Flexible Manufacturing & IT Makes Zara the World’s Largest Fashion Retailer

Pablo Valerio, International Business & IT Consultant | 1/11/2013 | 13 comments

Pablo Valerio
Manufacturers and retailers looking to model "just-in-time" manufacturing and logistics could do much worse than look at Zara.

Most people outside of Spain knew little or nothing about Zara, the now hugely successful fashion retailer, until about a decade ago. Owned by Spanish company Inditex, 37-year-old Zara overtook Gap as the biggest apparel retailer in the world in 2008. Now it has 5,887 retail stores -- 360 opened just last year -- and 116,110 employees in 86 countries.

There are several factors behind Inditex's success in the highly competitive fashion market:

Vertical integration: Inditex wants to keep store inventory to a minimum, and keep a fast turnaround of new products. This encourages customers to buy the product as soon as they see it in a store because the same product might not be there the next time, and Inditex does not always send stores the same product twice.

Customer feedback and fast response: The IT infrastructure of the company and fast logistics allows the company to deliver a sold-out product to a store in India in less than 48 hours.

Customers are encouraged by the sales staff to comment on products and give opinions about why they like or dislike any particular garment. Store managers collect this information daily and send it to headquarters, where it is evaluated by marketers and designers. Keeping the manufacturing of designs close to home enables a quick turnaround, from design to store in about three weeks.

Proximity to factories: Inditex does manufacture some clothing in Asia, but not to save cost. It is to save time in supplying the Asian market and to keep its own factories in Europe and North Africa free to respond quickly to customer demands.

Location: Inditex's investment in real estate is legendary; they own premium commercial space in many cities. Recently, the group purchased the building housing the newly-opened Apple store in Barcelona, considered to be the most expensive real estate in the city. They have opened Zara, Massimo Dutti, and other store brands in the vicinity of luxury neighbors, such as Gucci, Prada, and Cartier. According to The New York Times last November, Inditex paid $324 million last year to buy space at 666 Fifth Avenue, the most expensive retail space ever sold in Manhattan.

Interestingly, Zara retains part of its flexibility by choosing its markets carefully. The "just-in-time" approach leads them to largely ignore the lucrative American market. You can find Zara stores in cities such as Boston, New York, Los Angeles. and Chicago, but you can't find them in most malls. One reason is the larger clothing sizes necessary for the American market. "Zara to me is a European store for European style; it's very fashion forward. And what is the problem in America? They don't fit in the clothes. So why do it? Having to make larger sizes makes production so much more complex,” said Jesus Echevarria, in the New York Times story.

Zara's strategy in America may seem limiting in one aspect, but it is actually indicative of consistent decisions to align manufacturing and retail decisions to keep supply chains short, communication intimate, and provide fast response to the customer and to retail outlets.

CIOs looking to achieve similar results need to work with the CMO to align customer communications and marketing while working with the CFO, COO, and CEO to align the manufacturing strategy with the strategy as a whole. It is Zara's close alignment and focus on short lines of supply and communication that make it so quick and flexible. Every CIO can make changes like these "just in time" to save their company.

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Taimoor Zubair   Flexible Manufacturing & IT Makes Zara the World’s Largest Fashion Retailer   1/24/2013 11:43:40 AM
attractive appeal
'Delivery within a short time is a very attractive appeal for your potential customers. As an online shopping lover, If i like two items by different companies i would definitely go for the one which asserts over 'just in time' delivery of a product. No wonder they are so successful , it's a great retail strategy. i expect Zara to expand even more in future .
Susan Llewelyn Leach   Flexible Manufacturing & IT Makes Zara the World’s Largest Fashion Retailer   1/21/2013 5:03:06 AM
Zara groupie
I am a huge fan of Zara and was fascinated to read Pablo's blog and The New York Times's longer exposé. But it was hard to believe that they really changed their displays and merchandise at the pace they claimed. So I decided to test that assertion.

There are three huge Zara stories within walking distance of our flat in Barcelona. I visited the main store on Paseo de Gracia -- a gorgeous building on the same street as the city's most highend fashion stores (Prada, Versace, Gucci etc.) -- and took a good look at what was on the tables and hanging along the wall. Then I went back two week's later. And I was shocked. Almost everything had changed. A few items that had caught my eye the first time were gone. It was almost all fresh merchandise.

