Inditex in India - a Closer Look at Zara’s Indian Experience

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INDITEX IN INDIA

A Closer Look at Zara’s Indian Experience

By

Aravindan Chandrasekaran

Roll No: EPGCSM-09-05

A PROJECT REPORT

Submitted to

PROF. P.RAMESHAM

FACULTY OF INTERNATIONAL BUSINESS

EXECUTIVE POST GRADUATE PROGRAM

STRATEGY MANAGEMENT

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INDIAN INSTITUTE OF MANAGEMENT

KOZHIKODE

Apr, 2017

Table of Contents

Abstract        3

        4

Inditex – The Group        4

Zara – The Brand        5

Zara’s Modus Operandi:        5

Zara in 2016        6

Three Decade Experience – The Global Strategies that works locally        7

Zara’s strategies – What makes this brand so successful        7

        10

Trent Retail – A Background        10

Indian Fashion Retail – The Changing Landscape        11

Factors Influencing the Changing India Fashion Landscape        12

Zara in India – The Desi Challenges        13

        15

Conclusion        16

        17

Abstract

"The entry in the Indian market has a significant strategic importance for Inditex. India is one of the top priorities in the Asia region where our retail offering has been very well received," said Jesus Echeveria Hernandez, Chief Communication Officer at Inditex Group said while commenting about the launch of first Zara store in New Delhi on 29 May 2010.  

Inditex is a fashion retailer dates to 1963 when it started life in a small workshop making women's clothing. Its first store was opened in the centre of La Coruña, Spain, after 12 years of work by Amancio Ortega Gaona, Inditex's founder. Inditex flagship store is Zara, but it also owns the chains Zara Home, Massimo Dutti, Bershka, Oysho, Pull and Bear, Stradivarius and Uterqüe.

With Indian Fashion and the Retail industry booming, Zara has seen a phenomenal success in the last 7 years. However, Zara’s success is merely not result of market condition but also its ability to chase fashion trends around the world, move a catwalk design from the design stage to shop floor in a span of two weeks and launch new lines in the quickest possible time with limited scope for reorders.

The case study is an attempt to unravel Zara’s Indian Journey with the following perspective

• Inditex India Entry through FDI Mode – A Joint Venture with Trent Limited, a Tata Group company, a highly recognized clothing line distributor
• How Zara handled Indian Demographic and Cultural Challenges
• How Zara used its unique distribution strategy to gradually adapt to the Indian market.
• How Inditex used its Zara’s India Experience to launch its premium brand Inditex launched stores for its second brand Maussimo Dutti

The case study also offers a very comprehensive overview of Zara in Indian Fashion Retail Context comparing its performance with Global Competition in India. This is aimed at understanding the opportunities from the current context and way ahead for Inditex.

Inditex & Zara – The Group and The Brand  

Inditex – The Group

The world’s largest fashion retailer Inditex S.A., known better for its brand Zara opened its first store in the centre of La Coruña, Spain, after 12 years of work by Amancio Ortega Gaona, Inditex's founder, as a textiles maker in 1975.  Inditex, however was incorporated as Group’s holding company only during 1985-1987.

Inditex operates with nine sales formats - Zara, Pull and Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home, Uterqüe and Kiddy's Class - boasting 7000 + stores in 90 countries. The Inditex Group is comprised of over one hundred companies associated with the business of textile design, manufacturing and distribution.

The company has been putting up a staggering performance Year on Year expanding into new geographies every year. Inditex's net sales rose 12% to €23.3bn in FY16 with Net profit totaled to €3.2 billion, year-on-year growth of 10%.

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The key to Inditex’s success has been the uniqueness of its management model based on innovation and flexibility. Creativity and quality design together with a rapid response to market demands- has resulted in fast international expansion and excellent response to their sales concepts.

As Echeveria says "In this trendy world, we find it to be crucial to learn from customers and quickly respond to their requirements,". It’s this customer focus that has kept the group and its brand growing despite the Global Economic Slowdown.

The Group's brands strive to sell fashionable products of the highest quality. Inditex is committed to its customers; which means that its more than 162,000-strong workforce is focused on staying true to its word. A state of the art logistics system centered in Spain helps deliver new products to all the Group's stores twice weekly to meet our customers' needs.

Zara – The Brand

Inditex has several brands – Zara, Pull&Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home and Uterqüe – all of which share one sales and management approach with a focus on customer service.

Zara as a concept and brand is designed to cater fashion clothing for men, women and children. Its widely acknowledged that Zara needs just two weeks to develop a new product and get it to stores, compared with a six-month industry average, and launches around 10,000 new designs each year.

Zara’s Modus Operandi:

• Zara’s design team monitors fashion trends and store sales. Based on this they come up with 1,000 designs a month.
• They send these out for manufacturing around the world.
• Completed designs are shipped back to Spain.
• Local store managers in each country tell the Zara head office in Spain what the store needs and how much.
• The design team then flies or trucks out consignments for each of Zara’s over 1,608 stores based on local needs and trends. A store gets consignments twice a week.

Zara in 2016         

Given below is the breakup of Inditex’s brand based on presence and annual sales. Zara accounts to about 67% of the Group’s sale

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Three Decade Experience – The Global Strategies that works locally

Zara’s strategies – What makes this brand so successful

1. No World Class Designers – Copy World Class Designs

Zara doesn’t hire world-class designers but instead politely copies them. Then it relies on a global network of shopper-feedback to tweak their designs. Corporate HQ absorbs thousands of comments and sends tweaks to their manufacturers in Europe and Northern Africa, who literally sew the feedback into their next line of clothes.

1. Now or Never Choice – Influence customer’s Decision Making Process

The stock changes so quickly that shoppers are motivated with a “now-or-never” choice each time they try on a blouse that won’t be in-store in a few weeks. It’s the user-generated approach to fast fashion.