The Secret of Zara’s Success: A Culture of...
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The Secret of Zara’s Success: A Culture of Customer Co-creation
Zara is one of the world’s most successful fashion retail brands – if not the most successful one. With its dramatic
introduction of the concept of “fast fashion” retail since it was founded in 1975 in Spain, Zara aspires to create
responsible passion for fashion amongst a broad spectrum of consumers, spread across different cultures and
age groups. There are many factors that have contributed to the success of Zara but one of its key strengths,
which has played a strong role in it becoming a global fashion powerhouse as it is today, is its ability to put
customers first. Zara is obsessed with its customers, and they have defined the company and the brand’s culture
right from the very beginning.
The Zara brand offers men and women’s clothing, children’s clothing (Zara Kids), shoes and accessories. The
sub-brand Zara TRF offers trendier and sometimes edgier items to younger women and teenagers.
The Zara brand story
Zara was founded by Amancio Ortega and Rosalía Mera in 1975 in downtown Galicia in the northern part of
Spain. Its first store featured low-priced lookalike products of popular, higher-end clothing and fashion. Amancio
Ortega named Zara as such because his preferred name Zorba was already taken. In the next 8 years, Zara’s
approach towards fashion and its business model gradually generated traction with the Spanish consumer. This
led to the opening of 9 new stores in the biggest cities of Spain.
In 1985, Inditex was incorporated as a holding company, which laid the foundations for a distribution system
capable of reacting to shifting market trends extremely quickly. Ortega created a new design, manufacturing, and
distribution process that could reduce lead times and react to new trends in a quicker way, which he called
“instant fashion”. This was driven by heavy investments in information technology and utilising groups instead of
individual designers for the critical “design” element.
In the next decade, Zara began aggressively expanding into global markets, which included Portugal, New York
(USA), Paris (France), Mexico, Greece, Belgium, Sweden, Malta, Cyprus, Norway and Israel. Today, there is
hardly a developed country without a Zara store. Zara now has 2,251 stores strategically located in leading cities
across 96 countries. It is no surprise that Zara, which started off as a small store in Spain, is now the world’s
largest fast fashion retailer and its founder, Amancio Ortega, is the sixth richest man in the world according to
Forbes magazine.
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Today, Inditex is the world’s largest fashion group with more than 170,000 employees operating more than 7,400
stores in 96 markets worldwide and 49 online markets. The revenues of Inditex was USD 31.1 billion in 2017. The
other fashion brands in the Inditex portfolio are:
Zara Home: Home goods and decoration objects founded in 2003. Operating 520 stores.
Pull & Bear: Casual laid back clothing and accessories for the young founded in 1991. Operates 979 stores.
Massimo Dutti: High end clothing and accessories for cosmopolitan men and women acquired in 1995. Operates
780 stores.
Bershka: Blends urban styles and modern fashion for young women and men founded in 1998. Operates 1,098
stores.
Stradivarius: Casual and feminine clothes for young women acquired in 1999. Operates 1,017 stores.
Oysho: Lingerie, casual outerwear, lounge wear and original accessories founded in 2001. Operating 670 stores.
Uterqüe: High-quality fashion accessories at attractive prices founded in 2008. Operating 90 stores.
The Zara brand strategy
In 2017, Zara was ranked 24th on global brand consultancy Interbrand’s list of best global brands. Its core values
are found in four simple terms: beauty, clarity, functionality and sustainability.
The secret to Zara’s success has largely being driven by its ability to keep up with rapidly changing fashion
trends and showcase it in its collections with very little delay. From the very beginning, Zara found a significant
gap in the market that few clothing brands had effectively addressed. This was to keep pace with latest fashion
trends, but offer clothing collections that are a combination of high quality and yet, are affordable. The brand
keeps a close watch on how fashion is changing and evolving every day across the world. Based on latest styles
and trends, it creates new designs and puts them into stores in a week or two. In stark comparison, most other
fashion brands would take close to six months to get new designs and collections into the market.
