Jaouhari 1 Christina Jaouhari
Ms. Dorothy Wu
FTM.220.601
11 December 2013
Zara Company Audit
Company’s History
! 1963-1974: In 1963, Amancio Ortega Gaona officially started his journey as a clothing
manufacturer. Gaona, the owner of Zara, founded Inditex, one of the largest distribution
groups in the world. From 1963 until 1974, Gaona continued to purchase several other
manufacturing sites and began distributing his merchandise throughout all of Europe
(Timeline).
! 1975: The first Zara store opened on a street downtown Coruna, Spain (Timeline).
! 1976-1984: The first store received positive feedback from the fashion lovers in Spain,
which resulted in high demands that could only be met by opening more stores. Zara
began to open in other major Spanish cities (Timeline).
! 1985: Inditex became the holding company for an array of businesses (Timeline).
! 1986-1987: The companies that Inditex owned at the moment officially decided to devote
all of their labor and resources to building up Zara. The group outlined a supply chain
that would keep pace with the growing demand of Zara customers (Timeline).
! 1988: In December of 1988, Zara opened up its first store outside of Spain in Oporto,
Portugal (Timeline).
! 1989-1990: For the first time, Zara opened in New York and France (Timeline).
Jaouhari 2 ! 1992-1994: Zara continued to expand outside of Spain. Zara opened stores in Mexico,
Greece and Sweden (Timeline).
! 1999-1998: Zara entered into new markets. Such as those in Israel, Norway, Germany,
Turkey, Venezuela, Argentina, United Arab Emirates, Japan, Kuwait and Lebanon.
Timeline).
! 2000: Zara moved its headquarters to a newer building in Arteixo, Spain. The company
continued to broaden its horizon as it entered Andorra, Austria, Denmark and Qatar
(Timeline).
! 2001: Zara began trading in the stock market on May 23, 2001. Afterwards, the company
opened stores in Ireland, Iceland, Italy, Luxembourg, the Czech Republic, Puerto Rico
and Jordan (Timeline).
! 2002: Zara made heads turn with its new distribution center in Zaragoza, Spain. Zara
opened outlets in Finland, Switzerland, El Salvador, the Dominican Republic and
Singapore (Timeline).
! 2003: Zara opened its first Zara Home outlet, making it the seventh retailer in Inditex. In
order to complement the distribution center in Arteixo, Zara opened its second
distribution center in Zaragoza, Spain. Zara ended the year by opening stores in Slovenia,
Slovakia, Russia and Malaysia (Timeline).
! 2004: Zara had obtained a global footprint that covers 56 countries in Europe, the
Americas, Asia and Africa. Zara opened stores in Morocco, Estonia, Latvia, Romania,
Hungary, Lithuania and Panama (Timeline).
! 2005-2006: Zara expanded into Manaco, Indonesia, Thailand, the Philippines, Costa
Rica, Serbia, Mainland China and Tunisia (Timeline).
Jaouhari 3 ! 2007: Zara Home introduced the company’s first online store. Zara also opened two new
distribution centers in Madrid, Spain and León, Spain. Zara hit its one thousandth store
with its opening in Florence, Italy (Timeline).
! 2009: Zara introduced a new distribution center in Barcelona, which is near the current
logistics platform (Timeline).
! 2010: Inditex, as a whole hit its five thousandth store with the launch of the eco-efficient
Zara store in the center of downtown Rome, Italy. Zara officially began selling its
merchandise online, making it available to a total of sixteen European countries
(Timeline).
! 2011: Pablo Isla took the position as the new chairman and CEO for Inditex. Zara opened
its online stores in the United States and Japan (Timeline).
! 2012: Inditex reached its six thousandth store mark. In addition, Zara introduced its new
image based solely on the four principles, which include: beauty, clarity, functionality
and sustainability. Zara emphasized the importance of simplicity as well as its mission to
bring the latest fashion trends directly to its consumers. (Timeline).
Company’s Mission
Zara’s mission statement:
“Through Zara’s business model, we aim to contribute to the sustainable development of
society and that of the environment with which we interacts. The company's commitment to the
environment is included in Inditex Group’s Corporate Responsibility Statement, published on
our website: www.inditex.com” (Our Mission Statement).
Jaouhari 4 Zara aims to revolutionize the concept of mass merchandising by responding to their
customers needs and wants, coining a new terminology known as “fast fashion” (Loeb). With
local help and recognition of loyal customers, Zara was able to evolve from single stores in the
1970s to multi-billionaire retailer well known for its fast response to its consumers (Hansen).
The company was able to globalize itself through the words of their loyal customers. Zara
refuses to advertising itself, instead it leaves that task to the consumers (Hansen). Its vision
includes providing its customers the upper hand in the latest fashion trends with a two week long
lead time and quick turnover (Hansen). In addition, Zara follows a strict set of objections in order
to better enforce their mission as a whole. Some of the daily objectives include, but are not
limited to: saving energy, producing less waste by recycling hangers and alarms, increasing
awareness among their team members through their training programs and in-house awareness
campaigns, using ecological fabrics, utilizing biodiesel fuel. The usage of biodiesel fuel is
beneficial because Zara transports over 200 million garments a year. Also, Zara refuses to sell
any merchandise that is created through the harming animals in any sort of way (Our Mission
Statement).
