S6 Case - Zara in China and India

SMU300
ZARA IN CHINA AND INDIA
Flogging fashion is like selling fish. Fresh fish, like a freshly cut jacket in the latest colour, sells
quickly and at a high price. Yesterday’s catch must be discounted and may not sell at all.
Amancio Ortega, founder, Inditex1
Amancio Ortega, the visionary founder behind Zara’s stupendous success, was now 81 years old.
Starting from scratch, his net worth stood at US$85 billion in 2017, making him one of the wealthiest
people in the world. Despite stepping down as chairman in 2011, he continued to visit the office
every day.
In 2016, Inditex as a group with worldwide sales of US$24.9 billion, and Zara, as its flagship retail
concept store, had recorded significant year-on-year growth in net sales at 11.5% and 13%
respectively.2 The Group had posted a 10% growth in its net profits, in contrast to the declining
numbers of its key competitors, such as Hennes & Mauritz (-10.8%) and Fast Retailing (-22.6%).
Despite a presence across 93 countries, Inditex’s regional sales contributions were skewed. Europe,
comprising only 26% of the global apparel market and exhibiting declining growth, accounted for
60.8% of Inditex revenues. The Americas, the second largest market in the world with a 30% share,
had the least contribution at 15.3%, and Asia Pacific, the fastest growing and largest market with a
36% share of the global apparel market, contributed only 23.9%.
Zara’s atypical tactics of no advertising, high impact stores, frequent introduction of new collections,
just-in-time inventory, and close monitoring of consumers’ buying preferences had led the company
to develop what was dubbed “fast fashion” in the apparel industry (refer to Appendix for details on
this strategy). Observing this trend, Daniel Piette, Chairman of LVMH Investment Funds, noted,
“Zara is possibly the most innovative and devastating retailer in the world.”3
Consistent with Zara strategy, and unlike other apparel producers, the company manufactured 60%
of its merchandise in the ‘near markets’ of Europe and North Africa, close to its logistics centres in
Spain. The labour costs in these markets were substantially higher than in Asia, where the bulk of
global apparel production took place. Would this put Zara at a disadvantage in reaching out to the
high growth Asian consumer markets of China and India, as the stores in these countries were located
far away from the factories and the centralised distribution centres?
Moreover, the growth of online retail in the fashion industry had resulted in many firms, such as Gap
and Walmart, closing down their physical stores or slowing down the opening of new stores. While
Zara had been online since 2010, its online sales in 2016 accounted for only 7% of its total sales.
This case was written by Professor Nirmalya Kumar, Dr Sheetal Mittal and Havovi Joshi at the Singapore Management
University. The case was prepared solely to provide material for class discussion. The authors do not intend to illustrate either
effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying
information to protect confidentiality. This case was developed with the support of the Retail Centre of Excellence (RCoE).
Copyright © 2018, Singapore Management University Version: 2017-06-08
This document is authorized for use only in Nirmalya Kumar's Advanced Marketing Strategy (Term 5 Block 27) - 2023 at BITS School of Management (BITSOM) from Oct 2023 to Nov 2023.
SMU-18-0003 Zara in China and India
This lagged considerably behind the apparel industry’s online share of 14%. 4 As consumers
increasingly shopped online, would Zara, with its reliance on stores and impulse purchases, become
another retail casualty of e-commerce? Or was its strategy powerful enough to sustain the historical
double-digit growth in revenues?
The Global Retail Apparel Industry
In 2016, the global apparel and footwear market was valued at US$1.7 trillion, of which apparel
contributed a 79% share, with Womenswear at US$630 billion, Menswear at US$414.2 billion and
Kidswear at US$157.7 billion.5 In the period after the 2008 global economic recession, the apparel
industry maintained a CAGR of 2% until 2016, when it dropped to 1%, largely on account of subdued
demand in Europe.6
Regionally, Asia Pacific had grown exponentially since 2008, exceeding both Europe and North
America, to account for US$594 billion in sales in 2016 (refer to Exhibit 1 for region-wise shares).
While China along with the US dominated the industry with a combined 70% market share, emerging
markets such as India were growing rapidly at a cumulative annual growth rate (CAGR) of 7%. In
comparison, Western Europe had contracted significantly and sales had declined by US$63 billion
from 2002 to 2016.7 A June 2017 study by Euromonitor forecasted,
While the global apparel sales would rise by US$156 billion from 2016 to 2019 (measured in
current prices) - eight times the annual turnover of the world’s largest apparel corporation,
H&M Hennes & Mauritz AB, which generated USD19.8 billion in sales in 2016 - it would be
unevenly distributed, with six countries namely China, the US, India, the UK, Russia and Mexico
accounting for two-thirds of it.8
The apparel industry was highly labour intensive, employing 24.6 million workers globally in
manufacturing in 2014. Availability of cheaper labour drove the manufacturing operations to be
increasingly outsourced to developing markets, while the knowledge-intensive parts such as creation
of designs remained in the developed world. In 2014, the bulk of production took place in Asia, with
China as the largest exporter of apparel in the world at 36.5%, followed by India, at 5.3% (refer to
Exhibit 2 for the top apparel exporters globally).9
The industry had different retail channel formats: specialty retailers, departmental stores, mass
merchandisers, and warehouse clubs; of which, the specialty retailers, such as Benetton, C&A, H&M,
Uniqlo, Gap, and Next, had the highest share at 50% in 2016. However, the landscape was getting
redefined by the increasing penetration of non-store based retailing, with the apparel industry being
one of the leading industries in terms of e-commerce adoption.10 Technological advances such as
smart phones and the ensuing shifts in consumer behaviour were further bridging the gap between
offline and online retail, with the e-commerce value expected to increase from US$228 billion in
2017 to US$319 billion in 2021.11
The competitive landscape
The apparel industry was highly fragmented, with the top five companies accounting for only 8% of
the market in 2016.12 Fast fashion that catered to the customers’ desire for instant gratification by
making the latest and most recent fashion trends quickly and cheaply available had started in Europe
in the 1990s, and soon spread globally to become the new norm for the industry, catapulting brands
like Zara and H&M to the top ten global apparel brands (refer to Exhibit 3 and Exhibit 4 for the
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global brand shares and performances).13 It led to the industry evolving radically, from a traditional
model of long lead times with most of the inventory committed before the start of the season, to a
model with a highly flexible and reactive supply chain capable of supporting large volumes in the
shortest possible turnaround time. Consequently, the affordable luxury segment grew, with the
number of garments produced annually exceeding 100 billion for the first time in 2014 - about 14
items of clothing for every person on earth.14
Zara was ahead of its closest competitor H&M in its ability to churn out new collections every four
to six weeks. Yet at the same time, businesses such as Fast Retailing that owned Uniqlo continued to
grow by investing in styles that did not go quickly out of fashion and focusing more on quality and
value than a quick response to changing trends.
H&M15
Founded by Erling Persson, the Swedish company had started as a single womenswear store in
Västerås, Sweden, in 1947. By 2016, it had close to 161,000 employees, 4351 stores in 64 countries
