ZARA: FAST FASHION

AGENDA

Industry Overview

Zara Overview

Zara Supply Chain

Zara Challenges

Recommendations

INDUSTRY OVERVIEW

• High Demand Uncertainty• Push vs. Pull Method• 30% of world production exported from developing

countries

• Geographic Differences• Per capita spending and preferences different in any

given market

INDUSTRY OVERVIEW: COMPETITION

Gap, Inc. H&M Benetton Zara

Production Outsourced Outsourced In-House40% In-House

60% Outsourced

Production

Lead TimesHigh High High Low

Net Margins -.06% 9.6% 7.05% 10.47%

INDUSTRY OVERVIEW: POSITIONING

Fashion - Fashion +

Price -

Price +

ZARA

H&M

Gap

Benetton

ZARA OVERVIEW Owned by Inditex (Industria

de Diseno Textil)

Largest of 6 Inditex Chains

500 stores in 30 countries

For women, men, and youth

From infants to age 45

Zara starts with “Z”

Zara

Massimo Dutti + Bershka+ Pull and Bear +

Stradivarius + Oysho

$2,153

$782

$0

$500

$1,000

$1,500

$2,000

$2,500

Sales

('00

0,000

's)

Zara vs. 5 other Inditex Chains (2001 exchange rate: 1.15 Euro=$1)

The “yoo-goo-goo-lizer” –you know, the guy that speaks at funerals!

ZARA OVERVIEW: ADVANTAGES• Vertical Integration

• Quick Response to Demand (Pull System)

• Small Batch Production

• High Product Turnover

• Central Distribution Center / Strong IT System

INDITEX MANAGEMENT /

DESIGNERS

Determine apparel designs and

manufacturing locations

IN-HOUSE (40%)

High QRHigh Cost

EUROPE / N. AFRICA

(40%)

High QRHigh cost

ASIA(20%)

Low QRLow Cost

DISTRIBUTION CENTER

Increased shipment frequency increases QR

Small batch production lowers cost of demand

uncertainty

STORES

Decentralized store management supplements

QR

Managers determine products to sell and return

IT SYSTEMS

Provides accurate demand information to

determine manufacturing locations

and production levels

Manufacturing

Design SaleDistribution

System is designed for short productioncycles, quick response (QR) to demand,

and reduced number of markdowns

Returns from stores either rerouted or disposed of in local stores near dist. center

ZARA OVERVIEW: SUPPLY CHAIN

ZARA CHALLENGES

Aggressive growth strategy needed 76% of equity value based on future growth expectations

Need to maintain competitive advantages in new geographic markets Data collection, Quick response, High product turnover, Strong

IT System

RECOMMENDATIONS

Short-Term Solution: Expand in Europe Focus on Italy (63 Billion Euro Market) Implement “Oil Stain” expansion method

Long-Term Solution: Expand Outside of Europe Establish operations in North America North American Distribution Center (Mexico) Initially focus on coastal cities Implement “Oil Stain” expansion method

Culturally Diverse Management Team

Q & A