It is through this strategic ability of introducing new collections based on latest trends in a rapid manner that
enabled Zara to beat other competitors. It quickly became the people’s favourite brand, especially with those who
want to keep up with fashion trends. Founder Amancio Ortega is famously known for his views on clothes as a
perishable commodity. According to him, people should love to use and wear clothes for a short while and then
they should throw them away, just like yogurt, bread or fish, rather than store them in cupboards.
The media often quotes that the brand produces “freshly baked clothes”, which survive fashion trends for less
than a month or two. Zara concentrates on three areas to effectively “bake” its fresh fashions:
Shorter lead times (and more fashionable clothes): Shorter lead times allow Zara to ensure that its stores
stock clothes that customers want at that time (e.g. specific spring/ summer or autumn/ winter collections, recent
trend that is catching up, sudden popularity of an item worn by a celebrity/ socialite/ actor/ actress, latest
collection of a top designer etc.). While many retailers try to forecast what customers might buy months in the
future, Zara moves in step with its customers and offers them what they want to buy at a given point in time.
Lower quantities (through scarce supply): By reducing the quantity manufactured for a particular style, Zara
not only reduces its exposure to any single product but also creates artificial scarcity. Similar to the principle that
applies to all fashion items (and more specifically luxury), the lesser the availability, the more desirable an object
becomes. Another benefit of producing lower quantities is that if a style does not generate traction and suffers
from poor sales, there is not a high volume to be disposed of. Zara only has two time bound sales a year rather
than constant markdowns, and it discounts a very small proportion of its products, approximately half compared to
its competitors, which is a very impressive feat.
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More styles: Rather than producing more quantities per style, Zara produces more styles, roughly 12,000 a year.
Even if a style sells out very quickly, there are new styles waiting to take up the space. This means more choices
and higher chance of getting it right with the consumer.
Zara only allows its designs to remain on the shop floor for three to four weeks. This practice pushes consumers
to keep visiting the brand’s stores because if they were just a week late, all the clothes of a particular style or
trend would be gone and replaced with a new trend. At the same time, this constant refreshing of the lines and
styles carried by its stores also entices customers to visit its shops more frequently.
In the following sections, the key components of Zara’s winning formula in the fashion retailing industry are
illustrated.
Customer co-creation: Zara’s principal designer is the customer
Zara’s unrelenting focus on the customer is at the core of the brand’s success and the heights it has achieved
today. There was a fascinating story around how Zara co-creates its products leveraging its customers’ input. In
2015, a lady named Miko walked into a Zara store in Tokyo and asked the store assistant for a pink scarf, but the
store did not have any pink scarves. The same happened almost simultaneously for Michelle in Toronto, Elaine in
San Francisco, and Giselle in Frankfurt, who all walked into Zara stores and asked for pink scarves. They all left
the stores without any scarves – an experience many other Zara fans encountered globally in different Zara stores
over the next few days.
7 days later, more than 2,000 Zara stores globally started selling pink scarves. 500,000 pink scarves were
dispatched – to be exact. They sold out in 3 days. How did such lightning fast stocking of pink scarves happen?
Customer insights are the holy grail of modern business, and the more companies know about their customers,
the better they can innovate and compete. But it can prove challenging to have the right insights, at the right time,
and have access to them consistently over time.
One of the secrets of Zara’s success is that the brand trains and empowers its store employees and managers to
be particularly sensitive to customer needs and wants, and how customers enact them on the shop floors. Zara
empowers its sales associates and store managers to be at the forefront of customer research – they intently
listen and note down customer comments, ideas for cuts, fabrics or a new line, and keenly observe new styles
that its customers are wearing that have the potential to be converted into unique Zara styles. In comparison,
traditional daily sales reports can hardly provide such a dynamic updated picture of the market. The Zara empire
is built on two basic rules: “to give customers what they want”, and “get it to them faster than anyone else”.
