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ZARA: Case Study Analysis

Article · September 2015

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 ZARA:
Case Study Analysis

KERUI LIU
17/09/2015
 Table of Contents
1. Introduction

2. Business Model Analysis

2.1 Identification of key success factors of Zara
2.1.1 Individuation
2.1.2 Limited
2.1.3 Designer
2.1.4 Data
2.1.5 Manufacture and Logistic
2.2 Discussion of key success factors of Zara

3 Product Management Process Evaluation

3.1 Compare and contrast Zara’s product management process with traditional new
product process
3.1.1 Opportunity identification and selection
3.1.2 Concept generation
3.1.3 Concept evaluation
3.1.4 Development
3.1.5 Launch
3.2 Evaluate Zara’s product management process and ‘New product process’

4 Market Application
4.1 HM
4.2 GAP
4.3 UNIQLO

5 Conclusion

6 References

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 1. Introduction
Zara is one of the most popular fast fashion brands which expand quickly in the

worldwide fashion market. This report aims to develop and analysis the case of Zara to

explore Zara’s successful legend in the fashion world. To begin with, the report is going

to analysis the business model of Zara to find the successful factors. In addition, it will

compare, contrast and evaluate Zara's previous and new product management process.

Last but not least, the report will discuss the market application of Zara's successful

product management process with brands HM, GAP, and UNIQLO.

2. Business Model Analysis

2.1 Identification of key success factors of Zara
The fashion director of LVMH said that Zara is the most devastating and innovative

retail brand in the world (John M. Gallaugher,2008). The product of Zara looks like

high-end fashion, but not expensive. The market of Zara cover 68 countries until now.

Why can Zara do this successful job? There are five main reasons. Firstly, Zara's design

is based on the demand of customer and meet people’s need of individuation. The

second reason is Zara provide the unique product by limited run and Zara always update

new product quickly in store. The third reason is Zara has young design team who are

passionate and innovative. In addition, Zara gather the data by PDA (personal detail

analysis) via store POS (Point-of-sale) system to analysis customer’s behavior. The last

reason is Zara's unique manufacture and logistic process (John M. Gallaugher,2008).

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 Individuation

Manufacture
Limited
& Logistic

Zara

Data Designer

Figure 1: Zara’s success factor

2.2 Discussion of key success factors of Zara

2.2.1 Individuation
Zara's most successful reason is it follows the fashion trend of individuation. In the

traditional fashion industry, firms often attract customers by produce lower cost and

similar product to gain a slender portion of the profit. However, they ignore the fact

that customers are willing to pay the higher price for the individuation product, they are

the target customers Zara looking for (Chua, J.,2015).

2.2.2 Limited
Zara has limited production runs, and it mainly have three benefits. Firstly, it can make

the product have the unique value, which can bring customers new store experience

every two weeks and people will rarely have the same clothing with others. Secondly,

it can make customers pay the full price for the product because not every product can

wait customers. Last but not least, limited production runs can reduce the risk of

collection mistakes and reduce the loss of stock (John M. Gallaugher,2008).

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 2.2.3 Designer
Zara's designer teams are mostly young, professional, passionate and creative (John M.

Gallaugher,2008). They often go to New York, London, Paris, Milan, Tokyo and other

fashion cities to learn the new fashion trend and collect the newest information of sells

conditions and customer feedbacks. Based on the report, Zara has more than 400

designers who are the typically ‘fly-man'. They often appear in Fashion shows or some

fashion events in Milan and Paris and shows in several fashion activities to observe and

collect the newest design concept and fashion trend (Smith, K. 2014). Normally, after

some top brand produces their product, Zara will launch the similar design soon. This

design method can make sure that Zara follow the fashion trend and make the brand

take the 35% of middle to high market share, which makes Zara become the top 100

famous fashion brands (Smith, K. 2014).

2.2.4 Data
Another key successful factor of Zara is their data collection in store. Zara has personal

digital assistants (PDA) to gather the customer information. Stuff often chat with

customers to collect the customer's suggestions, looking for feedbacks of products to

analysis the store's product performance (John M. Gallaugher,2008). PDA are linked to

the store's POS (point-of-sale) system, which can see the garment sell data and stock

conditions hourly online. The manager will order the product by PDA based on the data

collected in POS twice a week. By using PDA and POS, head office and store can

connect each other well in time. Zara's design always based on the demand of the

customer (John M. Gallaugher,2008). The sales data and customers demand will be

collected by every store and send to the head office. Then the designers can make design

based on customer's demand (John M. Gallaugher,2008).

2.2.5 Manufacture and Logistic

Zara can finish the design, manufacture and delivery within 15 days without the vertical

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 integration process, in-house manufacture and clear logistic system. Based on report,

over half product are produced in La Coruña, which can lower recycle time, reduce

error and finish the complex task (Smith, K., 2014). The trucks and flight serve are

designed for the optimal time and distance, which allow the product delivery in time

and frequently. It is worth to mention that Zara use the biodiesel for trucking. The

renewable energy system allows Zara to have a better performance in sustainable

development, therefor increase the reputation of Zara (Smith, K. 2014).

