Zara Case

Jose Maria Castellano (CEO, Inditex) and Xan Salgado Badas (IT, Inditex) must decide whether to upgrade Zara’s IT infrastructure and capabilities.

Zara Business Model

Zara a fashion retailer within the apparel industry was founded by Amancio Ortega. He opened their first store in 1975 in La Coruna. Ten years later, Inditex was formed as a holding company atop Zara. Jose Maria Castellano became Inditex’s CEO in 1997.

Zara’s original business idea is to link customer demand to manufacturing and link manufacturing to distribution.

Speed and Decision Making

Their target customers are young, fashion conscious city dwellers. They respond quickly to customer demands and take advantage of a decentralized decision making process by providing and trusting the judgment of their employees throughout the company.

Marketing, Merchandising, and Advertising

The marketing expenditure on advertising is minimal and little promotion ads are run except for the announcement of new stores and their twice yearly sales. More of their focus in spent on finding prime locations for their retail stores and typically each store layouts are changed every 4-5 yrs.

Garment pricing is set by the product managers. The prices are set for the Spanish market in Euros and tagged in La Coruna. Prices for other countries were set at a fixed percentage of this baseline, taking into account distribution costs and market conditions.

Zara fashion are not designed and manufactured to be highly durable and in fact have a short life span. 75% of the merchandise is changed every 3-4 weeks. The do not sell their clothes over the internet as the DC are not designed for small orders and shipping to customers. They also will have a difficult time managing the RMAs. They have a current in store return of 5% compared to the competitors 50-60%.

Financials and Growth

There are 550 stores out of 1550 Inditex supply chain in 45 countries.