Case Study
Zara Model O
ver the past couple of decades, high street fashion house Zara has redefined the fashion industry. Here, Tom Peterson tells you how
you can profit from using the principals of Europe’s greatest trend setter.
The ideology of the Zara is to be the first to react to changing trends. It is claimed that the fashion house only need two weeks from design until it appears in stores. Key to this is the company’s decision to buck international trends from within the fashion industry and keep over 50% of its production lines and designers in Spain. Although Zara loses out on the low-cost production from Africa and Asia, the decision to keep their business local allows them to produce and distribute over 11,000 new designs per annum. Recently Daniel Piette, Fashion Director for Louis Vuitton has described the fashion chain as “possibly the most innovative and devastating retailer in the world”.
In terms of a competitive advantage, Zara’s production of 11,000 distinctive products dwarfs its key competitors by as much as 9,000 items per annum. However, it is the lag time from design to production which truly sets them apart. This is made possible because Zara have complete control of the production and design process. It designs, produces and distributes seamlessly worldwide.
The model is not new, nor is Zara’s approach a new found theory. Founded in 1975 for just €30, the company that owns Zara, Inditex, now boasts a market-cap of €43.7 billion and has just overtaken Santander’s market-cap valuation of €43.66 billion. Considering Zara does not spend any money on advertising, this is a truly impressive feat.
Being disruptive is in Zara’s nature. When the company opened trading in the UK the Zara model forced Sir Philip Green to cut down his production time from 9 to 6 weeks. This shows a growing shift in the fashion market from price v quality model to trend reaction and speed. If it continues then China and India may miss out on these types of contracts as they will be unable to compete with delivery times from within Europe. Already, both H&M and Mango have reduced their product distribution time to just 3 weeks.
Tailoring the Zara model to your business
Don’t predict, react! Nobody knows the future. The way to be first to market does not always rely on a product that the world has never seen, as proved by Zara. It is the ability to react to consumer demands as they occur, giving them first mover advantage.
Zara conducts the majority of its market research with those on the ground. They find out what is selling, gain feedback from store managers and conduct customer surveys at University campuses which provide vital data. This is done in order to establish what is ‘hot’ and which items can be discarded from their collection.
It is crucial to continually review what your client base wants. It is those who have an open dialogue with their customers who truly know their company’s SWOT (Strengths, Weaknesses, Opportunities and Threats) and how to best move to the market’s needs.
Be decisive
Once the market research is conducted, designers begin developing the new season’s collections. The commercial team work with them to identify which products will receive new lines or tweaks in order to meet demand. Their most important task however is choosing the price points of each garment/product. Zara places as much effort into researching consumer trends as they do into their materials.
When committing to a new product or offering, keep your market research close. The research is what your clients want and it ensures your product works. Remember, correct market research is the foundation of great products.
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