3. Product Management Process Evaluation

OPPORTUNITY
Direction: where
IDENTIFICATION
should we look?
AND SELECTION

Initial review: Is the

CONCEPT
idea worth
GENERATION
screening

Full screen: should

CONCEPT
we try to develop
EVALUATION
it?

Progress report:
have we developed
DEVELOPMENT
it? If not, should
we continue to try?

Market tasting:
LAUNCH should we market
it? If so, how?

Figure 2: The Evaluation Tasks in The New Product Process (C. M. Crawford, 2012)

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 • ZARA:Customer want the high-design
OPPORTUNITY
fast fashion&designers market rearch
IDENTIFICATION
AND SELECTION
• NEW: Generate, Research, Evaluate

• ZARA: PDA gather the customer input

and POS update in time
CONCEPT
GENERATION • NEW: Problem-solve Approach

• ZARA: Designer get feedback from

collages and team members
CONCEPT
EVALUATION • NEW:Evaluated, Screened, Sorted Out

• ZARA: In house manufacture &Limited

quantity production
DEVELOPMENT • NEW:Produced, Tested, Costed Out

• In-time transportation&Tight control of

stores by POS system & No reproduced
LAUNCH • NEW:Commercializ, Prototypes,Track

Figure 3: Zara’s product management process vs. New product process

3.1 Compare and contrast Zara’s product management process with

traditional new product process
3.1.1 Opportunity identification and selection
In new product process, the business will generate, research, evaluate and rank the new

product opportunities, new product suggestions, change in market plan, resources

change and new needs in the marketplace (C. M. Crawford, 2012). However, in Zara's

case, the opportunity identification is based on the need of customer, the trend and

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 elements in the high-end fashion show, and fashion event all over the word.

3.1.2 Concept generation

In new product process, business will select high potential opportunity and active

customer involvement. They will collect the new opportunity ideas by problem solve

approach and select the suggested solutions from problem-solving activities (C. M.

Crawford, 2012). However, in Zara's case, Zara’s personal digital assistants (PDA) will

gather the customer data and staff will chat with customers to collect feedbacks. For

example, if the customer doesn't like the color or the V shape collar, PDA will record

this feedback for the headquarter (where designers located), and designers will change

the product based on customer's need.

3.1.3 Concept evaluation

In new product process, the new ideas need to be evaluated, screened, sorted out before

been generated. The business will evaluate the product concept on technical, marketing,

and financial aspect (C. M. Crawford, 2012). Similarly, In Zara's case, designers will

get feedback from colleagues and team members to decide the new design project.

However, due to Zara is integrated vertically, the distribution center, design and

manufacture all located in La Coruña, which saves time between suppliers and

designers. As a result, the concept evaluation process is faster than other business.

3.1.4 Development
In new product process, the development includes resources preparation, and the

comprehensive business analysis, such as the financial analysis. The product stream

contains industrial design, bench work, prototype, product specifications and so on,

which mainly consists of produced, tested and costed out (C. M. Crawford, 2012).

However, in Zara's case, the in-house manufacture gives Zara higher speed and lower

recycle time. According to the research, 2.5 million items will be sent out weekly and

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 there is no item stay in stock over than 72 hours (Inditex.com, 2015).

3.1.5 Launch
In new product process, business will commercialize the plan and prototypes from

development phase, distribution, and manage the launch program to achieve the goal.

When product been launched, the track plan needs to be prepared carefully. New

product manager should implement the tracking plan, seeking to spot every glitch

during launch and prepared solutions (C. M. Crawford, 2012). Similarly, in Zara's case,

the clear logistic progress guarantees the in-time transportation. The POS system makes

sure the sell condition is tight controlled by the manager and headquarter. However,

most appeal business reproduce the most welcomed product, but Zara is different. They

just produce the new product once in limited quality as Zara aims to provide customer

new product experience rather than rely on the hot sale product (2015, Zara).

3.2 Evaluate Zara’s product management process and ‘New product

process’
The new product process often takes six to nine months for new product design and

manufacture, which requires the process of product evaluation, testing, and financial

analysis. Unlike other fashion brand, Zara saves the cost of advertising and sales cost

by using vertically integrated manufactured process (Günbal, B., 2015). Zara's fast

speed is benefit from the vertically integrated supply chain, in-house manufacture. The

data collected system of PDA and POS provide Zara a platform to control the sells

figure and contribute a better design to meet customers' demand. What traditional

business can learn from Zara is that they always make the limited amount of product.

Although Zara launches about 12000 styles each year, the amount of each product is

limited, including the hot sales items. ‘Buy more style, less quantity’. Zara breaks the

traditional product process, satisfied the needs of individuation, which gives them more

loyal fans.

