research for business model/zara/tehran university/MBA 2014

1. www.magenta.house

2. Zara is a Spanish clothing and accessories
retailer which Amancio Ortega opened its first
Zara store in 1975 in a central street in
downtown La Coruña, Galicia, Spain.
www.magenta.house

3. Who is the customer?
Zara’s target market is young, price-conscious,
and highly sensitive to the latest fashion
trends. They have an advantage over
traditional retailers because they do not define
their target by segmenting ages and lifestyles
giving them a much broader market.
They segment their product line by women’s
(60%), men’s (25%) and the fast growing
children’s (15%) department.
www.magenta.house

4. Three Steps to success
There are three steps to being
a successful fashion company
Step one:
Make clothes that people want to wear.
Step two:
Sell enough clothes for more than you
made them.
Step three:
Do it again, and again, and again.
www.magenta.house

5. Fashionable, affordable clothes
Zara’s strategy is to offer cutting edge fashion at
affordable prices by following fashion and identifying
which styles are “hot”, and quickly getting the latest
styles into stores. They can move from identifying a
trend to having clothes ready for sale within 30 days
(where as most retailers take 4-12 months). This is
made possible by controlling almost the whole
garment supply chain from design to retail.
www.magenta.house

6. Large choice of styles
Zara produces around 12,000 styles per year (compared to
the retail average of 3,000), which means that fresh fashion
trends reach the stores quickly. A typical Zara’s customer
visits the store 17 times a year compared to the average of 3
times per year. This high number of styles also means that
the commercial teams have more chances to find a winning
style.
www.magenta.house

7. Scarcity
By reducing the manufactured quantity of each
style, Zara creates artificial scarcity and lowers
the risk of having stock it cannot sell.
Scarcity in fashion increases desirability, which
means shoppers need to buy quickly as the
item may not be available next week.
Lower quantities also mean there are not
much to be disposed when the season ends;
Zara only discounts 18% of its stock in sales,
which is half the industry average.
www.magenta.house

8. Prime locations
Zara spends relatively little on advertising
(0.3% of revenue) compared with traditional
retailers (3-5%), instead they reach their target
market by locating their stores in prime town-
centre locations.
www.magenta.house

9. How do they deliver it?
Most retailers outsource production to low cost Asian
countries. In contrast Zara is vertically integrated with the
majority of production carried out in owned or closely
controlled facilities in Spain. This gives a lot more flexibility
and speed however it means higher costs.
Stores place orders twice per week and the supply of
finished goods is matched to store demand. Production is
then increased or decreased in the flexible production
facilities. Demand based production means there is very
little inventory in Zara’s supply chain, which results in much
lower working capital requirements.
Deliveries typically arrive one to two days after ordering
with most deliveries arriving by truck from the Spanish
factories. Clothes are then put straight onto the sales floor
and are available to purchase.
www.magenta.house

10. Zara Project Strategic Plan
Vision of Business
- High Quality
- High Fashion
- Superb Service
www.magenta.house www.magenta.house

11. Value Proposition
We will provide convenience
Excellent customer service
Online shopping
Home delivery
Zara Project Strategic Plan
www.magenta.house

12. Target Markets
Middle to upper class
25-40 age range
Similar to that of Nordstrom or Banana
Republic
Zara Project Strategic Plan
www.magenta.house

13. Potential locations
Bellevue ( somewhere near Bellevue Square).
Downtown Seattle.
Zara Project Strategic Plan
www.magenta.house

14. Size of Stores
Depends on Location
Downtown Seattle = Bigger
Bellevue Square = size of any normal boutique
in that area
Zara Project Strategic Plan
www.magenta.house

15. Marketing Approach
Billboards
* Downtown Seattle
* Bellevue Area
Catalogs/ Magazines
* Vogue, Glamour, Cosmopolitan, etc.
Television and Radio
Zara Project Strategic Plan
www.magenta.house

16. Ownership
Sole Proprietorship
* A non-incorporated business entirely
owned by one person.
Zara Project Strategic Plan
www.magenta.house

17. Financial Arrangements
Combination of:
* Bank Loans
* Investors
Zara Project Strategic Plan
www.magenta.house

18. Suppliers
Zara Company – to maintain brand name.
Other suppliers could be taken on later.
Zara Project Strategic Plan
www.magenta.house

19. Management Organization
Flat hierarchy organization
Fewer levels of management (3-4 levels at
most).
Centralized chain of command.
Zara Project Strategic Plan
www.magenta.house

20. Business Growth
Start out moderate in size then gradually
expanding.
As store grows, multiple openings of Zara
stores all over the west coast.
The next logical location would be Portland
then moving south into California.
Zara Project Strategic Plan
www.magenta.house

21. Designing and producing
 Designing and producing brand new fashion
with consideration of costumer's taste
 Pioneering in imitating others and offering
cheaper price
 Reducing the period of 6 months of
presentation to 2-3 weeks
 Having lots of shops throughout the world
 Production based on market's demand
www.magenta.house

22. Selling low price products in luxurious shops
Short risk of rejection by the costumers
Compensating high costs of production by
flexibility and avoiding extra production (no
excess inventory lying around)
Respecting the costumers in their own
particular way
Designing and producing
www.magenta.house

23. Designing and producing
Changing customers' taste and making them
impulsive buyers
Variability of productions (clothes, accessories,
home accessories, etc.)
Not relying on advertising, yet, investing
heavily on the Beauty, historical appeal and
high location of its shops.
The campus includes Inditex's headquarters.
www.magenta.house

24. Disadvantages of Fast Fashion
 It is unsustainable. It has short product life
cycle.
 It is unsustainable. It has short product life
cycle.
The focus largely lies on imitation of original
products which misleads the customer.
Those who are aware of this replication or
who have lack of fashion consciousness
wouldn't suffer, but those interested in
purchasing original brands are deceived by
these fast fashion trends.
 The retailers make closest copies of the
original which involves reputation risk and
using lowest cost labor amounts to labor
exploitation making it an ethical issue.
www.magenta.house

25. Disadvantages of Fast Fashion
 There is also scarcity experienced of
qualified personnel in manufacturing
garments.
 There is a tough competition due to low-
cost producers. These retailers use more
style, take less time in producing the
garment and have rapid delivery.
 Another negative aspect of fast fashion is, it
stands against costume designing. Both are
closely related to each other but costume
designing has got hardly any recognition as
compared to (fast) fashion designing.
www.magenta.house

26. Spain: 335 stores (159 with Zara Kids)
France: 115 stores (4 with Zara Kids)
Italy: 87 stores (12 with Zara Kids)
China: 77 stores
Japan: 68 stores
United Kingdom: 65 stores
Germany: 64 stores
Portugal: 61 stores (21 with Zara Kids)
Mexico: 51 stores
Russia: 51 stores
Greece: 48 stores (6 with Zara Kids)
United States: 48 stores
Poland: 33 stores
Brazil: 31 stores
South Korea:30 stores
Turkey: 29 stores
Belgium: 27 stores
Saudi Arabia: 24 stores
Canada: 19 stores
Israel: 19 stores
Netherlands: 18 stores
www.magenta.house

27. Zara Positioning
"Zara is possibly the most innovative retailer in the world."
www.magenta.house

28. www.magenta.house

29. Mehdi Karimi
Nasrin
Poorghafur
www.magenta.house