Case 2:
Zara
MRK2514 Markedsføring, Handelshøyskolen BI, høst 2007
Les artikkelen under og svar på de påfølgende spørsmål/oppgaver.
Inditex
The future of fast fashion
Jun 16th 2005 | LA CORUÑA, SPAIN
From The Economist print edition
Spain's Inditex, the owner of the Zara chain
of fashion stores, has bold but worrying
expansion plans
WHEN Spain's Crown Prince Felipe and Letizia Ortiz Rocasolano announced their
engagement in 2003, the bride-to-be wore a stylish white trouser suit—which raised some
eyebrows among those concerned with royal protocol. But within a few weeks, hundreds of
European women were wearing something similar. Welcome to the world of instant fashion,
in which a Spanish company is defying conventional wisdom and building a global brand:
Zara.
Instead of trying to create demand for new trends in the summer and winter seasons using the
catwalks of fashion shows, Zara studies the demands of the customers in its stores and then
tries to deliver an appropriate design at lightning speed. In the process, Zara has become the
most profitable arm of Inditex, a holding company of eight retail brands, and one of the
biggest success stories in Spanish business.
From its beginnings in 1963 when Amancio Ortega Gaona, its founder, began to trade
garments, Inditex has emerged as one of the world's fastest-expanding makers of affordable
fashion clothing. Since 2000 it has more than doubled its number of shops to 2,240 by the end
of last year, with sales of more than €5 billion ($7 billion). On June 13th, Inditex announced
net profits up by 21% for the first quarter.
How can Inditex thrive when Europe's entire textile industry is supposed to be under threat
from cheap imports from China? At Inditex's heart is a vertical integration of design, just-intime production, delivery and sales. Some 300 designers work at the firm's head office in La
Coruña in Galicia, a poor region in northern Spain. They are in daily contact with store
managers to discover bestselling items.
Fabric is cut in-house and then sent to a cluster of several hundred local co-operatives for
sewing. When the finished product returns, it is ironed, carefully checked and wrapped in
plastic for transport on conveyor belts to a group of giant warehouses. Twice a week lorries
deliver the garments to other European countries and by aircraft to the rest of the world.
Production is deliberately carried out in small batches to avoid oversupply. While there is
some replenishment of stock, most lines are replaced quickly with yet more new designs
rather than with more of the same. This helps to create a scarcity value. Shoppers cannot be
sure that something that has caught their eye will appear in the store again—or can be found
at another Zara store, even in the same city. On the other hand, they also know that everyone
they meet will not be wearing it.
The result is that Zara's production cycles are much faster than those of its nearest rival,
Sweden's Hennes & Mauritz (H&M). An entirely new Zara garment takes about five weeks
from design to delivery; a new version of an existing model can be in the shops within two
weeks. In a typical year, Zara launches some 11,000 new items, compared with the 2,0004,000 from companies like H&M or America's giant casual-fashion chain, Gap.
All of Zara's shops use point-of-sale terminals to report directly to La Coruña. On top of that,
every evening store managers consult a personal digital assistant to check what new designs
are available and to place their orders according to what they think will sell best to their
customers. In this way, its store managers help shape designs. Zara does not employ star
designers but often unknowns, many of whom are recruited directly from top design schools.
Inditex is extremely clever in how it uses technology, says Andrew McAfee, a Harvard
Business School specialist in the corporate use of information technology. The company
keeps its technology simple—even a little old-fashioned—but as a result spends five to ten
times less on information technology than its rivals.
Zara is also more parsimonious with advertising and discounts. It spends just 0.3% of sales on
ads, compared with the 3-4% typically spent by rivals. “We try to avoid markdowns”—now
an almost permanent feature of American department stores—says José María Castellano
Ríos, Inditex's deputy chairman. On June 13th the board appointed Pablo Isla to succeed him
as chief executive. Mr Isla, a former co-chairman of Altadis, a Franco-Spanish tobacco
company, is not a fashion man. His appointment followed a long search by head-hunters for
someone able to manage a company that will inevitably become more complex as it grows
and its supply chain lengthens.
Mr Castellano says that over the next four years, Inditex plans to double in size to some 4,000
shops with sales of more than €10 billion. Most of this expansion will be in Europe, where he
sees room for growth, especially in fashion-conscious Italy. Some investors are worried about
this rapid pace. Over recent months the shares of H&M, a company with more modest plans
for expansion, have performed better than those of Inditex.
So far, Inditex has only 16 shops in America, the world's biggest market, and aims to gets its
European expansion going before pushing hard on the other side of the Atlantic. By February,
H&M had 76 stores in America, so it could get well ahead of its Spanish rival in that market.
But H&M does things differently, including the hiring of star designers. Stella McCartney has
been appointed to design its autumn collection, which will be sold in some of its European
and American stores.
Inditex's caution could be wise. Only two years ago it missed some of the year's main fashion
trends. In their assessment of what went wrong in 2003, analysts at CSFB, an investment
bank, identified issues of complexity and control as being among the causes—worrying for a
company that likes to keep things simple. Even so, José Luis Nueno of IESE, a business
school in Barcelona, believes the firm will grow successfully. Consumers have become more
demanding and more arbitrary, so fast fashion is better suited to these changes, he argues.
Inditex has proven that cheap and fast fashion can also be trendy and well presented. Zara's
stores have won awards for their decoration and their shop windows.
To smooth its growth, Inditex has opened a new distribution centre in Zaragoza. It has also
begun to obtain some of its basic garments from low-cost countries, although the bulk of its
production remains in Europe. China, for instance, accounts for just 12.5% of its production,
less than that of rivals. Yet the further Inditex moves away from home, the trickier it will be
to cater to instant-fashion whims. When Madonna gave a series of concerts in Spain, teenage
girls were able to sport at her last performance the outfit she wore for her first concert, thanks
to Zara. Although Mr Castellano insists that Inditex can be as nimble in other countries as it is
at home, that could prove difficult. And if it stumbles, as Mr Castellano must know, the fickle
world of fashion will be merciless.
(Kilde: The Economist)
Oppgave 1.
Diskuter hvordan Zara bruker markedsinformasjon for å ta beslutninger med hensyn til sine
kleskolleksjoner.
Oppgave 2.
Vurder Zara som merkevare: Hva er det Zara bygger sitt merke på? Hvordan differensiere de
seg fra for eksempel Hennes & Mauritz?
Dere skal ikke ta kontakt med bedrifter nevnt i dette caset eller andre bedrifter for å løse
oppgaven. Pensumbok og forelesninger er hovedkildene for å besvare oppgaven på en god
måte.