and online presence in 41 markets. Its 2016 sales were US$25 billion, which yielded a net profit of
US$2.09 billion. Germany was its largest market, contributing 16% of turnover, followed by the US
at 12%. In 2017, H&M planned to open about 430 new stores, enter five new markets and extend its
online presence in six countries. The H&M group retailed fashion apparel, cosmetics, accessories
and shoes for women, men, teenagers and children, in addition to home furnishings through its retail
brands H&M, COS, & Other Stories, Monki, Weekday, Cheap Monday and H&M Home.
H&M strived to provide consumers with fashionable, high quality clothing at the best prices possible.
Unlike Zara, it primarily outsourced its production to over 900 suppliers (long term partners) in low
cost countries - about 70% in Asia and the remaining in Africa, Europe and the Middle East.16 H&M
was cost conscious at every stage of the business, and to that end did not use any middlemen, relying
on an in-house buying team that sought to buy the right product from the right market. It also did not
buy its own fabric, and instead simply placed an order with one of its partner companies in the region
that already possessed the necessary fabrics. Thereafter, it relied on its 21 satellite production offices
to oversee the independent suppliers to control for quality and prices and provide market feedback;
state-of-the-art IT network to ensure effective communication and logistics; and rails and sea routes
(90% merchandise) for faster transportation of its goods from the factories to stores.17
About 80% of H&M’s merchandise was stocked year around, while the remaining 20% was designed
during a season depending on the prevailing trend. 18 Flexible assortment planning and efficient
distribution ensured that both the latest trends and timeless classics were available and replenished
consistently at its stores and online platforms. While most of H&M’s collections were created
centrally by an in-house team of designers at Stockholm, it also collaborated with some well-known
names such as Versace, Alexander Wang, Marni and Jimmy Choo to offer a differentiated product
line as limited flash collections.
H&M spent about 5% of its revenues on advertising, working with the world’s best photographers,
models and style icons.19 Its campaigns spanned a wide range of channels from product catalogues,
television commercials, billboards, direct marketing to internet websites and social media. It
sponsored many hit and trendy shows on television channels like MTV, while appearing on famous
magazines like Vogue Netherlands, British Vogue and British GQ. Its promotions featured celebrities
such as supermodel Amber Valletta, and presented unique collaborations with other luxury fashion
brands including Balmain, or were tailored to reflect local cultural contexts and showcase inclusivity.
Uniqlo20
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Acquired by the Fast Retailing Co. in November 2005, Uniqlo had started its operations 20 years
earlier as a small clothing store in Yamaguchi, Japan in June 1984. In 2016, it was the group’s
flagship brand (81.5% share of the total revenues), with Uniqlo Japan generating US$7.7 billion in
sales and US$0.98 billion as operating profit, and Uniqlo International generating US$6.4 billion in
sales and US$0.37 billion as operating profit. Uniqlo had a network of about 1795 stores (795 stores
in Japan, 1000 internationally) in 18 countries. Greater China was its largest market after Japan. On
e-commerce, it had a limited presence, with online sales in China and the US accounting for 10%
and 20% of the revenues respectively, and Japan comparatively lower at only 5.3% of total sales.
Uniqlo positioned itself as a specialty store retailer of private label apparel. It had a business model
that unified the entire clothes-making process from planning through design, production and retail,
with all strategic decisions taken at the company headquarters in Japan. Its research and design
centres in Tokyo, New York, London, Paris, Shanghai and Los Angeles continually garnered first-
hand information on latest trends to create new designs, and looked for new functional materials such
as ‘Heattech, Airism and Blocktech’ to create unique offerings. Its materials development team
negotiated directly with natural materials manufacturers worldwide to secure stable, low cost, long-
term supplies of high-quality materials in large volumes.
Uniqlo’s manufacturing operations were outsourced to low-cost markets such as China, Vietnam,
Bangladesh and Indonesia. To control the production process across its partner factories, it had a
team of 450 including textile takumi (skilled artisans) that oversaw the operations, ensuring desired
quality standards. A centralised inventory management system monitored sales and stock on a weekly
basis, and accordingly dispatched merchandise.
Uniqlo offered innovative, performance oriented, high-quality, basic casualwear to women, men, and
kids, at reasonable prices. Its designs were fashionable but not trendy, with the minimalist style
popular in Japan. It sold much fewer items than its rivals but kept them longer on the shelves.
According to the Tadashi Yanai, Chairman, President and CEO,
The LifeWear concept of comfortable everyday clothes differentiates UNIQLO from fast fashion
brands such as Zara and H&M. Most fashion brands chase the latest trends, but UNIQLO is
striving for something quite different. Our customers want comfortable everyday clothes, quality
clothes that fit well and feel good, clothes that make their lives better, fun clothes that help express
their individual style. These are the clothes that UNIQLO will keep on making.21
Uniqlo spent about 4% of its revenues advertising its core products through television, print, outdoor
and social media; featured celebrities in its commercials such as Orlando Bloom, Charlize Theron,
and Keisuke Honda; had global brand ambassadors such as Shingo Kunieda, Kei Nishikori and Adam
Scott; and collaborated with luxury fashion designers including Jil Sander, Celia Birtwell, and Ines
de la Fressange.
The company practiced an enticingly low pricing model to be affordable to every consumer. In the
past, its experiment to raise prices by 5 to 10% in 2014 and 2015 had resulted in dampening of the
Japanese market, causing a setback to its profits. Hence, in 2016, Uniqlo restored the pricing back to
the original low levels.22
Inditex23
In 1963, Ortega, son of a railway worker, started Confecciones GOA, a modest workshop making
housecoats, dresses, and robes for distribution in La Coruña, north-west Spain. Within ten years,
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Ortega had a workforce of 500, and in 1975 he decided to open his own store. Initially planned to be
called Zorba after the 1964 film “Zorba the Greek”, the name was changed to Zara. According to
Jesus Echevarría, Communications Director, Inditex,
Apparently there was a bar that was called the same, Zorba, like two blocks away, and the owner
of the bar came and said, ‘This is going to confuse things to have two Zorbas.’ They had already
made the moulds for the letters in the sign, so they just rearranged them to see what they could
find. They found Zara.24
Over the next ten years, Ortega opened nine more Zara stores across Spain, and in 1985 founded
Inditex as the holding company. Zara started its international foray with Portugal in 1987, and the
transatlantic one with US in 1989. In the 1990s the chain expanded across Europe, the Middle East
and some parts of North America.
In 2001, Inditex had an initial public offering (IPO) at the Madrid Stock exchange, where 26% of its
shares were floated. Ortega, the chairman of the company, remained the company’s majority
shareholder with 61% share. Meanwhile, Inditex’s portfolio continued to grow, and by 2003, it
included six retail apparel chains and a home furnishings and interiors chain called Zara Home (refer
to Table 1 for brand wise targeted consumer segments).
TABLE 1: INDITEX CONCEPT WISE – TARGETED CONSUMER GROUP
Year Retail Chain Brand Consumer Group

