Zara Case Study Answers

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Explain the data collected by Zara to predict the trend. What makes the middle aged mother to buy cloths in Zara while the daughter aged in mid 20s buys Zara clothing? Because it is fashion able and up to trend. By collecting data and focusing on shorter response times, the company ensures that its stores are able to carry clothes that the consumers want at that time. Zara can move from identifying a trend to having clothes in its stores within 30 days. That means Zara can quickly and catch a winning fashion trend, while its competitors are struggling to catch up.

Catching fashion while its hot is a clear recipe for better margins with more sales happening at full prices and fewer discounts. In comparison, most retailers of comparable size even smaller, work on timelines that stretch into 4-12 months. Thus, most retailers try to forecast what and how much its customers might buy many months in the future, while Zara moves in step with its customers. Unlike other retailers, Zara’s machinery can react to the report immediately and produce a response in terms of a new style or a modification within 2-4 weeks.

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Many other retailers have such long supply chain lead times that for them it would seem a lost cause those to even try and respond to sales report. In order to collect data, they also visit university campuses, discos and other venues to observe what young fashion leaders are wearing, from daily feedback from the stores and from the sales report. There are 200 designers who are the major players in the Zara creative beehive. They are not allowed to let anything get by them. They receive data from the boutiques on what is selling and adapt their products almost simultaneously with purchasing behavior.

They are also kept up to date on what is selling at the different designers from whom they draw their inspiration, in order to determine their pieces’ selling potential. Collecting vital information, such as daily sales numbers, allow designers to approximate what types of fashions are selling well. Thus, the designers have real-time information available when deciding which type of fabric, cut, and colors to use when designing new clothes or modifying existing ones. Information and inspiration comes from forecasting agencies, trade shows, and various other places.

Over a period of 3-5 months they are develop the ideas into physical samples. Data are collected at any time for forecasting trends. Zara largely concentrates its forecasting effort on the kind and amount of fabric it will buy. Similarly garment styling for Zara actually starts from the email or phone call received from the stores. Thus, from the beginning Zara is responding to an actual need, rather than forecasting for a distant future. Collecting information on consumers’ needs trend information flows daily, and is fled into a data base at office.

Designers check for these dispatches as well as daily sales numbers, using the information to create new lines and modify existing ones thus, designers have access to real-time information when deciding with the commercial team on the fabric, cut, and price points of a new garment. On the whole Zara believes in react rather than predict. Briefly explain the target market for the Zara’s product. 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. Zara started operations in Spain in 1975, and now operates in 74 countries worldwide. Basically, Zara target market is people from teens to adult, men and women. Zara’s target market is a young, educated one that likes fashion and is sensitive to fashion.

Today people around the world through various communication devices have more access to information about fashion. Therefore, fashion has globally standardized and Zara uses these advantages by offering latest in apparel. For that reason, most of all the products Zara offers globally are relatively standardized fashionable products. In terms of marketing costs, Zara relies more on having prime retail locations than on advertising for attracting customers into its stores. It spends a meager 0. 3 per cent of sales on advertising compared to an average of 3. of competitors according to the company, choosing highly visible locations for its stores renders advertising unnecessary. Zara provides following options to its targeted market:- 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 (whereas most retailers take 4-12 months).

This is made possible by controlling almost the whole garment supply chain from design to retail. Large choice of styles Zara produces around 1000 new styles every month, 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. 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 is not much to be disposed when the season ends; Zara only discounts 18% of its stock in sales, which is half the industry average. Explain the strategies adapted by Zara to keep the cost low. Zara owns their own production house in Spain where they produce all their goods. Even while manufacturing in Europe, Zara manages to keep its costs down. None of its assembly workshops are owned by the company.

Most of the informal economy workers the workshops employ are mothers, grandmothers and teenagers. Last year the average monthly salary of a Spanish industrial worker was about 250,000 pesetas – $1,300 a month, excluding the state’s 30. 8 percent charge for social contributions. Girls looking to add their household incomes in the small towns and villages where they live in. In comparison with other clothing retailers, who spent 3-4 per cent of sales on advertising, Zara spent just 0. 3 per cent. The little it did spend went to reinforce its identity as a clothing retailer that was low-cost but high fashion.

