“Managing Retailing, Wholesaling & Logistics”
Anne Stam, Febrini Wulandari & Irwan Arfandi B.
Master of Management – Gadjah Mada University
Marketing Strategy Focus
Zara Vertical Integration Production ?
Store Location All Around The World
Advantages from Using Single Distribution
• Zara is the flagship chain store of Inditex
Group owned by Spanish tycoon Amancio
Ortega, who also owns brands such as
Massimo Dutti, Pull and
Bear, Oysho, Uterqüe, Stradivarius and
Bershka. The group is headquartered in A
Coruña, Spain, where the first Zara store
opened in 1975.
• Zara has resisted the industry-wide trend
towards transferring fast fashion production
to low-cost countries. Perhaps its most
unusual strategy was its policy of zero
advertising; the company preferred to
invest a percentage of revenues in opening
new stores instead
The elements supporting Zara’s business structure and strategy are also
greatly interlinked and interdependent. The following three factors stand out:
Extensive market research providing a constant stream of inputs into the
product development process, rather than in batches or discrete seasons.
Locating various business function in close proximity of the
headquarters, and tight control, allows the various functions to coordinate
and take joint-decision very quickly. Control also refers to early investment
in raw material, and direct or indirect “ownership” of processing and
production capacities. These provide the capability to respond very quickly
to the market research-influenced decions.
Communication and information Technology are absolutely vital to
managing the constant interface of various and management of the huge
variety of product information.
“How Zara manage the strategy of distribution
and vertical integration ?”
On which way can vertical integration of zara
be an advantage for the company?
Cutting cost because they do not outsource
Cutting time, more faster, effective, and
Avoid conflicts emerge from different
What to do before
• Store atmosphere
• Target market Zara store’s athmosphere is high end but
Zara’s target market is people from classy, high lighting, no pictures on the
teens to adults, men and women.
• Product assortment
• Store activities and experiences
Zara is broadly and deeply assorted.
Stay update through the website.
No advertising, but free press is good
sources, policies and practices.
• Location decision
Zara product price is affordable
Zara locates themselves in central
business districts with as many outlets
Prepurchase service, postpurchase
service, ancilary service.
Overall about Zara’s Vertical Integration
Zara manufactures and distributes products in
small batches. Instead of relying on outside
partners, the company manages all
design, warehousing, distribution, and
logistics functions itself
Zara has been able to achieve
excellent financial status due
to its core competencies that
provide the chain with a
competitive advantage over
traditional retailers in the
Zara is an apparel chain that works differently
from traditional retailers. Generally, a
traditional retailer outsources all of its
production while focusing on distributing and
retailing those goods. This is due to the fact
that the global apparel industry is “highly-
labor intensive” rather than capital intensive
Zara is a chain that has
developed a successful diverse
method of doing business in the
fashion industry. Zara by working
through the whole value chain is
very vertically integrated and
highly capital intensive
a distinctive feature of Zara’s
business model, has allowed the
company to successfully develop a
strong merchandising strategy. This
strategy has led Zara to create a
climate of scarcity and opportunity
as well as a fast-fashion system.
Zara manufactures 60% of its own
products. By owning its in-house
production, Zara is able to be
flexible in the variety, amount, and
frequency of the new styles they
Zara’s in-house production purposely creates a
rapid product turnover since its “runs are
limited and inventories are strictly controlled”.
This rapid product turnover creates a climate
of scarcity and opportunity in Zara’s retail
Human Resource goes Better
Zara’s unique quick response system, composed of
human resources as well as information
technology, allows Zara to respond to the demand of
its consumer better than the competition. Zara, who
focuses on the ultimate consumer, places “more
emphasis on using backward vertical integration to
be a very quick fashion follower than to achieve
Zara has human resource teams in the retail and
manufacturing environment that work exclusively
toward this goal. In the manufacturing
environment, Zara’s product development teams are
responsible for attending high-fashion fairs and
exhibitions to translate the latest trends of the
season into their designs.
In The Retail Environment
Zara’s managers and sales associates
are in charge of transmitting the
sales analysis, the product life
cycles, and the store trends to the
designers. This allows the designers
in Spain to develop the right
products within the season to meet
Others Zara’s Environment
• Accelerated IT software to transfer spesific
communication and design
• Zara Centralized distribution facility, Zara’s
internally or externally produced merchandise
goes to the distribution center
• Targeting a broad market to international
advantages over its competitors
Extended information :
Specific Zara’s Target Market
• Zara’s target market is very broad because
they do not define their target by segmenting
ages and lifestyles as traditional retailers do
• Zara’s target market is a young, educated one
that likes fashion and is sensitive to fashion
Others Question for Zara’s ?
On which way can the fact that zara
has a single distribution centre be an
Centralized control, avoid
misunderstanding or conflicts.
Manageable time scheduling, focused
on one rather than managing several
different time schedules.
On which way can this be an
Diseconomic of scale – in long
term, the costs is getting higher and
Because of managing distributions on
their own, designing and production
process might not be in its optimum
Cooperate with vary range of designers so Zara can maintain its competitive
advantage to be “the fast fashion” but remain more and more creative.
Cooperate with any channel of production all over the world so new
improvements in operation technology can be applied into Zara instead of keep
using the old ones.
Making more distribution centres so they will enable Zara to be more
faster, effective, and efficient in distributing their products to the retailers.
Advertising might be important in the future when competitors are becoming
more competitive and demands are declining.