1975 Zara Trendy urban youth
1991 Pull & Bear Fashionable adolescents and young adults
1991 Massimo Dutti Elegant and practical, with urban lifestyle
1998 Bershka Adventurous young people, aware of the latest trends, into new
technologies
1999 Stradivarius Dynamic young people with a casual and imaginative style
2001 Oysho Lingerie
2003 Zara Home Home decorations and interiors
2008 Uterqüe Fashion accessories
Source: Company Website
In 2005, the group employed about 60,000 people, with operations in over 60 countries. Planning to
further expand internationally, Inditex reinforced its senior management structure by appointing
Pablo Isla Álvarez de Tejera, who had considerable experience in international distribution, as the
group’s Deputy Chairman and Chief Executive. In 2011, when Isla took over as the Chairman of the
group from Ortega, Inditex had widened its network to more than 5000 stores across 82 markets.
By the end of 2016, Inditex was a global phenomenon in the apparel industry, employing 162,450
people drawn from 99 nationalities (refer to Exhibit 5 for the regional contributions to the turnover
and to Exhibit 6 for a breakdown of stores based on region and concept). By June 2017, the company
had 7405 stores across 94 countries, and an online presence in 46 countries.
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Zara25
Zara, Inditex’s flagship retail format, generated 66% of the company’s overall sales in 2016 with net
sales of US$16.5 billion. Zara’s global reach included e-commerce presence in 39 countries besides
2,213 physical stores located in the central shopping districts of large cities across 93 countries (refer
to Exhibit 7 for Zara’s key markets and top global apparel markets). 91% of Zara stores were
company-owned while the rest were franchises or joint ventures.
Zara’s apparel collection was divided into three main lines: Women (60%), Men (20%) and Kids
(20%). Under the women category, it targeted different consumer segments with Zara Woman
offering the fashionable wear, TRF offering merchandise for young shoppers, and Zara Basic
offering garments which were not going out of fashion such as jeans or plain t-shirts. All these
product lines were accompanied by accessories such as shoes, bags, jewellery, and perfumes.
Since 2010, Zara had focused on progressively widening its e-commerce platform. By 2013, it was
receiving more than 1.3 million unique visitors online per day.26 In 2015, it relented its pace of store
openings from 8-10% to 6-8% growth in new sales space, in favour of an aggressive online expansion,
and large flagship stores in place of the smaller ones.27 Inditex expected online sales to be 12% of
turnover by 2020.28
In 2016, the retail chain opened its new flagship store in La Coruna with over 54,000 square feet and
five stories, replacing the four smaller stores in the town. In 2017, its largest store at 65,000 square
feet was expected to come up at Madrid in Spain, and globally, Inditex planned to open between 450
and 500 new stores while absorbing 150 to 200 smaller ones. The objective was to encourage
customers who were not close to the location of the flagship stores to instead shop online. This was
hoped to enable Zara to grow its online platform without cannibalising the physical stores.
Gunning for an omni-channel approach, Zara ensured a complementary seamless platform with about
a third of the online deliveries being made in the physical stores. Other than the need to upgrade
some of its technology platforms, the company’s business model was equally effective online as it
was offline. Operationally used to processing individual orders from store managers, Zara was well-
equipped to handle orders of online customers. Items were shipped for free between 3-5 days no
matter what the volume, or within 48 hours at additional cost. Returns or exchanges could be carried
out either in-store or a free pick up could be arranged.
Zara in Asia
Asia Pacific, the most promising retail apparel market in the world, grew by 26% from 2011 to 2016,
and was predominantly driven by China and India (refer to Exhibit 8 for the forecasted apparel
market shares), with the thriving middle class in these emerging markets becoming increasingly
fashion conscious.
Despite an economic slump, depreciating currency and a volatile stock market, demand for affordable
fashion in China had remained strong over 2014-16. As a result, China continued to be the largest
market for apparel and footwear industry in Asia Pacific. It was projected to contribute an absolute
value growth of US$42 billion from 2016 to 2020. By 2019, China would surpass the US to become
the world’s largest apparel market, with sales of US$361 billion.29,30 Even in the e-commerce space,
China dominated the region, accounting for 20% (US$23 billion) of the internet sales of apparel and
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footwear in Asia Pacific in 2016. By 2018, exponential growth in the digital space was expected to
lead internet apparel sales to overtake store-based sales in the country.31
India, propelled by its robust economic performance, growing number of high earners and young
demographic profile, was expected to overtake Japan, Germany and the UK by 2021 to be the third
largest retail apparel market at US$124 billion.32 In 2016, after China, it was considered the most
attractive “must-win” market by leading global retailers.33 Zara was keen to strengthen its presence
in the both these markets.
Zara in China
China is a very attractive market for us. First of all, Chinese people like fashion very much.
Second, because all of the economic development of the country, from the evolution of the cities
to shopping mall development, to a lot of people moving from the country to the cities. China is
a very relevant market for us. The idea is to keep on growing in a significant way there.
- Pablo Isla Álvarez de Tejera, Chairman and Chief Executive, Inditex34
Inditex entered the Chinese market in February 2006, opening the first Zara store at Nanjing West
Road, Shanghai. The location of the store was in line with the company’s strategy of being situated
at a high visibility commercial centre of a city. As a global fashion brand, Zara enjoyed immense
popularity in the local market, leading to its store recording stellar sales of US$122,000 on the very
first day. The number of stores soon grew to 120 by 2011, and with further expansion into second
tier cities, Zara spread to 193 stores by 2016, with China becoming its second biggest market after
Spain.
Zara though was slow in realising the growing prominence of online medium in China, and it was
only in 2012 that it started to build its e-commerce capability in the country by setting up its own
online shopping website and publishing an m-shop application. Two years later, in 2014, it opened
its official flagship store on T-mall – the giant online mall with more revenues and users than Amazon
and Ebay combined.35
Chinese consumers saw Zara as an international brand originating from Europe. Consistent with this,
and other leading global brands, Zara’s prices in China were higher than in Europe (refer to Exhibit
9 for Zara’s global pricing).
However, Zara was repeatedly pulled up by China’s quality and consumer associations for the poor
quality of the fabric used – 15 times from 2006 to 2014. In the tests (like fibre content, colour fastness
and pH value) conducted by the Beijing Consumers’ Association (BCA), clothes by Zara
successively failed, the highest rate among all the brands tested. In 2009 and 2010, its down coats
were found to have their actual down content lower by 9.1% and 18.5% respectively than what the
labels claimed; and in 2011, the fabric in its pair of trousers did not match the contents declared on
the label.36 Zara, along with three other international brands also accounted for more than 25 per
cent of clothing quality issues found in the first half of 2014. Most cases involved excessive pH levels
in the clothes, which could cause damage to human skin.37
Inditex however emphasised that it complied with the most demanding laws worldwide and
conducted one million quality tests on its products annually. Its spokesperson said,
We strive to ensure that products meet the most stringent health, safety and quality standards,
including those set by the authorities in China.38
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The Chinese apparel market was highly competitive with 70% of the 500 leading international luxury
brands present in the country, and a fiercely combative large number of domestic players.39 Zara’s
high pricing strategy in China, unlike Europe, placed it in direct line of fire from the high-end players,
and at a disadvantage vis-à-vis the local rivals. It also faced stiff competition from its key mid-market
rivals. Uniqlo preceded Zara in its entry to China by four years, and over 2002-16, established 560
stores across the country, while H&M followed Zara a year later in 2007, and by 2016 boasted of
444 stores.40 Over 2011-2016, Inditex in China reported a CAGR of 17% against 27% of H&M, and
37% of Fast Retailing.41
While the international fast fashion brands like Zara and H&M were perceived as premium and
aspirational by the Chinese consumers, the local players had dug much deeper inroads into the market
(refer to Exhibit 10 for images of Chinese consumers). The Chinese apparel companies like
Peacebird, Heilan and Septwolves were retail giants operating in more than ten times the number of
stores of Zara (2000-4000 stores each), and continuing to expand in second and third tier cities.42
Also, having historically pursued a low pricing strategy, these big local companies were repositioning
themselves by upgrading and moving upmarket.
Additionally, many local players like Me&City, Metersbonwe, Semir and Girdear had learnt to
emulate the production cycles and quicker inventory turnovers of the global fast fashion brands.
Taking advantage of their localised resources, they optimised their business models managing to
narrow down the consumers’ perceived value-gap from the international brands.43 Few even tied up
with top international fashion forecasting agencies and renowned international fashion designers to
keep track of international fashion trends.
Zara in India
We view our entry into the Indian market to be of significant strategic importance...Our retail
offering has been very well received by shoppers in Asian markets, and we have rapidly expanded
there and now India will be one of our top priorities in the region.
- Pablo Isla Álvarez de Tejera, Chairman and Chief Executive Inditex, 200944
In accordance with the country’s regulations on foreign direct investment, Zara entered the Indian
market in 2009 through a joint venture with Trent Limited, a retail subsidiary of the Tata Group, an
Indian multinational conglomerate. Inditex owned 51% stake in the partnership while Trent had the
remaining 49% share. In 2010, Zara opened its first store (1800 square feet) at a luxury mall in New
Delhi. Noel Tata, Managing Director of Trent, commented,
We see great opportunities for Zara in a country which is becoming increasingly fashion
conscious. Zara has proven itself capable of quickly adapting to changing consumer tastes across
geographies. It will satisfy the discerning Indian consumers’ demand for the latest fashion trends
very well.45
Riding high on the brand’s novelty value and the increasingly aspirational Indian middle class
consumer, Zara performed spectacularly in the initial years, posting a profit in the first year of its
operations, and doubling sales every two years. In 2013, it opened a 28,000 square feet store across
two floors in the Ambience mall – a premier and the largest shopping mall in Gurgaon (satellite town
of New Delhi); and for the financial year reported a double digit growth rate of 41%.
By March 2015, Zara became the first apparel brand in India to have crossed the US$100 million
sales mark, and although it failed to sustain the previous momentum, it still docked high growth at
24%.46 By the next year, Inditex posted US$131 million in annual revenues; and despite the growth
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rate having further declined to 17%, it remained optimistic, undertaking the largest ever space
transaction by any international retailer on a high street across the country when it leased 50,000
square feet in South Mumbai's most prime location of Flora Fountain.47,48
Having entered the Indian market at a much earlier stage than other leading international fashion
brands, Zara enjoyed the first mover advantage. However, its store expansion remained particularly
slow, with the retailer having only 19 stores across the country by the end of 2016.49 Inadequate
availability of prime retail locations in major cities limited Zara’s ability to pursue its flagship store
format strategy. The general lack of retail space in the country was compounded by the regulatory
constraints on foreign owned businesses in acquiring property.
Zara also faced some challenges to its business model in India (refer to Exhibit 11 for images of
Indian consumers). The lack of much seasonal weather variation across the country (mostly warm to
hot weather with a very short winter) limited Zara in introducing its wider range of global
merchandise. Another challenge faced by the apparel retailer was in getting the sizes right. Unlike
most other countries, India neither followed international sizing standards, nor did it have its own
standardised sizing charts due to large regional variations across different parts of the country. 50
Over 2014-2016, the Indian government improved the ease of doing business in the country, and
approved 100% FDI in single brand retail. This resulted in an increasing flux of global apparel
fashion brands such as Gap, Aéropostale, Children’s Place, Topshop and Topman.51
In 2015, Zara’s main fashion rival H&M also entered India. It clocked about US$300,000 on the
opening day of its first store (twice as much as Zara did on its first day in 2010), and turned profitable
within the first six months of its operations. By the end of 2016, it posted US$69.5 million in revenue,
and expanded to 12 stores across the country.52
H&M’s 30% lower prices had prompted Zara to pre-emptively slash its prices by 10 to 15% at the
time of the Swedish retailer’s entry in the Indian market. While this helped Zara achieve a 21%
revenue growth for the financial year 2016-17, its net profits fell to US$7.5 million from US$12.5
million in the previous year (refer to Table 2 for financial performance).53
TABLE 2: ZARA PERFORMANCE IN INDIA
2012-13 2013-14 2014-15 2015-16 2016-17
Revenues 62.3 87.9 109.4 127.9 155.2