Zara’s cuts in advertising investments reduce total expenses, which make the international expansion more economical. This also signifies that Zara relies mainly on its stores to project their image. Zara most importantly wants to create desires among customers and make them come back.. They have just in time production which helps to keep the cost low. Vertical integration, a distinctive feature of Zara’s business model, has allowed the company to successfully develop a strong business strategy. This strategy as led Zara to create a climate of scarcity and opportunity as well as a fast-fashion system. Traditional retailers lack this flexibility. Traditional retailers are obligated to place production orders to manufacturers overseas at least 6 months in advance of the season. Zara’s fantastically integrated supply chain has enabled them to deliver on their positioning and promise to offer affordable, trendy clothes to its fashion conscious target market in quick time. With Zara you don’t have to be a millionaire to look like a million dollars.

Zara’s global strategy is to offer cutting edge fashion at affordable prices by identifying which styles are “hot” at fashion shows and moving simulations into production even before the original designer can. This is made possible by exerting a strong influence over almost the entire garment supply chain from design to retail. Zara only spends about 0. 3% of their revenue on promotion. This would be the reason Zara does not appear on television or poster advertisements. Zara focuses heavily on their product, place and pricing as opposed to promotion.

Zara rarely advertises any store sales or have sales promotions other than sale items unlike other retailers. It is also interesting to note that Zara never places their brand or logo on their products. It is their innovative products and affordable pricing that keeps customers returning to their store. Their products seemingly advertise it. In addition, Zara has remarkable logistics and they are able to get a product from design to the shelf in just two weeks. With such efficiency, they are able to produce thousands of new designs a year.

In fact, Zara produces new products every week as said on their website. Zara is known for their fast fashion, which means popular products may disappear off the shelf within days, forcing customers to constantly check for new items. Elaborately explain how information and communication technology is adding to the success of zara. Zara’s information and communication protocols are significantly different . Zara spends less than 0. 5% of total revenue on IT and IT employees account for only 0. 5% of Zara’s total workforce.

Zara utilizes human intelligence (from store managers and market research) and information technology (such as their PDA devices) in order to have a hybrid model for information flow from stores to headquarters. For example, managers at Zara stores use handheld devices to send standardized information regarding customer feedback and ordering needs directly to in-house designers. This not only keeps Zara’s designers informed of fast-changing customer trends and demand, but also provides the company with insight on less-desirable merchandise.

Unlike Zara’s hybrid model (which incorporates human intelligence and IT applications), competitors rely almost completely on information technology. Zara’s unique approach of human intelligence assisted IT solutions results in well-managed inventories, linkages between demand and supply, and reduced costs from obsolete merchandise; however, there is still room for improvement in their IT processes to realize more effective management of inventory levels.

Hence, the hybrid information and communication system that Zara uses provides cost advantages to Zara’s operations and helps to abide by their fundamental principle to have the ability to rapidly respond to changes in consumer demand. Zara’s concept, capabilities, and value drivers, as demonstrated through their business model, have proven to be extremely successful. Their resistances to outsourcing, concentration on core operations and production capabilities, and focus on the pulse of fashion have made them one of the most successful clothing retails.

Communication Strategy: its weekly shop windows. Zara relied on its shop windows to communicate its brand image. They are elaborated in Spain every week and have to be the same in all shops. This choice of an almost non-existent communication makes them save a huge budget in order to invest in real estate. The stores have the best location possible which is crucial they must be seen, accessible and in places known for shopping to keep a direct relation with consumers. It is extremely important for Zara to speed the information flow of consumer desires to their apparel designers.

For that reason, Zara has human resource teams in the retail and manufacturing environment that work exclusively toward this goal. In the manufacturing environment, Zara’s product development teams are responsible for attending high-fashion fairs and exhibitions to translate the latest trends of the season into their designs. Also throughout the season, Zara’s product development teams are constantly researching the market by traveling to universities, and clubs around the world to track customer preferences.

Additionally, the young, fashionable, and international staff helps to interpret the desire of the moment. In the retail environment, Zara’s managers and sales associates are in charge of transmitting the sales analysis, the product life cycles, and the store trends to the designers. This allows the designers in Spain to develop the right products within the season to meet consumer demand. The transfer of this communication is also accelerated by IT software that is specifically designed for Zara’s diverse business.

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