Due to Zara’s competitive customer research capabilities, its product offerings across its stores globally reflect
unique customer needs and wants in terms of physical, climate or cultural differences. It offers smaller sizes in
Japan, special women’s clothes in Arab countries, and clothes of different seasonality in South America. These
differences in product offerings across countries are greatly facilitated by the frequent interactions between
Zara’s local store managers and its creative team.
In the fashion world, a trend starts small, but develops fast. Zara employees are trained to listen, watch and be
attentive to even the smallest seismographic signals from their customers, which can be an initial sign that a new
trend is taking shape. Zara knows that the quicker it can respond, the more likely it is to succeed in supplying the
right fashion merchandise at the right time across its global retail chain. Zara has set up sophisticated technology
driven systems, which enable information to travel quickly from the stores back to its headquarters in Arteixo in
Spain, enabling decision makers to act fast and respond effectively to a developing trend. Its design teams
regularly visit university campuses; nightclubs and other venues to observe what young fashion leaders are
wearing. In its headquarters, the design team uses flat-screen monitors linked by webcam to offices in Shanghai,
Tokyo and New York (the leading cities for fashion trends), which act as trend spotters. The ‘Trends’ team never
goes to fashion shows but tracks bloggers and listens closely to the brand’s customers.
The fact that Zara’s designers and customers are inextricably linked is a crucial part of the brand strategy.
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Specialist teams receive constant feedback on the decisions its customers are making at every Zara store, which
continuously inspires the Zara creative team.
Zara’s super-efficient supply chain
Zara’s highly responsive, vertically integrated supply chain enables the export of garments 24 hours, 365 days of
the year, resulting in the shipping of new products to stores twice a week. After products are designed, they take
around 10 to 15 days to reach the stores. All clothing items are processed through the distribution center in Spain,
where new items are inspected, sorted, tagged, and loaded into trucks. In most cases, clothing items are
delivered to stores within 48 hours. This vertical integration allows Zara to retain control over areas like dyeing
and processing and have fabric-processing capacity available on-demand to provide the correct fabrics for new
styles according to customer preferences. It also eliminates the need for warehouses and helps reduce the impact
of demand fluctuations. Zara produces over 450 million items and launches around 12,000 new designs annually,
so the efficiency of the supply chain is critical to ensure that this constant refreshment of store level collections
goes off smoothly and efficiently.
Here are some of the characteristics of Zara’s supply chain that highlight the reasons behind its success:
Frequency of customer insights collection: Trend information flows daily into a database at head office, which
is used by designers to create new lines and modify existing ones.
Standardization of product information: Zara warehouses have standardised product information with common
definitions, allowing quick and accurate preparation of designs with clear manufacturing instructions.
Product information and inventory management: By effectively managing thousands of fabric, trim and design
specifications and their physical inventory, Zara is capable of designing a garment with available stock of required
raw materials.
Procurement strategy: Around two-thirds of fabrics are undyed and are purchased before designs are finalized
so as to obtain savings through demand aggregation.
Manufacturing approach: Zara uses a “make and buy” approach – it produces the more fashionable and riskier
items (which need testing and piloting) in Spain, and outsources production of more standard designs with more
predictable demand to Morocco, Turkey and Asia to reduce production cost. The more fashionable and riskier
items (which are around half of its merchandise) are manufactured at a dozen company-owned factories in Spain
(Galicia), northern Portugal and Turkey. Clothes with longer shelf life (i.e. the one with more predictable demand
patterns), such as basic T-shirts, are outsourced to low cost suppliers, mainly in Asia. Even when manufacturing
in Europe, Zara manages to keep its costs down by outsourcing the assembly workshops and leveraging the
informal economy of mothers and grandmothers.
Distribution management: Zara’s state-of-the-art distribution facility functions with minimal human intervention.
Optical reading devices sort out and distribute more than 60,000 items of clothing an hour.
In addition to these supply chain efficiencies, Zara can also modify existing items in as little as two weeks.