(US$ million)
YOY Growth 58.7% 41.1% 24.3% 16.9% 21%
Moreover, the competition from the e-commerce apparel companies had also intensified, with
apparel accounting for nearly 25-35% of the overall sales for online retailers like Amazon, Flipkart
and Snapdeal.54 Despite being in India since 2010, Zara did not operate its own online sales platform
and was limited to an online presence through third-party platforms. 55 To overcome this, the
company planned to launch its own fully integrated e-commerce store by the end of 2017.56
Going Forward
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Isla believed that fashion trends were becoming more and more global, and commented, “There is
not any additional secret [of Zara’s success] apart from the business model and the execution.”57
Customers in similar neighbourhoods across different countries tended to share similar trends,
allowing Zara to continue with its centralised structure. Echevarría explained,
For example, the store on Fifth Avenue in Midtown New York is more similar to the store in Ginza,
Tokyo, which is an elegant area that’s also touristic. And SoHo is closer to Shibuya, which is
very trendy and young. Brooklyn now is a wildly trendy place to go, while Midtown — well, no
New Yorker is actually shopping on Fifth Avenue now. The buyers there are suburban tourists.58
However, while Zara owed its spectacular success to its unique business model, could Asian
expansion pose a threat with stores far from the factories and logistics centre in Europe? Must
everything be routed through the centralised distribution centres of Spain? With intense competition
from other mid-market brands such as H&M, Gap and Uniqlo who had strong manufacturing bases
in Asia, Isla would have to be concerned if Zara could sustain its competitive advantage in China and
India.
Furthermore, sooner or later, Isla would have to steer Zara alone after the 81-year-old Ortega retired
completely. Its 40 years of extraordinary growth had left Zara in the industry at a leading position
for profitability. But would Zara’s rivals eventually shrink the creativity gap as well as match its
business model and execution capabilities? Or would the rise of China and India as the major apparel
markets blunt the effectiveness of its business model in the future?
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APPENDIX: ZARA’S MARKETING STRATEGY AND SUPPLY CHAIN MANAGEMENT
The Value Proposition
Zara practised an unconventional approach of ‘anti-advertising’ to promote its fare, spending only
0.3% of its revenue on advertising.59 As Isla explained, “It’s not a philosophical thing. We would
just rather spend the money on our stores and products.”60
Flagship stores were located at prime locations in big cities, such as high street retail areas in town
centres that included the likes of Oxford Street in London or Rue-Saint Honoré in Paris. In 2016,
Zara paid US$324 million to buy the storefront at 666 Fifth Avenue in New York, in close proximity
to the Museum of Modern Art (MoMA), Salvatore Ferragamo, Versace & Fendi. Masoud Golsorkhi,
editor of the culture and fashion magazine Tank, commented,
Prada wants to be next to Gucci, Gucci wants to be next to Prada. The retail strategy for luxury
brands is to try to keep as far away from the likes of Zara. Zara’s strategy is to get as close to
them as possible.61
Zara also created exceptional stores modelled to communicate compelling visions of its brand image.
Having adopted the global design concept since 2012, Zara’s stores were designed centrally to give
the same image, centred on the four pillars of beauty, clarity, functionality and sustainability.62 A
Zara store typically had large display windows with groups of mannequins adorning a variety of the
latest merchandise available. Inside it was modern and spacious, with shiny sparse surfaces, luxury
boutique layout, a predominantly white background to make the colour of the apparels stand out,
minimalist mirrors, bright lighting and a colour wise presentation of the collections. Additionally,
the stores were eco-friendly, as per Inditex’s sustainability plan for 2011-2015, delivering average
water and energy savings of 40% and 20% respectively.
Zara brought out a large number of collections each season, putting new styles on the shelves every
4 to 6 weeks, unlike the existing trend of just one collection for spring-summer, and another for fall-
winter season. Zara committed only 15-25% of a season’s line six months in advance (the industry
average was 40-60%) and only 50-60% of the line by the start of the season (80% industry average).
The remaining 40-50% was designed and manufactured right in the middle of a season. 63 Isla
explained the approach; “Instead of designing a collection long before the season, and then working
out whether clients like it or not, we try to understand what our customers like, and then we design
it and produce it.”64
Zara tested small runs of new products in its test stores before rolling them out in the entire network,
resulting in a considerably low failure rate of only 1% as compared to the 10% industry average. 65
What appealed most to the customers was Zara’s ability to imitate the latest high end designs from
the catwalk, tweak them, and churn them out as cutting edge affordable luxury within a short time.
Julia Grindell, Head of Corporate Affairs at Inditex elaborated,
If a trend proves successful, this will be evolved and new items on this trend will come to store.
And if a trend is not successful, this trend will not be evolved, or it will be adjusted through the
season.66
Twice a week, the store managers would send orders to the headquarters based on what was selling
and their qualitative insights on what shoppers liked or disliked. The new styles were developed
accordingly. The system resulted in Zara introducing about 18,000 styles annually, compared to just
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2000 to 4000 of rivals H&M and Uniqlo.67 75% of Zara’s merchandise was changed every three to
four weeks, with new designs being introduced every week in the stores.
Zara ensured that only limited inventories of each style were available at its stores, willingly creating
‘stock-outs’. Compared to the industry average of 60 to 70%, Zara managed to sell 80 to 85% of its
stock at full price.68
This strategy enticed customers to frequently visit Zara, as each time they would encounter
something new and different – and it was no surprise thus that the global average of 17 visits per
customer per year for Zara was significantly higher than three of its competitors.69
Compared to other fashion brands, Zara was priced higher than H&M, Uniqlo, Forever 21 or Primark,
but was lower than Gap or Next. However, Zara practised a pricing strategy unique to each country
(refer to Exhibit 9 for comparison in prices across different markets).
In the industry, Zara stores were frontrunners for adopting the latest radio frequency identification
(RFID) technology. RFID enabled the retail chain to take real time inventories in a fraction of time
in comparison to the barcode based technology being used by most other apparel retailers. Isla
elaborated,
Now we offer our customers a much better service, as we can check immediately if (an item) is
available or not. Then we offer them the possibility to order online from the stores. But it also
helps a lot in terms of the way we receive the product in the store, the way we replenish from the
stockroom to the floor, and the inventories.70
Agile and Sprightly Supply Chain: Just in Time
You see the stores and you can’t imagine what is behind them.
- Pablo Isla Álvarez de Tejera, Chairman and Chief Executive, Inditex71
Zara’s time-sensitive and fashion-dependent products (60% of the total merchandise) were produced
in factories (company owned and others) that were located within proximity to company headquarters,
in Europe or Northern Africa, such as Spain, Portugal, Turkey and Morocco - instead of Asia, the
cheaper alternative. Isla commented,
Typically, in our sector you manufacture products in Asia and you try to sell in Europe. In our
case, in my store in Taipei we had many labels that said ‘Made in Spain’ and ‘Made in
Portugal’.72
The company used a number of automated factories (about 11 were Inditex-owned) as well as a
network of over 300 small finishing shops.73 The automated factories created unfinished goods
known as ‘greige goods’, which were partially prepped and assembled pieces to be sent to factories
to be finished. Once a new design was finalised, these goods were sent to the finishing shops to be
made into final products.74 Of the remaining items, about a third were outsourced from Eastern
Europe, and the rest from Asia. The products with minimum fashion content were sourced from Asia,
making up the staples category of Zara’s offering.
The entire design to distribution process was ensconced in a structure called ‘The Cube’ - a huge
open airplane hangar-size space (5 million square feet) at the company’s headquarters at Artexio.
The Cube had 124-mile-long underground monorail links to the company owned factories, and all
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raw materials and finished goods passed through it on their way either from suppliers, or to the
stores.75 In there, Zara had 200 plus designers, market specialists and teams for procurement and
production working alongside to create designs.76
The design team sat across the aisle on either side of the market specialists, and on the same floor
were the workshops where the prototype models were developed. The creative team could inspect
them at any time. Also, a mock high street of Zara stores was built within the headquarters allowing
the commercial team to examine the new ranges, and the stylists to decide how to display every
product in the stores.
Most of the designers, a group of young and talented people, were hired directly from top design
schools. They were tasked to create designs based on the latest trends and input from the market
specialists. The market specialists, each one representing a specific country, communicated
constantly with store managers stationed across thousands of Zara outlets around the world to help
keep track of what was in demand and capture customer feedback in real time. Additionally, Zara
employed runway watchers and fashion scouts to determine the latest in vogue at catwalks, clubs,
streets, malls and other social gathering points across the globe. Peppered with all this information,
the designers churned out 40,000 new designs annually while tweaking the existing ones.77
Procurement and Production
Zara placed great emphasis on procurement of the fabric. The year-long availability of fabric allowed
the company to respond to fashion trends in real time. It purchased about half the fabric grey
(uncoloured), so that it could be dyed later as per the ongoing colour trend during a season. To ensure
the most optimal use of fabric, the cutting process was carried out at the factories using robotic
equipment. The patterns as per the approved designs were generated using special software, and sent
to computer-aided machines that cut the multiple layers of fabric into hundreds of pieces. While the
process was mechanised, manual checks were done at each stage.
In another departure from the traditional industry practice, Zara ensured that 85% of its factories’
capacities were kept on standby to be able to respond to any in-season adjustments anywhere in the
world. For example, a drop in demand of a particular item would prompt the teams at the Cube to
either tweak the design or completely overhaul it. This improvised product was then manufactured
by the factories (which were idle) at full speed to reach the stores within the targeted turnaround time.
To further facilitate this process, the labour-intensive work like sewing was outsourced to private
contractors, most of whom were based within the Galicia region. The contractors picked up the cut
pieces and other accessories like buttons or zippers, and delivered the sewn items back to the same
factory. Next, every piece was inspected, ironed and labelled before being packed in plastic bags,
ready to be placed directly on store shelves. The finished products from the factories and outside
suppliers were sent to the distribution centres.
Distribution
Zara’s globally centralised distribution system, located in Spain, comprised three key distribution
centres: with 190,000 square meters for women garments at Zargoza; with 180,000 square meters for
children garments at Meco; and with 500,000 square meters at Artexio. Historically, all products,
regardless of their origin, passed through one of these distribution centres, with the three handling
over a million pieces daily.78
Technology played a key part in enabling Zara to operate at such a massive scale on a global level.
At Artexio, a tunnel network comprising a carousel that carried the finished products connected the
13/25
onsite factories to the distribution centre. Optical reading devices were used to track each item and
direct its movement on the carousel towards an allocated box. Each box was tagged for a specific
store and automatically packed with the different items the store had placed an order for. While a
large part of the operations was automated, the distribution centre employed more than 1200
employees including the temporary workers during peak times.
The store orders, eventually consolidated at Zargoza, were dispatched either through trucks or by air.
They took an average of 24 hours to reach European stores and 48 hours to reach American or Asian
stores. Both trucks and airlines had published schedules with specific times for dispatches and
shipment arrivals.
EXHIBIT 1: GLOBAL RETAIL APPAREL AND FOOTWEAR MARKET
Percentage Share of the Worldwide Revenues
Australasia 1%
Eastern Europe 4%
Latin America 7%
Middle East & Africa 7%
Western Europe 22%
North America 23%
Asia Pacific 36%
Source: Euromonitor International, “Channel Overview in Apparel and Footwear”, May 2017
EXHIBIT 2: TOP FIVE LARGEST EXPORTERS OF APPAREL (2014)
Country Export Value (USD Global

