Zara

Case Summary of ZARA: Fast Fashion

Zara and the Global Apparel Industry

This case focuses on the Spanish retail giant, Inditex and how its largest retail chain Zara has been so successful through its simple business model of speed, flexibility, and high fashion. As of 2002, Inditex operated six separate chains: Zara, Massimo Dutti, Pull & Bear, Bershka, Stradivarius, and Oysho. Each chain operates independently and is responsible for its own strategy, product design, sourcing and manufacturing, distribution, image, personnel, and financial results. Zara is by far the largest, most profitable, and most internationalized of the chains. At the end of 2001, Zara operated 507 stores around the world (40% of Inditex), posted EBIT of 441M Euros (85% of Inditex), and sales of 2,477M Euros (76% of Inditex). Currently, H&M is Inditex’s major competitor. The ratio analysis below shows H&M and Inditex’s competitive standing in the industry.

　                            Gap                      H&M                Benetton                       Inditex

Net Margin             -0.06%                    9.60%                 7.05%                        10.46%

Asset Turnover         1.82                       1.96                    0.74                            1.25

ROA                       -0.11%                  18.78%                 5.25%                        13.05%

ROE                       -0.27%                  24.85%                11.93%                       22.88%

Zara’s success is based on a business system that depends on vertical integration, in-house production, quick response, one centralized distribution center, and low advertising cost all of which made it so successful thus far. Powered by Zara’s success, Inditex has expanded into 39 countries, making it one of the most global retailers in the world. But in 2002, it faces the important questions concerning its future growth. There were significant local variation in customers’ attributes...