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Introduction

Accurately predicting consumer demand along with the capability to rapidly react and re-

adjust to environmental changes including demand and supply fluctuations differentiates the

market leaders in today’s business environment. In order to ensure that these companies

perform well in this highly competitive environment, they must continually improve their

people, processes and technologies to create a competitive advantage. Most organizations,

today, need to extend beyond the boundary of the enterprise functions and come up with

innovations which help foster the growth and sustenance of the enterprise.

In the current scenario, process innovation seems to dictate the success of organizations.

Process innovation basically refers to the change in the technique of delivery, processes or

even the implemented software systems. Process innovation however tends to be more

important as compared to product innovation. These innovations tend to have some unique

characteristics which make them more important as compared to other forms. This can be

attributed to the fact that innovations in the firms’ processes might not always be visible to

competitors. Process innovations usually remain relatively hidden. Also, copying business

model innovations is extremely difficult as compared to product innovations. Process

innovators focus on changing how something is done, and not on what is done. Zara serves as

a prominent example of a company which has revamped the way it operates through

innovations in its process.

Zara

Zara is the oldest and biggest brand of the wildly successful fashion company, Inditex. It is

probably the most creative and innovative retailer in the world. When most of the players in

apparel industry were giving up the control over production facilities, Zara retained its

control over production and also enhanced its designing processes. As it makes cloths for

itself, it can quickly respond to the dynamically changing market demands. The company’s

success lies in owning every part of its business. Apart from the vertical integration model, it

also allows various customers to provide direct feedback which is analysed and further

worked upon to improve operational efficiency. Zara has also optimized its production

process to suit the company strategy of agility towards market demands.

It has a fast turnover model termed as ‘Ramp to Rack’ strategy which allows it to understand

the market and analyze the success trends. It takes the latest catwalk designs and converts

them into affordable fashion in no time. Based on the established success trends, the new

designs are explored. This also reduces the costs of carrying inventory and other associated

risks of over production. In spite of being a prominent global brand Zara adopts a zero

advertising model which in turn helps it achieve its low cost goals. It has a very strong

distribution network which also complements its continuous innovation.

There are basically five steps involved in Zara’s model of Ramp to Rack.

Zara’s design team monitors the fashion trends and store sales across the stores. Based on

these, they come up with around 1000 designs per month. These involve tweaking with the

most popular catalogues to bring in something new and refreshing

These new designs are sent out for manufacturing in all the factories located around the world

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All the completed designs are shipped back to Spain

The local store managers in each country tell the Zara head office in Spin about their

requirements that is, what they need and how much.

The design team in Spain then flies out consignments for each of Zara’s 1608 stores based on

the local needs and trends observed. A store on an average gets the consignments twice a

week.

In this case, the IT system comes into play. Zara has managed its internal IT system very well

and each store is connected to the head office in Spain via which the demand is delegated to

the designers. Also, it enables the feedback from the customers reaching quickly to the

designers which can be further analyzed and the changes in the designs can be made

accordingly.

Their ability to bring the changing fashion quickly to the market has enabled them to steer the

market according to their convenience. The customers in Europe prefer to visit Zara’s stores

17 times on an average as compared to 3 for other fashion brands. Many competitors have

tried to emulate Zara’s successful business model but have failed miserably. This is primarily

due to the secretive nature of the company. Zara has managed to cross boundaries with ease

and has presence in around 77 countries of the world including China.

Inditex, the parent company of Zara, is betting big on India. It might be one of the most

challenging markets to enter owing to diverse factors.

Zara in India

Zara opened its first store in Delhi followed by Mumbai in July 2010 and added 2 more stores

in Delhi and Bangalore respectively. Zara expanded in other markets but this was not the case

in India. Here, Zara followed an experimentation based approach where if successful, it

would expand in the market. If it failed, it would have to review its strategy of penetrating the

Indian market. Even the history did not favour Zara’s entry into the Indian market. Most of

the global brands which entered the Indian market failed to build a strong franchisee based on

import led premium pricing strategy. So, it was a challenge for Zara to establish itself in

India.

