • Improve waste separation and storage • Facilitate recycling
  • ZARA “Business Model” 1. Develop system that requires short lead times 2. Decrease quantities produced to decrease inventory risk 3. Increase the number of available styles and/or choice
  • ZARA “Competitive Advantage” Cost Leadership Fashionable (quality) at reasonable price 1. Based on Product Positioning: “ZARA is cheaper price than Benetton and GAP, and still being fashionable” Fast Production 1. Ability to Design and get finish goods in stores within 4 to 5 weeks 2. Very quick to get designer-influenced products into their stores Product Variation 1. Ability of ZARA to launch new trends, design and variation of product 2. 3. 4. Low Level of Inventory Efficient Distribution System Turnover of Product is High
  • ZARA “Objectives” Maximize Profit: • Maintain an ability to go further fashionable (quality) at reasonable price  ZARA positioning Before + Price Transform Objective/Expectation + Price + - ZARA fashion - + Fashion - ZARA (New)
  • ZARA “Objectives” Analysis map of Zara Adapted from the Survey.
  • ZARA “Objectives” • Continuous design, production and distribution Creative Departments: Staff = 200+ Delivery: Garments arrive in store within 48 hours of ordering Shipping: From Logistics centres to stores, road and air Finishing: Garments are pressed, dressed and quality checked Design, Product and market Cycle; 1. Final design : 1 day 2. Manufacture : 3-8 days 3. Transport : 1 day 4. Selling : 17-20 days TOTAL : 22-30 days Sewing: Cut fabric is shipped to workshops to be stitched Samples: Prototypes made in-house and by suppliers Spreading: Material for garments laid out in layers and marked Cutting: A machine cuts the fabric according to the patterns
  • ZARA “Strategies” MIS Production & distribution Objectives Design Marketing
  • ZARA “Strategies” Production & distribution • Maintain quality • Cost leadership • High bargaining power to suppliers • Fast distribution system Design • Coordinate with R & D and stores to get the new trends • Ability to produce new trends
  • ZARA “Strategies” MIS • Product distribution system • Improving inventory system • Order information flow  stores ordering system Marketing •R&D • Market penetration • Market , location of stores , consumer behavior analysis
  • ZARA “Value Chain” MIS Store MIS Store Store Production : Store Factory & distributor Inventory Store Check the Material availability then deciding How much this product will be Produce Design Close watch On trend and Buying Behaviors Marketing : Commercial Team & designer Market Research and Analysis MIS MIS
  • Strengths • • • • Ability to recreate fashion Owned 1947 stores and Active use of stores Cost leadership strategy Differentiated in high price fast fashion industry • Dedicated supply chain process • Vertical systematization of production process • Efficient distribution and High turnover.
  • Weaknesses • • • • • Centralized distribution system Doesn't spend much money on advertising Lack of online stores in many countries Repeated sales of out-of-stocks Low quality
  • Opportunities • Growth of fashion market • Diverse cultural area • Constant use of social media marketing strategy • Online marketing strategy • Global market penetration • Distribution center in US • Expanding into potential new market e.g. China, Australia
  • Threats • Emerging new comers • Local and Global competitors • Cheaper alternatives may be available in economic downturn • Zara based in Spain and has a great no of stores in Europe will dent in revenues • Limitation of design copies • Product Cannibalism
  • ZARA “International Strategy” • Combined Strategy: 1. Cost Leadership is usualy captured in mass production (mass product, less differentiation)  Standardization 2. Differentiation Strategy is ussualy captured to produce goods that are more value added  fashionable, fast delivery  customization • Good Consideration: 1. Market selection 2. Marketing approach 3. Market entry
  • ZARA “International Strategy” Market Selection Market Entry International Strategy Marketing Approach
  • ZARA “International Strategy” Market Selection:
  • ZARA “International Strategy” Market Selection:
  • ZARA “International Strategy” Market Selection: • Consideration • Characteristic or behavior of Consumers Country Character of Consumers French More Fashionable (Quality Oriented) German Price Sensitive Italian More Fashionable USA Less Trend Japan More Trendy British Stores Based on Social Affinity
  • ZARA “International Strategy” Market Entry: Economics Factor Market Entry Consideration Market Entry Barriers Factors Government
  • ZARA “International Strategy” Market Entry: • Consideration • Economics • Macroeconomics Factor : • tax, political condition, export tariff • Microeconomics Factor : • Local Competitors • Demand • Location of Store • Government • Regulation from Government • Barriers • Local producers protection issues
  • ZARA “International Strategy” Marketing Approach: • Consideration • 4 P consideration  Product, Price, Promotion and Placement. Each Country has different marketing approach. • Product  local preferences, design, trends • Price  different pricing strategy for each country. For example: Italy and Paris has no problem for price but quality-oriented, but German has sensitive price. • Promotion  different promotion strategy for each country • Placement  efficient distribution, location of stores
  • ZARA “Financial Position as Compared with Competitors” GAP H&M Benetton Inditex -0.06% 9.60% 7.05% 10.46% 1.82 1.96 0.74 1.25 ROA -0.11% 18.78% 5.25% 13.05% ROE -0.27% 24.85% 11.93% 22.88% Net Margin Asset Turnover
  • ZARA “Inventory Management” • Focus on reducing response time • Approximately 11,000 new items per year, compared with 2,000-4,000 for H&M and Gap.