billion) Share
China 265 36.5%
India 38.7 5.3%
Italy 32.7 4.5%
Turkey 30.4 4.2%
Bangladesh 28 3.9%
14/25
Source: Fashion United, “Global Fashion Industry Statistics - International Apparel”, 2016,
https://fashionunited.com/global-fashion-industry-statistics, accessed August 2017.
EXHIBIT 3: APPAREL BRAND SHARES (%) IN THE GLOBAL MARKET
Brand 2010 2015
H&M 1.2% 1.5%
Nike 0.8% 1.1%
Zara 0.8% 1.0%
Uniqlo 0.6% 0.9%
Adidas 0.7% 0.8%
Levi’s 0.6% 0.6%
C&A 0.7% 0.6%
Old Navy 0.5% 0.5%
Victoria’s Secret NA 0.5%
Ralph Lauren 0.4% 0.5%
Source: Data from Euromonitor International, accessed from Sheng Lu, “FASH455 Global Apparel & Textile
Trade and Sourcing”, October 2016, https://shenglufashion.wordpress.com/2016/10/16/statistics-global-apparel-
market-2016-2018/.
15/25
EXHIBIT 4: COMPETITVE PERFORMANCE OF THE KEY BRANDS
In US$ billions 2016 2011 2006 2001
Inditex (consolidated)
Revenue 24.93 19.32 10.85 4.30
Net profit 3.38 2.73 1.33 0.45
No. of stores 7292 5527 3131 1284
Zara (standalone)
Revenue 16.46 12.52 7.08 3.28
No of stores 2213 1830 990 507
H&M
Revenue 24.99 20.3 11.41 6.63
Net profit 2.09 2.49 1.54 0.54
No. of stores 4351 2472 1329 771
Fast Retailing (consolidated)
Revenue 17.31 10.69 3.83 3.51
Net profit 0.46 0.71 0.35 0.49
No. of stores 3160 2088 1632 519
Uniqlo (standalone)
Revenue 14.09 9.04 3.43 -
No. of stores 1795 1024 750 -
Please note: Numbers for Inditex include Zara, and numbers for Fast retailing include Uniqlo
Source: Annual Reports of the companies
16/25
EXHIBIT 5: REGIONAL CONTRIBUTIONS FOR INDITEX OVER 2001-2016
2016 2011 2006
Spain 16.9% 25% 39.6%
Rest of Europe 43.9% 45% 40.6%
Asia and the Rest of 23.9% 18% 8.9%

