Question

puts these designs into production by locating half its production facilities nearby in Spain, Portugal, and Morocco. It produces only a small quantity of each collection and is willing to experience occasional shortages to preserve an image of exclusivity. Clothes with a longer shelf life, like T-shirts, are outsourced to lower-cost suppliers in Asia and Turkey. With tight control on its manufacturing process, Zara can move more rapidly than any of its competitors and continues to deliver fresh styles to its stores every week. Logistics. Zara distributes all its merchandise, regardless of origin, from Spain. Its distribution process is designed so that the time from receipt of an order to delivery in the store averages 24 hours in Europe and 48 hours in the United States and Asia. Having 50 percent of its production facilities nearby is key to the success of this model. All Zara stores receive new shipments twice a week, and the small quantities of each collection entice consumers not only to return frequently but also to make purchase decisions more quickly. Because of its logistics and inventory policy, while an average shopper in Spain visits a main street store three times a year, shoppers to a Zara store average 17 trips. Some fans know exactly what day new shipments arrive and show up early to be the first in line, keeping the company’s sales strong throughout the year and even during slow economic times. The company also sells more products at full price—85 percent of its merchandise versus the industry average of 60 percent. Customers. Everything revolves around Zara’s customers. The retailer monitors customers’ changing needs, trends, and tastes through daily reports from shop managers about which products and styles have sold and which haven’t. Managers earn as much as 70 percent of their salaries from commission, so they have a strong incentive to stay on top of things. Zara’s designers don’t have to predict what fashion trends will be in the future. They react to customer feedback—good and bad—and if an idea fails, the line is withdrawn immediately. Zara cuts its losses and the impact is minimal due to the small quantities of each style produced. Stores. Zara does not run advertising campaigns. The retailer’s stores, in prestigioushigh-traffic locations around the world, are its key advertising element, featuring stylish and constantly changing window displays. Other retailers spend 3 percent to 4 percent of revenues on big brand-building campaigns, while Zara spends just 0.3 percent. The company has said it would rather use a percentage of revenue to open new stores than to advertise. Zara’s success comes from having complete control over all the parts of its business—design, production, and distribution. Louis Vuitton’s fashion director, Daniel Piette, described the company as “possibly the most innovative and devastating retailer in the world.” It has expanded aggressively throughout Europe as well as into emerging markets such as Asia, the Americas, and the Middle East, making sure it honors local tastes in each region. Zara was a latecomer to the Internet and launched its first online store only in 2011. However, the company now uses its Web site to test the waters before entering potential markets like China, Russia, and Canada with retail storefronts. While Zara has experience record sales as of late, it faces unique challenges ahead, including what to do in the United States, where obesity rates are much higher than in the rest of the world and roomy clothes are preferred to the slim fits and high fashion the company offers. It also needs to decide how to maintain its tight control on manufacturing as it expands throughout the world. Questions 1. Would Zara’s model work for other retailers? Why or why not? 2. What can Zara do to ensure successful growth around the world while maintaining the same level of speed and instant fashion?

Answer 1

Questions 1. Would Zara’s model work for other retailers? Why or why not?

No, Zara’s model wouldn't work for other retailers because:

1.Zara’s success comes from having complete control over all the parts of its business—design, production, and distribution which is tough to copy.

2.Zara’s designers don’t have to predict what fashion trends will be in the future.They react to customer's feedback and produce new varieties of clothes according to their choices which is tough to imitate by other retailers.

3.All Zara stores receive new shipments twice a week, and the small quantities of each collection entice consumers not only to return frequently but also to make purchase decisions more quickly. This immediate feedback system and conversion of feedback into collection is most tough to copy by other retailers.

4.Zara uses an Omni supply chain management system which integrates and synchronizes all the units of ZARA distribution network. If any other retailer tries to copy this then it includes a huge amount of logistics cost.

5.ZARAs distribution model is difficult to learn.ZARA is possibly the most innovative and devastating retailer in the world whose model cannot be copied easily.

6.Zara cuts its losses and the impact is minimal due to the small quantities of each style produced which is the most effective system and cannot be copied immediately by other retailers.

7.Zara does not run advertising campaigns. The retailer’s stores, in prestigious high-traffic locations around the world, are its key advertising element, featuring stylish and constantly changing window displays; this method of advertisement campaign cannot be copied by the retailers and also to occupy stores at prestigious high locations is tough for medium scale retailers.

2. What can Zara do to ensure successful growth around the world while maintaining the same level of speed and instant fashion?

Zara is successful because of its integrated production and design system.Zara uses a marketing pull strategy to attract their customer.Zara uses a customer centric approach and delivers the value based product to the customers.

For the success with expansion around the globe Zara needs to ensure that its distribution network is quick and efficient . Before expansion Zara has to make sure that its integrated distribution model is implemented properly.ZARA must ensure that its supply chain link will work properly for successful growth around the globe.