Company Structure: Public/Private (Ownership)
Zara belongs to Intidex; one of the world’s largest distribution groups, whose current
chairman and CEO at the moment is Pablo Isla Alvarez de Tejera (Zara). The company went
public on May 23, 2001, the day of its initial public offering (Timeline). Its stocks are sold under
the symbol ITX.MC (Quotes & Info). Zara consists of online sites as well as brick and mortar
facilities. In total, Zara has 1,770 stores that are located throughout the world and 166 stores for
their Zara Kids brand (Zara). Zara currently has a footprint that covers markets in 86 countries,
allowing one to find a Zara store on every continent (Zara). Zara’s headquarters is still located at
Jaouhari 5 exact place it started: 15142 Arteixo, A Coruna Spain (Zara). Zara’s headquarters is enormous in
size. Regional managers can be found behind a line of desks throughout the middle of the
facility, and the company’s designers can be found to the right of them. The layout allows for
quick results as managers call stores throughout the globe to figure out their customer’s needs by
analyzing what is selling (Hansen). Afterwards, the managers go to the designers and inform
them of their customers’ needs (Hansen). If multiple stores throughout the world are found
asking for the same product then the birth of a new global trend has just taken place (Hansen).
Throughout time, Zara has expanded its brand into kids clothing and home goods. The company
has does this by opening Zara Home and Zara Kids outlets. Zara, as stated before, is part of a
much larger retail group known as Intidex, which was founded by the same individuals who
founded Zara in 1963. Intidex subsidiaries include:
! Zara: A globalized retailer with stores in over 86 countries to better meet the demanding
needs of their kids, young adult and adult target markets (Our Group).
! Zara Home: Provides the latest trend in household furnishings (Our Group).
! Pull and Bear: Provides laid back and casual wear to the young population (Our Group).
! Bershka: Appeals to the youngest target market of the company (Our Group).
! Massimo Dutti: An independent and metropolitan style for the casual to high-end wearer
(Our Group).
! Stradivarius: Takes a funky and unique approach on new fashion trends for the younger
population (Our Group).
! Oysho: Provides a fashionable twist to women’s lingerie and intimate clothing (Our
Group).
Jaouhari 6 ! Uterque: As the newest addition to Inditex, the brand combines elegance, comfort and
quality all into one product (Our Group).
! Tempe: Specializes in footwear (Our Group).
Current Analysis
Due to the fact that Zara is a brand of Inditex, one must mirror Zara’s financial
performance off of Inditex’s quarterly and annual reports. The year 2012 marked a very
successful year for Inditex, as sales increased by 16% in comparison to 2011, leading to a
total of 15,946 million euros (Investor Relations). The year 2012 ended with a net profit of
3,913 million euros, an increase by 22% when compared to the net profit in 2011 (Investor
Relations). In 2012, Inditex opened its six thousandth store, an online store and spread into
the Asian market. The number of employees rose to 120, 314, which created a total of 10,802
new jobs within one year (Our Group). The company ended the year with a share price of
103.2 euros per share. When compared to the previous year the stock price increased by
54.7%. Currently, Inditex stocks are being sold for approximately 117.35 euros a share
(Quotes & Info).
In terms of quarterly performance, based on the 2013 half year results from February 1,
2013 until July 31, 2013 the net sales for the group increased by a total of 6% reaching 7.7
billion euros. Expansion took place within the last quarter as the company entered 40
additional markets (Investors Relations). The gross profit reached 4.5 billion euros, which
was 4% higher than the previous quarter (Investors Relations). Also, the gross margin rose by
58.6% (Investors Relations). During the last quarter, the company had increased its control
on their operating expenses by 6% as new stores opened up (Investors Relations). The net
income totaled to 686 million euros by the end of the first quarter, 1% higher than the
Jaouhari 7 previous year (Investors Relations). By the end of the year, Zara alone made up 10,541
million euros of the overall of Inditex’s net sales, which is 18% more than the previous year
(Investors Relations). The launch of Zara’s online store and the expansion into a total of 90
new markets has shaped and strongly influenced the increase in Zara’s financial performance
(Investor Relations).
Merchandise Mix
At the moment, Zara is a private label brand, as it sells its products under the store name
rather then the manufacturer’s name. Zara sells a range of products for both men, women and
children such as, lower garments, upper garments, shoes, cosmetics and complementary
products (Loeb). In addition, Zara is an international brand. Zara proves that borders are not
an issue as it is currently located in 86 different countries, placing their 1,770 stores in the
most high-end cities throughout the world (Zara). To add to the globalization of Zara, it
recently opened a number of online stores to better accommodate to its consumers’ needs.
Zara produces 11,000 products annually, while its competitors produce roughly around
2,000-4,000 garments annually (Loeb).
