Managing Retailing, Wholesaling & Logistics

Anne Stam, Febrini Wulandari & Irwan Arfandi B.

Master of Management Gadjah Mada University

Brief Summary
Why Zara?
Marketing Strategy Focus
Zara Vertical Integration
Production ?
Store Location All Around The World
Advantages from Using Single
Distribution Centre ?

COMPANY PROFILES

Zara es la tienda de cadena del

grupo
Inditex
propiedad
de
magnate espaol Amancio Ortega,
que tambin es propietaria de
marcas como Massimo Dutti, Pull
and Bear, Bershka, Oysho, Uterqe
y Stradivarius. El grupo tiene su
sede en A Corua, Espaa, donde
la primera tienda Zara abri en
1975.

Zara ha resistido a la tendencia de

toda la industria al transferir
produccin de moda rpida a los
pases de bajo costo. Tal vez su
estrategia ms inslito fue su
poltica de cero publicidad; la
compaa
prefiri
invertir
un
porcentaje de los ingresos en la
apertura de nuevas tiendas en su
lugar

Main Issues
The elements supporting Zaras business structure and strategy are also
greatly interlinked and interdependent. The following three factors stand
out:
Extensive market research providing a constant stream of inputs into
the product development process, rather than in batches or discrete
seasons.
Locating various business function in close proximity of the
headquarters, and tight control, allows the various functions to
coordinate and take joint-decision very quickly. Control also refers to
early investment in raw material, and direct or indirect ownership of
processing and production capacities. These provide the capability to
respond very quickly to the market research-influenced decions.
Communication and information Technology are absolutely vital to
managing the constant interface of various and management of the
huge variety of product information.

And also...
How Zara manage the strategy of
distribution
and
vertical
integration ?

Problem Statement
On which way can vertical integration
of zara be an advantage for the
company?
Cutting cost because they do not outsource
any channel.
Cutting time, more faster, effective, and
efficient.
Avoid conflicts emerge from different
channels.

What to do before
Target market
Zaras target market is people from
teens to adults, men and women.
Product assortment
Zara is broadly and deeply assorted.
Procurement
Establishing merchandise sources,
policies and practices.
Prices
Zara product price is affordable
Services
Prepurchase service, postpurchase
service, ancilary service.

Store atmosphere
Zara stores athmosphere is
high end but
classy, high lighting, no pictures
on the
wall.
Store activities and experiences
Stay update through the
website.
Communications
No advertising, but free press is
good
advertising.
Location decision
Zara locates themselves in
central
business districts with as many
outlets
as possible.

Overall about Zaras Vertical Integration

Zara manufactures and distributes

products in small batches. Instead of
relying on outside partners, the
company
manages
all
design,
warehousing,
distribution,
and
logistics functions itself

Strategic Advantages
Zara has been able to
achieve
excellent
financial status due to
its core competencies
that provide the chain
with
a
competitive
advantage
over
traditional retailers in
the industry

Zara is an apparel chain that works

differently
from
traditional
retailers.
Generally, a traditional retailer outsources
all of its production while focusing on
distributing and retailing those goods. This
is due to the fact that the global apparel
industry is highly-labor intensive rather
than capital intensive

Zara is a chain that has

developed a successful
diverse method of doing
business in the fashion
industry. Zara by working
through the whole value
chain is very vertically
integrated
and
highly
capital intensive

Vertical Integration
a distinctive feature of Zaras
business model, has allowed the
company to successfully develop
a strong merchandising strategy.
This strategy has led Zara to
create a climate of scarcity and
opportunity as well as a fastfashion
system.
Zara
manufactures 60% of its own
products. By owning its in-house
production, Zara is able to be
flexible in the variety, amount,
and frequency of the new styles
they produce

Zaras in-house production purposely

creates a rapid product turnover
since its runs are limited and
inventories are strictly controlled.
This rapid product turnover creates a
climate of scarcity and opportunity in
Zaras retail stores

Human Resource goes Better

Zaras unique quick response system,

composed of human resources as well as
information technology, allows Zara to
respond to the demand of its consumer better
than the competition. Zara, who focuses on
the ultimate consumer, places more
emphasis on using backward vertical
integration to be a very quick fashion follower
than to achieve manufacturing efficiencies

Zara has human resource teams in the

retail and manufacturing environment that
work exclusively toward this goal. In the
manufacturing
environment,
Zaras
product
development
teams
are
responsible for attending high-fashion fairs
and exhibitions to translate the latest
trends of the season into their designs.

In The Retail Environment

Zaras managers and sales

associates are in charge of
transmitting
the
sales
analysis, the product life
cycles, and the store trends
to the designers. This allows
the designers in Spain to
develop the right products
within the season to meet
consumer demand

Others Zaras Environment

Accelerated IT software to transfer

spesific communication and design
Zara Centralized distribution facility,
Zaras internally or externally
produced merchandise goes to the
distribution center
Targeting a broad market to
international advantages over its
competitors

Extended information :
Specific Zaras Target Market

Zaras target market is very broad

because they do not define their
target by segmenting ages and
lifestyles as traditional retailers do
Zaras target market is a young,
educated one that likes fashion and
is sensitive to fashion

Others Question for Zaras ?

On which way can the fact that
zara has a single distribution
centre be an advantage?
Centralized control, avoid
misunderstanding or conflicts.
Manageable time scheduling, focused
on one rather than managing several
different time schedules.
On which way can this be an
disadvantage?
Diseconomic of scale in long term,
the costs is getting higher and higher.
Because of managing distributions on
their own, designing and production
process might not be in its optimum
level.

Recommendation
Design
Cooperate with vary range of designers so Zara can maintain its competitive
advantage to be the fast fashion but remain more and more creative.
Production
Cooperate with any channel of production all over the world so new
improvements in operation technology can be applied into Zara instead of
keep using the old ones.
Distribution
Making more distribution centres so they will enable Zara to be more faster,
effective, and efficient in distributing their products to the retailers.
Advertising
Advertising might be important in the future when competitors are becoming
more competitive and demands are declining.