Shortening the product life cycle means greater success in meeting consumer preferences. If a design does not
sell well within a week, it is withdrawn from shops, further orders are canceled and a new design is pursued. Zara
closely monitors changes in customer preferences towards fashion. It has a range of basic designs that are
carried over from year to year, but some in-vogue, high fashion, inspired by latest trends items can stay on the
shelves for less than four weeks, which encourages Zara fans to make repeat visits. An average high-street store
in Spain expects customers to visit thrice a year, but for Zara, the expectation is that customers should visit
around 17 times in a year.
This expectation for such a high frequency of repeat visits is evidence of Zara’s confidence that it is keeping on
top of changing consumer needs and preferences and is helping them shape their ideas, opinions and taste for
fashion. In reality, Zara is also helping in giving birth to new trends through its stores or even helping in extending
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the longevity of some seasonal styles by offering affordable lines.
Sustainability at the core of Zara’s operations
Sustainability has been a hot topic in business for the last decade and is now quickly becoming a must-have
hygiene factor for companies that want to resonate with and win the loyalty of its global customers. For Inditex,
this means having a commitment to people and the environment.
Commitment to people: Inditex ensures that its employees have a shared vision of value built on sustainability
through professional development, equality and diversity and volunteering. It also ensure that its suppliers have
fundamental rights at work and by initiating continuous improvement programs for them. Inditex also spends over
USD 49 million annually on social and community programmes and initiatives. For example, its ‘for&from’
programme is aimed to enable the social integration of people with physical and mental disabilities, by providing
over 150 stable employment opportunities.
Commitment to environment: Being in a business where it taps on natural resources to create its products,
Inditex makes efforts to ensure that the environmental impact of its business complies with UNSDGs (United
Nations Sustainable Developmental Goals). Inditex takes wide-ranging measures to protect biodiversity, reduce
our consumption of water, energy and other resources, avoid waste, and combat climate change. For example, it
has outlined a Global Water Management Strategy, specifically committing to zero discharge of hazardous
chemicals. It also has a waste reduction programme through which customers can drop off their used clothing,
footwear and accessories at collection points in 598 stores in eight markets.
Zara’s culture: The word “impossible” does not exist
Zara has a very entrepreneurial culture, and employs lots of young talent who quickly climb through the ranks of
the company. Zara promotes approximately 90% of its store managers from within and generally experiences low
turnover. The brand has no fear in giving responsibility to young people and the culture encourages risk-taking (as
long as learning happens) and fast implementation (the mantra of fashion).
Top management gives its store managers full liberty and control over their store’s operations and performance
with clearly set cost, profit and growth targets with a fixed and variable compensation scheme. The variable
component amounts to up to half of the total compensation – making store level employees heavily
incentive-driven.
In addition, once an employee is selected for promotion, his or her store develops a comprehensive training
program for that individual with the human resources department, which is followed up by periodic supplemental
training – reflecting Zara’s commitment to talent development. The organizational structure is also flat with only a
few managerial layers.
Customers are the most important source of information for Zara, but like any other fashion brand, Zara also
employs trend analysts, customer insights experts, and retains some of the best talents in the fashion world. The
creative team of Zara comprises of over 200 professionals. They all embody and enact the corporate philosophy
that the word “impossible” does not exist in Zara.
For example, while many companies struggle with long lead times in discussions and decision making, Zara gets
around this challenge by getting various business functions to sit together at the headquarters and also by
encouraging a culture (through structures and processes) where people continuously talk to each other. The sales
and marketing teams who receive trend feedback talk regularly with designers and merchandisers. It is important
that there is constant two-way communication so that sales and marketing teams can talk about new lines to
customers and designers / merchandisers have a strong visibility of customers’ needs and preferences enacted
at a store level. The production scheduling is also closely coordinated so that there is no time wasted on
approvals. The design team structure is very flat and focuses on careful interpretation of catwalk trends that are
suitable for the mass market – the Zara customer. The design and product development teams, who are based in
Spain, work closely to produce 1,000 new styles every month.