Target Market
Zara’s target market consists of a young audience that is aware of the latest fashion
trends, although they are still price-conscience about their decisions. Zara, unlike other
retailers, does not segment its target market into different ages or lifestyles. Instead, Zara
expands its market by keeping it simple, segmenting its product lines into 60% women, 25%
men and 15% children (Analyzing Zara’s Business Model).
Jaouhari 8 Current News/Events
As the largest retailer in the world, all eyes have been on Zara as they watch the
enormous company’s next move. News about Zara is constantly found within the headlines
of major newspapers. Recently, a report was released about Zara on Good Morning America
by Juju Chang to address the company’s lack to cater to the large plus size market within the
United States of America. The report titled: “America is too big for Zara” focused on the fact
that many investors believe that Zara is missing a major opportunity by refusing to offer plus
sizes in their stores. This mistake might allow competitors, such as H&M and Forever 21,
whom both offer a range of plus size garments, to become more profitable as they expand
their markets within the states (Chang).
On August 15, 2013 Rosalia Mera, co-founder of Zara, passed away at the age of 69.
Rosalia Mera died from a brain stoke that abruptly put an end to her vacation at a
Mediterranean island with her daughter (Martin). Rosalia Mera was labeled as the world’s
richest self-made woman as she dropped out of school at the age of eleven, marrying the love
of her life and co-founder of Zara, Amancio Ortega (Martin). Mera made a total of 600
million dollars from Inditex’s Initial Public Offering, which she later invested in an array of
organizations and companies (Martin). After Rosalia Mera’s death, her daughter, Sandra
Ortega inherited 5 billion euros of Zara stakes (Metcalf). Just like her mother, Sandra Ortega
soon became the richest woman in Spain (Metcalf). Even after such a sudden death, Inditex
still manages to expand itself, increasing its sales throughout the world.
Zara’s expansion is yet another hot topic for economists as they try to predict Zara’s
future as it begins to saturate the Asian markets. Zara yet again lived up and surpassed its
potential when China became its second largest market, holding 142 of its stores (Morris).
Jaouhari 9 Zara’s strong foundation, high levels of control and centralized management allowed Zara’s
sales to soar while other retailers fell behind, unable to crack through the Asian markets
(Berfield & Baigorri). Zara’s supply chain is definitely a comparative advantage; Zara places
high emphasize on speed and responsiveness and less importance on cost (Berfield &
Baigorri). Due to Inditex’s size and variety in brand, it was able to obtain the best locations
and stable rent throughout China, unlike its rivals (Morris). Also, Zara was the only retailer
that was offered a ten to fifteen year lease with an option to leave early. The average retailer
is usually given a three-year lease in China (Morris). Zara stands out from its competitors by
investing a large amount of its profit into its store image and eco-efficient system, which no
competitor has yet to meet.
Retailer’s Future
Zara has an array of strengths one of them being its abundant inventory that caters to each
of its international locations. It has globalized the ideal of fashion, allowing for better
responsiveness when tracking the up and coming fashion trends around the globe.
Another strength is its revolutionary distribution network, which has shrunk the average
nine month long lead-time to only two weeks (Hansen). Zara’s strong hand on control and
local partners has lead to a distribution system that has put the fashion industry at awe
(Hansen). In addition, during the past years, Zara has seen growth in its expansion as well as
revenues. Zara continues to expand into newer markets; recently it entered the Asian markets
(Morris). Also, Zara jumped into the e-commerce world, as it opened online store in about 16
different countries (Hansen). Zara is making the most it has ever made and hopes to stay that
way for many years to come. Some may view Zara’s zero advertising tolerance as a
downfall; however, due to the lack of advertisements, Zara is able to focus its capital on more
Jaouhari 10 promising investments, such as the expansion and remodeling of its stores throughout the
globe (Hansen). Zara allows its products as well as its customers to do the talking for them
(Hansen). This gives Zara a certain elite image, allowing the customers to come to them
rather than the reverse. Zara’s consumer centered management and readily available
customer service guarantees that only positive words could be said.
Aside from the strengths, Zara will also have to prepare for challenges to come. Now that
Zara has globalized itself, it will need to follow a rewarding strategy that will erase any
localized fashion taste in order to satisfy the large number of consumers existing throughout
the world. In addition, Zara will have to adjust its financial statement in order to prepare for a
rise in labor costs within the European region (Berfield & Baigorri). After Christian
Louboutin sued Zara for copying his red sole trademark during the past year, Zara has had to
alter its off the runway designs to avoid any copyright issues that may arise with other
designers (Waterlow). Any lawsuit could lead to Zara losing billions of euros in the future.
Finally, just as any retailer should, Zara needs to keep a close eye on its competitors.
Retailers, such as, H&M and Gap Inc., are utilizing Asia’s cheap labor force to provide their
consumers with products at much lower costs than Zara could offer (Morris). In addition,
these same competitors are inventing newer techniques to shrink their lead-time to better
compete with Zara (Morris).
Jaouhari 11 Works Cited
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Chang, Juju. "Fat Shaming of Middle America: Americans Too Big for Zara Clothes." ABC
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