the World
America 15.3% 12% 11%
Source: Company Annual Report 2016, 2011 and 2006
EXHIBIT 6: STORE DISTRIBUTION BY REGION AND CONCEPT 2016
Inditex Americas Europe Asia & RoW

Total Stores 743 4990 1559
Stores Markets Stores Markets Stores Markets

Zara 309 21 1,351 44 553 28
Pull & Bear 86 11 700 39 187 20
Massimo Dutti 60 10 539 39 166 21
Bershka 101 11 765 37 215 23
Stradivarius 62 10 740 33 192 21
Oysho 56 6 451 23 129 16
Zara Home 57 13 390 25 105 20
Uterqüe 12 1 54 6 12 7
Source: Company Annual Report 2016
17/25
EXHIBIT 7: TOP APPAREL AND ZARA MARKETS
Country Apparel Population GDP Real GDP/Capita Zara

Market Size (millions, (US$ trillion, GDP (US$, 2016) Stores
(US$ billion, mid 2016) 2016) At Growth
2014 Current Rate, %
estimate) Prices
USA 330 324 18.57 1.6 57440 78
China 320 1378 11.22 6.7 8110 193
Germany 90 83 3.47 1.8 41900 77
Japan 85 125 4.94 1.0 38920 100
UK 80 66 2.63 1.8 40090 66
Russia 70 144 1.28 (0.2) 8930 95
India 60 1329 2.26 6.8 1720 19
Brazil 55 206 1.80 (3.6) 8730 56
France 50 65 2.46 1.2 38130 125
Italy 50 61 1.85 0.9 30510 100
Others*
Spain 21 43 1.23 3.2 26610 313
Mexico 16 129 1.05 2.3 8554 79
Portugal 5.5 10 0.20 1.4 19832 67
*Among the top ten markets of Zara
Source: Euromonitor International, “Top 10 Apparel and Footwear Markets: Growth Strategies When the Good
Times Stall”, September 2015;
Euromonitor International, Country reports on Apparel and Footwear Industry in Spain, Mexico and Portugal,
January 2017;
Population Reference Bureau, “2016 World Population Data Sheet”, http://www.prb.org/pdf16/prb-wpds2016-
web-2016.pdf, accessed September 2017;
Knoema, “GDP/Capita by country, Statistics from IMF 1980 – 2021”, https://knoema.com/pjeqzh/gdp-per-capita-
by-country-statistics-from-imf-1980-2021?country=Spain, accessed September 2017; and
Knoema, “World GDP ranking 2017”, https://knoema.com/nwnfkne/world-gdp-ranking-2017-gdp-by-country-
data-and-charts, accessed September 2017.
18/25
EXHIBIT 8: FORECASTED APPAREL MARKET SHARES (%) IN ASIA PACIFIC
Country 2016 2019
China 58 60
India 12 13
Japan 13 12
South Korea 5 4
Australia 3 2
Philippines 2 2
Indonesia 2 2
Hong Kong 2 2
Taiwan, Thailand, Malaysia 1 1
Source: The Statistics Portal, “Forecasted apparel market value in Asia Pacific”,
https://www.statista.com/statistics/650585/asia-pacific-forecast-apparel-market-value-by-country/, accessed
September 2017.
19/25
EXHIBIT 9: ZARA’S PRICING STRATEGY INDEX
Country Price Index
Spain 100
Portugal 104
Greece 114
France 122
Germany 124
Italy 124
Turkey 131
Poland 133
UK 147
Mexico 148
India 153
Japan 162
Russia 176
China 178
USA 192
South Korea 196
Source: Francelia Rodriguez Ceballos, “Zara: worldwide pricing strategy revealed by study”, Fashion Network,
26 June, 2015, http://us.fashionnetwork.com/news/Zara-worldwide-pricing-strategy-revealed-by-
study,544318.html#.WYAn8p32PIU, accessed August 2017.
20/25
EXHIBIT 10: CONSUMERS IN CHINA
Casual dressing
Shopping
Office wear
Zara Store in China
21/25
Source: Images downloaded from

https://www.google.com.sg/search?as_st=y&tbm=isch&hl=en&as_q=free+images&as_epq=&as_oq=&as_eq=&cr
=&as_sitesearch=&safe=images&tbs=sur:fc; https://www.marketingtochina.com/zara-decide-develop-refined-
strategy-china/; and https://www.shutterstock.com/
EXHIBIT 11: CONSUMERS IN INDIA
Shopping Zara store in India
Casual dressing
22/25
Formal wear
Source: Images downloaded from

