Case Application – Fast Fashion

(10 marks)

Please read the following case application and answer the question posed at
the end of case:

When Amancio Ortega, a former Spanish bathrobe maker, opened his first Zara clothing
store, his business model was simple: sell high-fashion look-alikes to price conscious
Europeans. After succeeding in this, he decided to tackle the outdated clothing industry in
which it took six months from a garment’s design to consumers being able to purchase it in a
store. What Ortega envisioned was “fast fashion”— getting designs to customers quickly.
And that’s exactly what Zara has done!
The company has been described as having more style than Gap, faster growth than
Target, and logistical expertise rivaling Walmart’s. Zara, owned by the Spanish fashion retail
group Inditex SA, recognizes that success in the fashion world is based on a simple rule—get
products to market quickly. Accomplishing this, however, isn’t so simple. It involves a clear
and focused understanding of fashion, technology, and their market, and the ability to adapt
quickly to trends.
Inditex, the world’s largest fashion retailer by sales worldwide, has seven chains: Zara
(including Zara Kids and Zara Home), Pull and Bear, Massimo Dutti, Stradivarius, Bershka,
Oysho, and Uterqüe. The company has more than 6,340 stores in 87 countries, although Zara
pulls in more than 60 percent of the company’s revenues. Despite its global presence, Zara is
not yet a household name in the United States, with just 45 stores open, including a flagship
store in New York City.
What is Zara’s secret to excelling at fast fashion? It takes approximately two weeks to
get a new design from drawing board to store floor. And stores are stocked with new designs
twice a week as clothes are shipped directly to the stores from the factory. Thus, each aspect
of Zara’s business contributes to the fast turnaround. Sales managers at “the Cube”—what
employees call their futuristic-looking headquarters—sit at a long row of computers and
scrutinize sales at every store. They see the hits and the misses almost instantaneously. They
ask the in-house designers, who work in teams, sketching out new styles and deciding which
fabrics will provide the best combination of style and price, for new designs. Once a design is
drawn, it’s sent electronically to Zara’s factory across the street, where a clothing sample is
made. To minimize waste, computer programs arrange and rearrange clothing patterns on the
massive fabric rolls before a laser-guided machine does the cutting. Zara produces most of its
designs close to home—in Morocco, Portugal, Spain, and Turkey. Finished garments are
returned to the factory within a week. Finishing touches (buttons, trim, detailing, etc.) are
added, and each garment goes through a quality check. Garments that don’t pass are
discarded while those that do pass are individually pressed. Then, garment labels (indicating
to which country garments will be shipped) and security tags are added. The bundled
garments proceed along a moving carousel of hanging rails via a maze of tunnels to the
warehouse, a four-story, 5-million-square-foot building (about the size of 90 football fields).
As the merchandise bundles move along the rails, electronic bar code tags are read by
equipment that send them to the right “staging area,” where specific merchandise is first
sorted by country and then by individual store, ensuring that each store gets exactly the
shipment it’s supposed to. From there, merchandise for European stores is sent to a loading
dock and packed on a truck with other shipments in order of delivery. Deliveries to other
locations go by plane. Some 60,000 items each hour—more than 2.6 million items a week—
move through this ultrasophisticated distribution center. And this takes place with only a
handful of workers, who monitor the entire process. The company’s just-in-time production
(an idea borrowed from the auto industry) gives it a competitive edge in terms of speed and
flexibility.
Despite Zara’s success at fast fashion, its competitors are working to be faster. But
CEO Pablo Isla isn’t standing still. To maintain Zara’s leading advantage, he’s introducing
new methods that enable store managers to order and display merchandise faster and is
adding new cargo routes for shipping goods. Also, the company recently announced that it’s
developing a new logistics hub that will be able to distribute almost half a million garments
daily to its stores on five continents. Zara’s CEO says that this new facility will lay the
groundwork for continued rapid expansion worldwide. And the company has finally made the
jump into online retailing. One analyst forecasts that the company could quadruple sales, with
a majority of that coming from online sales.

Q . How might SWOT analysis be helpful to Inditex executives? To

Zara store managers?