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Besides being customer centric, another important reason why Zara’s employee strategy is so successful is the
fact that it empowers its staff to make decisions based on data. Zara has no chief designer. All its designers are
given unparalleled independence in approving products and campaigns, based on daily data feeds indicating
which styles are popular.
Due to the unwavering focus on the customer, the entire business model is designed in such a way that the
pattern of needs for the finished goods dictate the terms of the production process to follow, instead of having the
raw materials determine the nature of the production process – something that is very rare in multinational
companies of similar scale.
In sum, the entire brand culture is extremely customer-centric, which has been and continues to be a significant
contributor to Zara’s success.
Zara brand communication strategy
Zara has used almost a zero advertising and endorsement policy throughout its entire existence, preferring to
invest a percentage of its revenues in opening new stores instead. It spends a meagre 0.3 per cent of sales on
advertising compared to an average of 3.5 per cent by competitors. The brand’s founder Amancio has never
spoken to the media nor has in any way advertised Zara. This is indeed the mark of a truly successful brand
where customers appreciate and desire the brand, which is over and above product level benefits but strongly
driven by the brand experience.
Instead of advertising, Zara uses its store location and store displays as key elements of its marketing strategy.
By choosing to be in the most prominent locations in a city, Zara ensures very high customer traffic for its stores.
Its window displays, which showcase the most outstanding pieces in the collection, are also a powerful
communication tool designed by a specialized team. A lot of time and effort is spent designing the window
displays to be artistic and attention grabbing. According to Zara’s philosophy of fast fashion, the window displays
are constantly changed. This strategy goes down to how the employees dress as well – all Zara employees are
required to wear Zara clothes while working in the stores, but these “uniforms” vary across different Zara stores
to reflect socio-economic differences in the regions they were located. This effectively communicates Zara’s
focus on the mass market, yet another detail that reflects its close attention on the customer.
To tap into the emerging e-commerce trend, Zara launched its online boutique in September 2010. The website
was initially available in Spain, the UK, Portugal, Italy, Germany and France, and was extended to Austria,
Ireland, the Netherlands, Belgium and Luxembourg. Over the next 3 years, the online store became available in
the United States, Russia, Canada, Mexico, Romania, and South Korea. In 2017, Zara’s online store launched in
Singapore, Malaysia, Thailand, Vietnam and India. More recently in March 2018, the brand launched online in
Australia and New Zealand. As at 2017, online sales made up 10% of Zara’s total global sales.
As a fast fashion retailer, Zara is definitely aware of the power of e-commerce and has built up a successful online
presence and high quality customer experience.
Zara’s future brand and business challenges
Mobile commerce: Zara woke up late to the potential of mobile commerce and needs to catch up fast with
competitors. Different forms of market analysis strongly point towards a scenario wherein spends on mobile
commerce will overtake desktop based ecommerce in the next 3 years. On an average, most brands get about
15-20% of their website traffic via mobile devices and this is growing rapidly. With the deluge of investments
planned in the mobile commerce space and Zara’s competitors already having an advantage on the mobile front,
Zara needs to quickly make mobile shopping not only an effortless experience but also a delightful one.
Price is not an advantage anymore: Offering the latest fashion lines at affordable prices continues to be a
strategic advantage for Zara, but cannot continue to be the only one. Across the world, and closer to home in
Europe, competitors are cutting prices and refining their business models to cut the competitive advantage that
Zara has. Swedish fast fashion retailer H&M launched an online store in Spain in 2014 to take own Zara in its
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home turf. Again in its home market, it now faces increasing competition from brands like Mango, which cut prices
and started focusing on fashion segments in which Zara enjoyed popularity. In addition to H&M and Mango, other
competitors like Gap and Topshop are all fighting for a share of the fast fashion retail market pie. Also with the
rise of e- and m-commerce, the number of indirect competitors has mushroomed. We now have online fashion
aggregators that bring in multiple brands under one single online platform and cut through borders and price
segments. Some examples of such aggregators who are doing well include Lyst, Farfetch, Spring and Yoox
Net-a-Porter.