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 4 Market Application
4.1 HM
HM is the second large fast fashion retailer in global fashion market. Compared with

Zara's, HM focuses on lower the product cost (Investide, 2014). HM has two supply

chain, one is in Europe (major in Turkey), which is in charge of the speed, while the

other one is in Asian, which is in charge of the quality and lower cost. As we all known,

HM is famous for the lower price daily wear (Zhihu, 2013). However, the major

problem of HM is the low quality. It is recommended that HM can use Zara's in-house

manufacture by tightly control the quality and improve the technical support. The in-

house manufacture can not only help HM improve the quality, but also help HM

decrease the cost and save time.

4.2 GAP
GAP focus on confident, simple, optimistic, courageous, inclusive, youthful, smart,

current, liberating, modern and classical American style. GAP's major style is simple

and basic (Gapinc.com,2015). However, due to the lack of fashion trend application, it

is hard to attract customer's eyes. The sale revenue is decreasing yearly based on the

report (Investide, 2014). As a result, in order to meet young customers' needs, it is

recommended that GAP can use young designers and apply trendy elements to improve

the design. Also, Zara's store data collecting model can be used for GAP to improve the

product, therefore, satisfying young customers.

4.3 UNIQLO
UNIQLO is a Japanese fast fashion brand, which famous for the comfortable fabric and

classical fashion style. UNIQLO focus on detail design, customer service, and technical

fabric. UNIQLO adopt Zara's successful business model by use the SPA (Specialty

Retailer of Private Label Apparel) model. SPA is a high concentrated business model

that vertically integrated the design, manufacture, logistic and launch, which can save

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 the time and reduce the cost (Tchcvs, 2013). Like Zara's store data collected system,

UNIQLO often gathers the suggestion from customer, store manager and customer

service center. The business will quickly adjust product design according to customers'

feedback (Tchcvs, 2013). It is recommended that UNIQLO can study Zara's limited

product strategy. So that it can provide customer new product experience frequently

and let the customer buy the product when the first sight, not waiting for the sales price.

Therefore, increase the sales revenue and reduce the cost of stock.

5 Conclusion
In conclusion, Zara breaks the rules of the fashion industry. Zara is successful in fast

fashion industry because they use the right business model, meet the individuation

requirement of customers, produce more styles but limited quantity, use young

designers, collected data by ADS, tightly control the sales condition by POS, in-house

manufacture process, and clear logistic system. Instead of traditional new product

process, Zara uses a vertical-oriented system that can faster the speed and lower the

cost. It is a win-win method as customers can catch the fresh fashion items and business

can obtain more profit. Inspired from Zara's successful story, companies can break the

traditional product process, therefore, improve their business performance.

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 6 References
John M. Gallaugher,(2008) Zara Case: Fast Fashion from Savvy Systems, [online]
Available at: http://www.gallaugher.com/chapters [Accessed 15 Sep. 2015].

C. Merle Crawford& C. Anthony Di Benedetto, (2012) New Products Management,

11th Edition, New York: Mc Graw Hill Education

Gapinc.com, (2015). Gap. [online] Available at:

http://www.gapinc.com/content/gapinc/html/aboutus/ourbrands/gap.html
[Accessed 15 Sep. 2015].

Smith, K. (2014). Zara vs H&M - who's in the lead? @EDITD compares the apparel
retail strategies. [online] EDITD. Available at:
https://editd.com/blog/2014/04/zara-vs-hm-whos-in-the-global-lead/ [Accessed
15 Sep. 2015].

Chua, J. (2015). Greenpeace Exposes Toxic Chemicals in Zara, Other Fast-Fashion

Brands. [online] Ecouterre.com. Available at:
http://www.ecouterre.com/greenpeace-exposes-toxic-chemicals-in-zara-other-
fast-fashion-brands/ [Accessed 10 Sep. 2015]

Zhihu (2013) Compared Zara with HM in fashion industry, [online] Available at:
http://www.zhihu.com/question/21459682/answer/18323701[Accessed 12 Sep.
2015]

Investide (2014) The Competitive Advantage Among ZARA, HM, QNIQLO and GAP.
[online] Available at: http://www.investide.cn/news/97221.html[Accessed 12 Sep.
2015]

Tchcvs (2013) The success factor of UNIQLO. [online] Available at:

http://ba.tchcvs.tc.edu.tw/application/100projects/pdf/paper/paper12.pdf[Accesse
d 12 Sep. 2015]

Günbal, B. (2015). Zara: Fast Fashion. [online] Slideshare.net. Available at:

http://www.slideshare.net/gunbal/zara-7936993 [Accessed 10 Sep. 2015].

Zara, (2015). Zara. [online] Available at: http://zarafashion2013.wix.com/zara#!brand-

position/c1q1p [Accessed 14 Sep. 2015].

Inditex.com, (2015). Zara - inditex.com. [online] Available at:

http://www.inditex.com/en/brands/zara [Accessed 15 Sep. 2015].

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 Smith, K. (2014). Zara vs H&M - who's in the lead? @EDITD compares the apparel
retail strategies. [online] EDITD. Available at:
https://editd.com/blog/2014/04/zara-vs-hm-whos-in-the-global-lead/ [Accessed
15 Sep. 2015].

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