On one level I could see it being quite frustrating never to find the same stuff twice. But it certainly puts an end to procrastination! 


vnewman   Flexible Manufacturing & IT Makes Zara the World’s Largest Fashion Retailer   1/21/2013 2:50:37 AM
Re: First steps for the retail CIO
I didn't realize that about the advertising @Pablo - but I can see how mere word of mouth would be enough to sustain Zara's success.  Not everyone I know knows Zara but the fashionable ones do and they love it for the reasons you cite: they're fashion forward, the quality is great and the price points are reasonable.  
Susan Nunziata   Flexible Manufacturing & IT Makes Zara the World’s Largest Fashion Retailer   1/18/2013 12:05:29 AM
Re: First steps for the retail CIO
@Pablo: Thanks, that's sound advice to give CIOs a good jumping-off point. You're right it behooves the CIO to keep the lines of communication open and make sure they lend their expertise to such initiatives. Otherwise they risk being left out of the loop which could ultimately harm their career.
Pablo Valerio   Flexible Manufacturing & IT Makes Zara the World’s Largest Fashion Retailer   1/16/2013 9:31:08 AM
Re: First steps for the retail CIO
@vnewman, interesting comparison. I believe this is the key to Zara's success: flexibilty, quick response and innovation across all parts of the organization.

One of their initial "disruptions" was the lack of advertisement. They claimed that they did not advertise because their showcase windows were the best possible marketing tool. Looks like it worked!
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vnewman   Flexible Manufacturing & IT Makes Zara the World’s Largest Fashion Retailer   1/16/2013 3:57:11 AM
Re: First steps for the retail CIO
I used to work for a retailer with over 1200 stores across America - they recently filed bankruptcy and sold off all the stores to another chain.  One of the biggest issues was having such a long lead-time - our store inventory was planned out a year in advance since production was in Hong Kong and they needed that long to make the release date.  Sometimes, by the time the merchandise would hit, the trend or style would be almost over...you can see why they finally went out of business....
Pablo Valerio   Flexible Manufacturing & IT Makes Zara the World’s Largest Fashion Retailer   1/15/2013 5:57:25 AM
Re: First steps for the retail CIO
@Susan,I think the first step for any Retail CIO is to improve communication at all levels of the organization.

The key to Zara's success has been the ability of every employee, specially the sales staff on the floor of their shops, to communicate effectively with HQ customers' comments, desires and complains. This enables the company to react quickly and correct mistakes, or have a new model delivered in just a few weeks to the stores.

Also CIOs, together with operations, should look for improvements in the supply chain flexibility, and invest in the technology necessary to make it more efficient, especially just-in-time delivery and recycling of old inventory.
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Pubudu   Flexible Manufacturing & IT Makes Zara the World’s Largest Fashion Retailer   1/15/2013 12:00:19 AM
Re: Key to success
Yes, if a company can address all the 7P's in marketing they will definitely be thrive in market (Product, Price, Place Promotion, Physical evidence, People and Process) But I think they have to think about their web site again it is not attractive enough for a fashion retailer.
Susan Nunziata   Flexible Manufacturing & IT Makes Zara the World’s Largest Fashion Retailer   1/14/2013 7:39:09 PM
First steps for the retail CIO
Excellent example of a successful retail strategy. Can you give retail CIOs some advice on the first steps they should take toward collaboration in order to create this kind of flexible, just-in-time supply chain and retail environment? Also, which information technologies are most crucial to a retail strategy of this nature?
Pablo Valerio   Flexible Manufacturing & IT Makes Zara the World’s Largest Fashion Retailer   1/14/2013 12:48:22 PM
Re: Key to success
@Henrisha, Zara is what people in the fashion industry would call a "disruptor". They don't follow the normal rules of two-three collections a year.

Instead they change clothes all the time, and customers are used to walk to their stores and buy them because they won't find them again. Customers can always return their purchases if they are not happy.

Their focus is to be in the best shopping districts and traditional fashion brands fear them.
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