3. Current Market – Current product:
market penetration
ZARA encourages to buy more by noticing major weaknesses of competitors.
* in-house operations, very fast moving: new items every week, which keeps
customers coming back
* Factories in Europe -> shipping time reduced to minimum -> the exposure to
‘fashion faux pas’ reduced as well
* ZARA controls almost every aspect of the supply chain
* Effective vertical integration: line can be made from start to finish in 3 weeks
(average in the industry – 9 months)
4. Current products – New market:
market development
1) ZARA identifies potential user groups in the current sales area
* E.g. some customers believe that GAP is for highschoolers and college
students. ZARA is timeless, classic. In fact, it is a good idea to analyze student’s
opinion on fashion as it is a big market.
2) ZARA considers selling in new locations in new markets
* ZARA’s parent company Inditex got fasters clothing manufacturer in the
world. ZARA, it’s fastest growing division, turns its inventory twice as fast as
major competitors, with an inventory-to-sales of 7% compared to an industry
average of 14%. Their profitability in European operations is 50% higher that
major competitors.
5. Current markets – New products:
product development
* “Affordable fashion” positioning, wide target audience. The relentless
introduction of new products in small quantities at fast speed and good prices
seems to be an answer to the large scale customization requirements of the
target customers.
* Business teams monitoring ‘external developments’ – consumers on
catwalks, at airports and shopping areas. The team of 200 people travels the
world with the aim of discovering new trends. appx 40’000 new designs to
choose 10k from.
* Instead of more quantities per style, ZARA produces more styles, roughly
12’000 a year.
6. New markets – New products:
diversification strategy
1) Computer-tape and information technology and manufacturing operations
* E.g. once the team selects a prototype for production, the designers refine
colors and textures using computer. Or if the item is to be made in one ZARA’s
factories, they transmit the specs directly to the relevant cutting machines and
other systems of that factory.
2) Constant flow of updated data mitigates ‘bullwhip’ effect – the tendency of supply
chains to amplify small disturbances
* Small change in retail orders -> wide fluctuations in factory orders. ZARA allows
retailers change up to 50% of orders once season has started which helps to
avoid costly overproduction and the subsequent sales