Zara’s design team would observe the trends in India and based on these, would send the

designs to the factories. These designs are then sent to Spain from where they are shipped to

the stores. This strategy worked in most countries, but in India, it would be very difficult to

succeed. The two-way shipping of designs and the consignments meant added cost which

would add a premium to the brand. Though Zara has been portrayed as a premium brand in

India, the easy way to succeed has been achieved by targeting the middle class population.

Zara has received enthusiastic welcome from the upper class that sees its products as a

fashion statement.

Zara’s business model would be tested in India on three counts.

Non-existent seasonal variation. In India, it is very difficult to drive season based sales.

Winter lasts mostly for a month or two and the people prefer to continue with the summer

collection in other seasons as well.

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The mall culture has grown rapidly in India. The buying habits of the customers have

changed, but still it does not reflect in their wardrobe. Indians are not well known for their

affinity for clothes as it hardly exists. Zara’s success model is much based on the scale of

operation. So for Zara, it is of immense importance that the footfalls increase

Indians like western dresses but even now, the wardrobe is dominated by the traditional

dresses. The colour choices also vary in India as compared to the rest of the world. Indians

prefer a wide array of colours including bright ones while in the west; it is mostly black,

white and browns.

Zara has entered the Indian market in a joint-venture with the Tata group and the company is

known as Inditex Trent. Zara, in India had an opening which not many foreign brands can

boast of. The sales figures in Delhi as well as Mumbai had been in excess of 10 million and it

even managed to increase the footfalls in the malls where its stores were located. Zara has

managed to charm the Indian customers due to the international look of its stores as well as

the collection it carries without having the higher prices generally associated with foreign

brands. The pricing has been strategic keeping the long-term goal in mind.

The biggest issue that Zara might face in the near future would be the added cost of shipping

the designs from the factory to Spain and then to the respective stores. Also, the change in

demand pattern in Asia and synchronising it with the head office in Spain would be a

daunting task as the number of stores increases.

Recommendations

Based on the visible trends in the Indian market, it is necessary for Zara to adjust to the

current scenario. It is a brand that has been received very well in India, and Zara should try to

build on that. According to the patterns, Zara can go ahead with the following options.

After the initial success in Delhi, Mumbai and Bangalore, demand has risen in other tier-1

cities as well. Due to absence of stores, they need to settle down with other brands. So, Zara

should focus on opening more stores in these cities

Manufacturing has been a major concern. As of now, everything goes back to Spain and then

delivered to the stores. The need of the hour is to manufacture in India and deliver it directly

to the stores. This will greatly reduce costs which can be used to improve the process and

open up more stores

A major step forward can be introduction of new product line. This would focus on the

traditional India wear which most of the major foreign brands have failed to capture

Another feather in the cap can be a toned down brand which would cater to the middle class.

This would enable the middle class to have an experience of the latest trends in the global and

Indian fashion industry at affordable costs. The brand value of Zara should not be diluted at

any cost as this has been the differentiating factor from the competitors

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References

http://articles.economictimes.indiatimes.com/2013-02-05/news/36764732_1_amancio-ortega-

gaona-spanish-brand-indian-unit

http://www.businessinsider.com/how-zara-is-changing-fashion-forever-2012-11

http://www.fashionunited.in/news/fashion/the-zara-aura-spreads-in-india-110520112005

http://www.forbes.com/2010/07/29/forbes-india-zara-business-model-tweak.html

http://www.just-style.com/comment/can-indian-fashion-firms-shape-up-to-

zara_id108042.aspx

http://www.managein.net/bk_issue/abst_5_4.htm

http://www.multinationalsolutions.telefonica.com/en/telefonica/case-studies/inditex-group-

%28zara%29.aspx

http://www.nytimes.com/2012/11/11/magazine/how-zara-grew-into-the-worlds-largest-

fashion-retailer.html?pagewanted=all&_r=0

http://www.theatlantic.com/business/archive/2012/11/zaras-big-idea-what-the-worlds-top-

fashion-retailer-tells-us-about-innovation/265126/

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