https://www.google.com.sg/search?as_st=y&tbm=isch&hl=en&as_q=free+images&as_epq=&as_oq=&as_eq=&cr
=&as_sitesearch=&safe=images&tbs=sur:fc; https://www.shutterstock.com/; http://indianbigul.com/zara-to-kick-
start-its-online-stores-in-india-in-october/; and
http://www.bollywoodhungama.com/more/photos/view/stills/parties-and-events/id/1459817
23/25
Endnotes
1
The Economist, “Zara, Spain’s Most Successful Brand, is Trying to Go Global”, 24 March 2012,
http://www.economist.com/node/21551063, accessed August 2017.
2
Inditex Annual Report 2016
3
CNN, “Zara, a Spanish Success Story”, June 2001, http://edition.cnn.com/BUSINESS/programs/yourbusiness/stories2001/zara/,
accessed August 2017.
4
Euromonitor International, “Apparel and Footwear Global Industry Overview”, June 2017.
5
Ibid.
6
Ibid.
7
Euromonitor International, “Channel Overview in Apparel and Footwear, May 2017.
8
Euromonitor International, “Focus on Emerging Cities: Best Prospects for Apparel Retailers”, June 2017,
http://blog.euromonitor.com/2017/06/emerging-cities-best-prospects-apparel-retailers.html, accessed August 2017.
9
Fashion United, “Global Fashion Industry Statistics - International Apparel”, 2016, https://fashionunited.com/global-fashion-industry-
statistics, accessed August 2017.
10
11
Ibid.
12
Ibid.
13
Sheng Lu, “Statistics: Global Apparel Market 2016-2020”, FASH455 Global Apparel & Textile Trade and Sourcing, October 2016,
https://shenglufashion.wordpress.com/2016/10/16/statistics-global-apparel-market-2016-2018/, accessed August 2017.
14
Nathalie Remy, Eveline Speelman, and Steven Swartz, “Style that’s Sustainable: A New Fast-Fashion Formula”, McKinsey &
Company, October 2016, http://www.mckinsey.com/business-functions/sustainability-and-resource-productivity/our-insights/style-thats-
sustainable-a-new-fast-fashion-formula, accessed August 2017.
15
The information in the section is from the company website and annual reports unless specifically stated otherwise.
16
Leire Uriarte Elizaga, “The Contrasts of Fast Fashion Giants ZARA, H&M and UNIQLO”, upna, June 2016, accessed August 2017.
17
Ibid.
18
Clara Lu, “H&M Supply Chain Strategy - Successful Retail Inventory Contro”, tradegecko, 12 August 2014,
https://www.tradegecko.com/blog/hm-retail-inventory-control, accessed August 2017.
19
Patrick Regnér, and H. Emre Yildiz, "H&M in Fast Fashion: Continued Success?", Exploring Strategy, Tenth Edition, (Harlow, UK:
Pearson Education Limited, 2014: 575-582).
20
21
Fast Retailing Inc., Annual Report 2016, http://www.fastretailing.com/eng/ir/library/pdf/ar2016_en.pdf, accessed August 2017.
22
Nikkei Asian Review, “Uniqlo Chief Admits Defeat on Higher Pricing Strategy”, 13 April, 2016,
https://asia.nikkei.com/Business/Companies/Uniqlo-chief-admits-defeat-on-higher-pricing-strategy, accessed August 2017.
23
24
Suzy Hansennov, “How Zara Grew into the World’s Largest Fashion Retailer”, The New York Times Magazine, 9, 2012,
http://www.nytimes.com/2012/11/11/magazine/how-zara-grew-into-the-worlds-largest-fashion-retailer.html?pagewanted=2, accessed
July 2017.
25
26
Jessica Vincent, Phillip Kantor and Daniel Geller, “Inditex Strategy Report”, Bridges Consulting, 19 April. 2013, http://economics-
files.pomona.edu/jlikens/SeniorSeminars/Likens2013/reports/inditex.pdf, accessed August 2017.
27
The Fashion law, “Zara to Slow Retail Expansion, Focus on e-Commerce Presence”, 9 March, 2016,
http://www.thefashionlaw.com/home/index-to-expand-online-presence-instead, accessed August 2017.
28
Jeannette Neumann, “How Zara Is Defying a Broad Retail Slump”, Morning Star, 14 June, 2017,
https://www.morningstar.com/news/dow-jones/TDJNDN_201706147413/how-zara-is-defying-a-broad-retail-slump.html, accessed
August 2017.
29
Source: The Statistics Portal, “Forecasted Apparel Market Value in Asia Pacific”, https://www.statista.com/statistics/650585/asia-
pacific-forecast-apparel-market-value-by-country, accessed September 2017.
30
31
Ibid.
32
Ibid.
33
Sapna Aggarwal, “H&M to Double Store Count in India by Year-End”, Livemint, 20 June, 2016, http://www.livemint.com/...html,
accessed September 2017.
34
Gemma Goldfingle, “Inside Inditex: How Zara became a Global Fashion Phenomenon”, Retail Week, October 2014,
https://www.retail-week.com/...article, accessed September 2017.
35
Luis Galán, “Insights on ZARA in the Chinese digital market”, 2Open, 19 May 2016, http://www.2open.biz/zara-chinese-digital-
market/, accessed September 2017.
36
Cui Jia and Wang Yan, “Top Brands Fail to Pass Quality Test”, China Daily, 20 April 2011,
http://www.chinadaily.com.cn/cndy/2011-04/20/content_12358979.htm, accessed October 2017.
37
James Griffiths, “H&M, Zara Defend Quality Control Practices after Watchdog Criticism”, South China Morning Post, 30 August
2014, http://www.scmp.com/business/..., accessed October 2017.
38
Ibid.
39
The Fashion Law, “Zara is Cutting Prices to Better Compete with Rivals”, 4 May, 2016, http://www.thefashionlaw.com/home/zara-
lowers-prices-in-india-to-better-compete, accessed September 2017.
40
Fast Retailing Annual report 2016; H&M Annual Report 2016
41
Euromonitor International, “Inditex in Apparel and Footwear World”, July 2017.
42
Jeffrey Towson, “Two Threats to the Big China Dreams of Zara and H&M”, |Apparel & Fashion, Asia Pacific, Retail & E-
Commerce, 3 February, 2016, https://www.linkedin.com/..., accessed September 2017.
24/25
43
Christina Nelson, “Fast Fashion in China: Revved Retail”, China Business Review. 24 February 2014,
https://www.chinabusinessreview.com/fast-fashion-in-china-revved-retail/, accessed September 2017.
44
Livemint, “Trent and Inditex forms JV to bring Zara to India”, 5 February 2009, http://www.livemint.com/...html, accessed
September 2017.
45
Ibid.
46
Sagar Malviya, “Zara Becomes the First Apparel Brand in India to Cross $100-Million Sales Mark”, ET Retail.com, 10 July, 2015,
http://retail.economictimes.indiatimes.com/..., accessed September 2017.
47
Suneera Tandon, “Zara’s Fast Fashion is Starting to Slow Down in India”, Quartz India, 13 July 2016, https://qz.com/730904/zaras-
fast-fashion-is-starting-to-slow-down-in-india/, accessed September 2017.
48
Kailash Babar, “Zara Leases Largest Retail Space by International Brand in India”, The Economic Times, 12 April, 2016,
http://economictimes.indiatimes.com/...cms, accessed September 2017.
49
Inditex Annual Report 2016
50
Shefalee Vasudev,” Ground Report: Size India”, Livemint, 4 October 2014,
http://www.livemint.com/Leisure/Rzwtdw8nSlRTwRt1fDi6mI/Ground -Report-Size-India.html, accessed September 2017.
51
Sapna Aggarwal, “H&M to Double Store Count in India by Year-End”, Live-mint, 20 June, 2016, http://www.livemint.com/...html,
accessed September 2017.
52
Sagar Malviya, “H&M Strikes a Chord with Indians, Turns Profitable in Just 6 Months”, The Economic Times, 26 June 2017,
http://economictimes.indiatimes.com/...cms, accessed September 2017.
53
Ibid.
54
Ibid.
55
Simone Preuss, “Zara's International Expansion Focuses on India and Belarus”, Fashion United, 19 July 2017,
https://fashionunited.in/.., accessed September 2017.
56
Inditex Website, Media, “Pablo Isla Highlights Solid, Sustainable and Integrated Growth as Key to the Inditex of the Future”, 18 July
2017, https://www.inditex.com/en/article?...growth, accessed September 2017.
57
https://www.retail-week.com/sectors/fashion/...article, accessed August 2017.
58
http://www.nytimes.com/2012/11/11..., accessed July 2017.
59
Mallika Srivastava, Atul Paul and Mohammed Saadulla, “A Case Study of Success Story of Zara in India: Pune City”,
http://ijmsrr.com/downloads/31102014ijmsrr6.pdf, accessed August 2017.
60
Tobias Buck, “Fashion: A Better Business Model”, Financial Times, June 18, 2014, https://www.ft.com/content/a7008958-f2f3-11e3-
a3f8-00144feabdc0, accessed August 2017.
61
http://www.nytimes.com/2012/11/11/, accessed July 2017.
62
CISION, “Zara Opens Its New Global Concept Store on New York City's Fifth Avenue” PR Newswire, March 14, 2012,
http://www.prnewswire.com/...html, accessed August 2017.
63
Kris Hiiemaa, “In the Success Stories of H&M, Zara, Ikea and Walmart, Luck is Not a Key Factor”, Erply, 18 March, 2016,
https://erply.com/in-the-success-stories-of-hm-zara-ikea-and-walmart-luck-is-not-a-key-factor/, accessed August 2017.
64
65
Jessica Vincent, Phillip Kantor and Daniel Geller, “Inditex Strategy Report”, Bridges Consulting, 19 April. 2013, http://economics-
files.pomona.edu/jlikens/SeniorSeminars/Likens2013/reports/inditex.pdf, accessed August 2017.
66
Tom Bailey, “What Makes Zara So Good?”, World Finance, July 2015, https://www.worldfinance.com/infrastructure-
investment/what-makes-zara-so-good, accessed August 2017.
67
68
Kasra Ferdows, Michael Lewis, M.A. and Jose Machuca, “Zara the World’s Largest Fashion Retailer”, Case Centre, 2015,
http://www.thecasecentre.org/corporate/products/view?id=130606, accessed August 2017.
69
Hitt, M., Ireland, R.D. and Hoskisson, R., “Strategic Management: Concepts and Cases: Competitiveness and Globalization”, 2015,
11 E, Cengage Learning.
70
RFID 24-7, “Inditex Continues RFID Rollout to 2,000 Zara Locations”, March 2016, http://rfid24-7.com/2016/03/17/inditex-
continues-rfid-rollout-to-2000-zara-locations/, accessed July 2017.
71
Graham Ruddick, “How Zara Became the World's Biggest Fashion Retailer”, The Telegraph, 20 October, 2014,
http://www.telegraph.co.uk/finance/...html, accessed August 2017.
72
https://www.retail-week.com/...article, accessed August 2017.
73
Kasra Ferdows, Michael Lewis and Jose Machuca, “Zara the World’s Largest Fashion Retailer”, Case Centre, 2015,
74
Greg Petro, “The Future of Fashion Retailing, Revisited: Part 2 – Zara” Forbes, 23 July 2015,
https://www.forbes.com/.../gregpetro/.../the-future-of-fashion-retailing-revisited-part, accessed August 2017.
75
Nitant Narang, “Guide to Zara’s Global Supply Chain”, Procurify, October 2016, https://blog.procurify.com/2016/10/24/supply-
chain-beats-zara-spend-culture/, accessed August 2017.
76
Greg Petro, “The Future of Fashion Retailing, Revisited: Part 2 – Zara” Forbes, 23 July 2015,
https://www.forbes.com/.../gregpetro/.../the-future-of-fashion-retailing-revisited-part, accessed August 2017.
77
Leire Uriarte Elizaga, “The Contrast of Fast Fashion Giants Zara, H&M and Uniqlo”, downloaded from https://academica-
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78
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SMU300

