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Transcript of ZARA
Annie Wu ZARA AMM 357. 01- Assignment 4
Fall 2012 Importance of this Information This data brings awareness to customers and consumers about where the products are manufactured as well as the import process
Acknowledge the strategies needed to become a fast fashion leader in this industry
Comprehend the fact that outsourcing is not always the best choice to maximize profit Aim of Report Gain knowledge about the process of apparel global sourcing, and what it takes to be a fashion leader. Learn about the company by researching various sources . To discuss more in depth information about Zara
To inform what type of business Zara is and the products being offered
To evaluate latest annual sales report
To demonstrate changes in imports
What countries Zara imports from
What products are being imported
To become acquainted with the importing channels used
To become familiar with the issues affecting importing
Political and financial factors Objectives ZARA Overview Approach taken to this work Sources used for this company's analysis:
Inditex Group website - 2011 Annual Report
Online database - articles associated with information used in this analysis
Course textbook - Going Global: The Textile and Apparel Industry
Tools utilized for analysis: Excel Brief History Zara was founded by Amancio Ortega Aona and its first store opened in 1975 in A Coruña, Spain
Originally, Zara was going to be named Zorba, however there was a bar located near its first store with the same name, so the company decided to change the name, that way its customers would not get confused between the bar and the apparel store
Zara is one of the eight companies that are part of the fashion retailer group Industria de Diseno Textil (Inditex)
Zara expanded nationally throughout the 1980s, and by the end of 2001, Zara operated 507 stores around the world
Zara opened its first store outside of Spain on December 1988 in Oporto, Portugal, and the first United States store in 1989 located in New York Zara is very well known for being a vertically integrated retailer.
About 60% of the manufacturing are processed in countries close to the Zara headquarters in Spain to help achieve a quick turnaround
Zara maintains a strong relationship with their contractors and suppliers—viewing them as part of the company.
Ninety per cent of Zara’s stores are company owned , the rest are franchises or joint ventures.
Store environment is predominantly white, modern, spacious, well-lit and walled with mirrors. Type of business Logistic Methods Because Zara outsources in small volume, the company does not have to deal with criticism of low-cost labor exploitation as much as the companies that outsource heavily
Zara was accused poor quality by China's consumer watchdog, but there is no surprise due to the fact that Chinese government typically targets foreign firms Political-legal Issues or Social-environmental
Issues Affecting Importing Policies Product Range women men kids accessories ZARA Importing Policies Total Sales Sales Contribution There was an increase of 10% in Zara's net sales from 2010 to 2011
Zara has always been the leading sales contributor to Inditex, by bringing at least 60% of its total sales 2011 Sales Contribution by Company - Portugal
- Morocco Countries Zara Imports From - China
- India Products Imported About half of the garments were manufactured domestically, and about two-thirds of the other half was outsourced from Europe and Noth Africa, and the remaining one-third from Asia
Fashion-forward items are manufactured in small lots domestically or countries located nearby because customer turnout is unpredictable
If the item sells, the reordering process will be easier and the product will arrive to the store faster
Basic items, which are more price-sensitive than time-sensitive, are outsourced to Asia due to the fact that production in Europe is about 15%-20% more expensive. Importing Channels Used Zara has its own distribution facility of approximately 400,000-square-meter located in Arteixo. Products either coming from internal or external suppliers must pass through this facility, that way the garments are sorted out to its designated barcoded area ready to be sent out
Additional satellite centers are located in Argentina, Brazil, and Mexico
Even though the Arteixo facility is operating well, it might not be able to handle the company's growth in demand. Hence, Zara started a second major distribution center in Zaragoza, which would increase 120,00 square meters of warehouse space Transportation Financial Issues of Importing The prices of Zara's garments differ between countries, with the Spanish marked being offered with the lowest price
Prices in international markets are generally higher, due to longer distribution channels, custom duties and tariffs
A landed markup of 20%-25% is expected for United States merchandise due to tariffs of up to 12% as well as other cost elements Time expectancy between receiving the order at the distribution facility and the delivery of the goods to the store is 24-36 hours for European stores and no more that 24-48 hours for American and Asian stores
Approximately 75% of merchandise by weight was transported by truck to stores located in Spain and neighboring countries, and the remaining 25% was shipped by air via KLM and DHL
Because all merchandise is prepriced and tagged, when items arrive to destination they are ready to be displayed. For that reason Zara shipments are 98.9% accurate with less than 0.5% shrinkage. In January 2002, Zara started to schedule shipments by time zone. In the morning, orders were packed and shipped to the Americas, the Middle East, and Asia; in the afternoon, they focused on the European shops
Zara's delivery system goal is not only to provide demand as soon as it hit the catwalk, but to stimulate customers to purchase products whenever available in store because if they don't, those products will be replaced by a new batch
This system gives customers a sense of scarcity, which allows Zara to sell more item at full price ZARA Discussion & Conclusion Key Aspects of Importing Policies Being a vertically integrated company has made it easier for Zara to become a fast fashion leader
Shorter time expentancy for delivery of goods
Easier reordering process
Even though Zara is vertically integrated, some products are outsourced from China, India, Bangladesh, either because of labor costs or demand for the garment How Importing Helps Meet Strategic Goals Products spend no more than two weeks in the store's shelf, therefore making sure that a new line arrives to every store in time is crucial
For that reason Zara spends a lot of time and money in improving their importing channels
Importing from countries further away from Spain does require more time; nevertheless, labor cost can be much lower Overall Conclusion To become a fast fashion leader one must be able to provide products that are fashionable, desirable, affordable, and of acceptable quality within short periods of time
The pros of being a vertically integrated company would be that products will arrive to its destination much faster and there is no need to worry about tariffs or quotas; the cons would be that it might cost more for the labor How Importing Strategies Respond to
Changing Circumstances Nowadays, fashion changes in the blink of an eye. Everyone is always trying to keep up with the latest trend, but not all of us can afford have it. Zara makes it possible by offering the latest fashion, with good quality and affordable price
That would not be possible if Zara imported its products like traditional companies
Zara manufactures most of its garments domestically, that is why it is possible for them to offer the latest fashion before other companies
Zara schedules its shipments by time zone, that way products will reach its destination as fast as it can Key International Competitors Product Market Positioning Map Zara's closes comparable competitors are:
Hennes and Mauritz (H&M)
Zara leads the industry with gross margin because of its quick response system to fashion and the ability of eliminating major costs out of the supply chain Product Range The main lines
Scarves & gloves
Apparel at Zara store ranges from $20 to $180 Amancio Ortega Aona First Zara Store (La Coruna, Spain) Anonymous, . (2005). How zara fashions its supply chain: Home is where the heart is. Strategic Direction, 21(10), 28-31.
Ghemawat, P., & Nueno, J. (2006). Zara: Fast bashion. Retrieved from http://researchingsustainability.files.wordpress.com/2012/01/zara-harvard-case.pdf
Inditex. (2011, December 14). Inditex group. Retrieved from http://www.inditex.com/en
Kunz, G. I., & Garner, M. B. (2012). Going global, the textile and apparel industry. (Second ed.). New York City: Fairchild Books
Tokatli, N. (2008). Global sourcing: Insights from the global clothing industry--the case of zara, a fast fashion retailer. Journal of Economic Geography, 8(1), 21-38. References