Innovation in Zara

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Executive Summary

ZARA SA is a spanish fast fashion (clothes and accessories) retailer based in Arteixo in Galicia and is the main brand of the Inditex Group, the world’s largest apparel retailer. With its dramatic introduction of the concept of “FAST FASHION” retail since it was founded, it aspires to create responsible passion for fashion amongst a broad spectrum of consumers, spread across different cultures and age groups. The company has achieved high rates of growth due to its innovative quick response process to adapting to the ongoing fashion. Thus, the key factor that has contributed to its success is its ability to put customers first.

Reason for Choosing ZARA

Zara has the best business model in the apparel industry and is expected to deliver double-digit earnings growth per year over the next five years even when the overall retail industry is in a state of turmoil. Thus, we would like to understand its differentiated business model and activity fit that has given it a significant competitive advantage and has pushed its growth for the past 40 years.

Service Innovation by ZARA

Zara sells medium quality fashion clothing at affordable prices enabled by its key operational theme Agility. Its product development, manufacturing, and supply chain processes – some of which are a radical departure from the normal practices in fast fashion – are expressly designed and implemented for agility. Also, the ability to come up with a quick-response is a key factor to Zara’s success. The process has been designed in such a way that the various functions within the business system such as designing, sourcing and manufacturing, distribution and retailing are all done by the company. Key success factors are:

• Vertical integration
• Quick new product introduction capability
• High product variability
• Small lot manufacturing
• Low inventory with frequent replenishment
• Huge investment in IT to track customer preferences

How is it different from the current market and industry trends?

The biggest strategic competitive advantage comes through their ability to keep pace with the ever changing fashion trends and being affordable at the same time. While most fashion retailers take at least 6 months to get new trends to their store, Zara makes sure to offer these design to customers in a span of a week or two. To complement this strategy, the company also believes in keeping it supplies short which not only gives it a chance to reduce its risk per design, but offer more variety to the customer.