ZARA IN CHINA AND INDIA

Copyright © 2018, Singapore Management University Version: 2017-06-08

The Global Retail Apparel Industry

The competitive landscape

TABLE 1: INDITEX CONCEPT WISE – TARGETED CONSUMER GROUP

Year Retail Chain Brand Consumer Group

Source: Company Website

TABLE 2: ZARA PERFORMANCE IN INDIA

2012-13 2013-14 2014-15 2015-16 2016-17

Revenues 62.3 87.9 109.4 127.9 155.2

APPENDIX: ZARA’S MARKETING STRATEGY AND SUPPLY CHAIN MANAGEMENT

The Value Proposition

Agile and Sprightly Supply Chain: Just in Time

Procurement and Production

Percentage Share of the Worldwide Revenues

Middle East & Africa 7%

Western Europe 22%

North America 23%

Asia Pacific 36%

EXHIBIT 2: TOP FIVE LARGEST EXPORTERS OF APPAREL (2014)

Country Export Value (USD Global

China 265 36.5%

India 38.7 5.3%

Italy 32.7 4.5%

Turkey 30.4 4.2%

EXHIBIT 3: APPAREL BRAND SHARES (%) IN THE GLOBAL MARKET

Brand 2010 2015

H&M 1.2% 1.5%

Nike 0.8% 1.1%

Zara 0.8% 1.0%

Uniqlo 0.6% 0.9%

Adidas 0.7% 0.8%

Levi’s 0.6% 0.6%

C&A 0.7% 0.6%

Old Navy 0.5% 0.5%

Victoria’s Secret NA 0.5%

Ralph Lauren 0.4% 0.5%

EXHIBIT 4: COMPETITVE PERFORMANCE OF THE KEY BRANDS

In US$ billions 2016 2011 2006 2001

Revenue 24.93 19.32 10.85 4.30

Net profit 3.38 2.73 1.33 0.45

No. of stores 7292 5527 3131 1284

Revenue 16.46 12.52 7.08 3.28

No of stores 2213 1830 990 507

Revenue 24.99 20.3 11.41 6.63

Net profit 2.09 2.49 1.54 0.54

No. of stores 4351 2472 1329 771

Fast Retailing (consolidated)

Revenue 17.31 10.69 3.83 3.51

Net profit 0.46 0.71 0.35 0.49

No. of stores 3160 2088 1632 519

Revenue 14.09 9.04 3.43 -

No. of stores 1795 1024 750 -

Source: Annual Reports of the companies

EXHIBIT 5: REGIONAL CONTRIBUTIONS FOR INDITEX OVER 2001-2016

2016 2011 2006

Spain 16.9% 25% 39.6%

Rest of Europe 43.9% 45% 40.6%