  • ZARA “Inventory Management” • Stock outs: Common • Short shelf life: More customers • • • • Inventory holding: ZARA: 6 days H&M: 52 days Cortefiel (Spain): 94 days
  • ZARA “Forecasting” • Extensive market research • Quick input and output response • Frequent new styles • Near-term forecasts • Customer feedback • Short product life cycles  Reduce errors  Improve current products
  • ZARA “Procurement” • In-house production: Half • Each clothing line: Separate staff • Basic textiles: Global suppliers • Simple items: Outsourced to China. • Difficult items: Zara factories and domestic outsourcing • Most suppliers: Close to distribution centers
  • ZARA “Production Planning” • Design & Production Centre: Centralized • Supply chain: Constant data flow • Retailers: Have authority to change 40%-50% orders • Factories:  Single-shift  Change quickly according to demands
  • ZARA “Warehousing” • High-velocity shipping: Rapid information flows • Stores: Electronically connected to headquarters • Logistics system: Speed and flexibility • Products:       Selected Sorted Routed Delivered Local distribution centers Retail store stockrooms
  • ZARA “Transportation” • Distribution: 2 weeks • Supply chain: Quick response • Transportation network: Effective and efficient • Zara Promotes: Service quality • Zara Coordinates: All aspects of logistics
  • Production Commitment and Markdown 6-month Pre-season Traditional Industry Model In-season 15-25% 80-100% 0-20% Advertisement Zara 45-60% Start of season Advertisement + Markdowns 50-60% 40-50% Sales% Not at full price Fresh items 30-40% 15-20%
  • Recommendations to ZARA KEY PROBLEMS: Emphasize on high efficiency and fast production processes Demotivation of workers Quality drops Lack of inventory tracking Inability to check inventory within stores Real time counts and scan must be done.
  • Recommendations to ZARA • ZARA SEEMS TO:  Go in the right direction  Grow at a remarkable rate  Show no signs of slowing down • ZARA SHOULD:  Expand in each district/region  Expand into North American and Asian markets  Continue growth throughout Europe  Increase its production and reduce costs by outsourcing to Asian countries
  • Recommendations to ZARA • CHANGE THE SYSTEM CentralizedTransform Decentralized Build decentralized distribution & Production in each region (Asia, Europe & America, more is better) to Penetrate new market & trend Decrease the complexity of process
  • Recommendations to ZARA INCREASE ADVERTISEMENT • Part of marketing • Bridge between customers and companies INCREASE NETWORKING CAPABILITIES: Ineffective communication between its stores and the home office.  Currently used POS terminals are not connected to other store POS terminals or to corporate headquarters.
  • Recommendations to ZARA Improve IT Infrastructure • Efficient for past operations • Insufficient to deal with modern technology • Ineffective in future as company continues to grow and expand internationally
  • References 1. Bureau of Labor Statistics (2011). International comparisons of hourly compensation costs in manufacturing, 2010. http://www.bls.gov/news.release/pdf/ichcc.pdf 2. Werner International management consultants (2012). Comparison of the hourly labor cost in the primary textile industry winter 2011. 3. Verlina N. Whatley (2011). Case Analysis of Zara: IT for Fast Fashion http://www2.uhv.edu/luj/MGT6352/ Samples/Student%20Sample%202.pdf 4. http://en.wikipedia.org/wiki/Zara_(retailer) 5. http://en.wikipedia.org/wiki/Inditex 6. http://www.inditex.com
  • ANY QUESTION?