For Zara to effectively compete and maintain its strategic advantage, the focus needs to shift away from price but
towards quality. Even today the Zara brand enjoys high levels of appeal, which is evident by the serpentine
queues outside its stores when it launches in new markets. There is a need for Zara to start investing in building a
strong brand positioning and aggressively communicate it. Additionally, Zara needs to adopt, imbibe and leverage
social media and digital platforms in its advertising and communication strategies deeper going forward.
Need for marketing strategy to evolve: As discussed above, Zara does not engage in advertising and instead
uses its store locations as a marketing strategy. However, brand communication is crucial in attracting new
customers to the brand to support its growth. Without advertisements, Zara relies heavily on word of mouth or
social media. This causes the perception of potential customers towards Zara to be heavily shaped by family and
friends, which may not be accurate. In addition, Zara’s social media platforms such as Facebook and YouTube
exists merely as a feed for updates rather than a platform that consumers can interact with. Its videos on
YouTube are also seeing very low viewership in comparison with its follower count, which is not ideal as videos
are a powerful medium for brands in the fashion industry. This is a gap that Zara needs to plug immediately as the
reach and impact of social media marketing gets stronger. As Zara’s target customer segments start using more
social and digital platforms for communication and for sharing their lives, it is important for Zara to have a strong
presence on such platforms.
Transition to next generation ownership: With various technological and business disruptions in the past
decade, leadership in the 21st century will be influenced by constant change, geopolitical volatility, and economic
and political uncertainty. Zara is currently controlled by 82-year-old Amancio Ortega, and is set to be succeeded
by his 34-year-old daughter, Marta Ortega. To effectively manage the above disruptions, Zara’s next generation
leadership needs to step up to the challenge by being resilient in staying true to the brand promise to consistently
produce “freshly baked clothes” for its fashion-forward consumers, and by balancing both short-term (profitability)
and long-term goals (growing the business and reaching more consumers). More importantly, despite Zara’s
global reach and consequent product standardization, it needs to constantly find new ways to serve local fashion
needs and preferences of its consumers across the globe. This will be a challenge for the brand’s leadership in
the next decade.
Conclusion: Take Zara’s cue and listen to your customers
The Zara brand was born with a keen eye on its customer – its ability to understand, predict and deliver on its
customers’ preferences for trendy fashion at affordable prices. In addition to its effective supply chain, the
brand’s ability to have its customers co-create designs is unique and provides it with a competitive advantage.
Most fashion trends often start unexpectedly, originate from uncommon places and grow out of nowhere. With
reference to the pink scarf trend mentioned above, it could have been that Hollywood actress Scarlett Johansson
had worn a pink scarf to a charity gala the evening before in Los Angeles, or golf star Michelle Wie had
showcased a pink scarf at a celebrity tournament in Asia. The fact that Zara was able to quickly jump on to this
trend and provide hundreds of customers with the pink scarves they desperately wanted to buy.
In a world swamped with Big Data, and yet more collected at an even more rapid pace than before, brands still
need to be careful and observant. Big Data does not provide answers to all business challenges, and it may be
too hyped to be considered as the Holy Grail.
One of the secrets behind Zara’s global success is the culture and the respect for the fact that no one is a better,
authentic trendsetter than the customer himself or herself – and this philosophy needs to be continually reflected
in all its business strategies going forward.
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So, why not consult your customers for a start? Zara always does.
Insights links
About the author: Martin Roll – Business & Brand Strategist
Read about Uniqlo: Uniqlo – The Strategy Behind The Global Japanese Fast Fashion Retail Brand
Read about Forever 21: Forever 21 – Fast Fashion Retail Brand With An Edge
Read more: Insights & Articles
Martin Roll Company – 2016 – All rights reserved - www.martinroll.com
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