Reference no: EM13184425
Zara, the largest fashion retailer in Europe, has been described as "possibly the most innovative and devastating retailer in the world." The company makes nearly all its clothing in its own workshops and factories, including designing, fabric dyeing, tailoring, and ironing. Just about all the clothing is produced in
Arteixo, Spain, where Zara operates 14 factories connected by tunnels to a giant distribution center. In a matter of hours, that center fills up with clothing. Zara's retail shops and clothing factories communicate through a sophisticated feedback mechanism for gathering market intelligence and putting it to work. Sales associates carry personal digital assistants to relay information on fashion trends and customer demand back to the company's team of 200 designers in Spain. Real-time sales data allow the factory to increase production of items that are selling and to bring out similar designs. By doing everything in-house, Zara avoids the delay involved with manufacturing in a low cost
country such as China. Direct shipments from factory to shops also eliminate the need for costly warehouses. Zara takes as little as two weeks to develop a new item and deliver it to one of its more than 1,000 retail stores. The industry average is nine months. The company launches about 10,000 new designs a year, making new items in small batches at first; so, if something doesn't sell, there is not much left over. But if something catches on, stores can restock in a few days, so Zara doesn't miss out on a fashion wave. Thus, shops never have to wait long for fresh stock or to get an order filled. Whereas traditional stores such as the Gap may get new fashions twice a season, Zara distributes them twice a week. And in perhaps its most unusual of strategies, the company advertises little, relying instead on prime store location and word of mouth. What is special about Zara? Could this model be used effectively elsewhere? Do you predict increased sales or inevitable decline? Relate this model to our discussions of issues of product differentiation, quality control and consumer preferences.
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