Zara : Fast Fashion Case Study

Zara’s Future: A Company’s Growth Analysis

The Issue:

The main concern for Inditex is which potential market growth will most effectively increase its net margin, and easily implement into its established successful, business model.

Thriving in Italy’s Market:

Italy’s larger spending capita (E 1000) versus Spain (E 600) shows Inditex to be a valuable source of expansion. According to exhibit 17, Italy held the highest total sales of all the European countries at 63 billion. In comparison to Spain at 25 billion, Italy’s apparel spending outnumbers Spain by 38 billion or 39%. From Exhibit 2, we observe Italy’s labor cost in apparel were $7 higher than Spain’s $7 hourly wage, but it had a two dollar increase in value added at a total of $20 verse Spain’s $11. If Inditex were to increase its goal of 80 stores in the next 10 years making it have a .08% market share in Italy’s overall apparel market, and drawing that percentage from the 63 billion in sales, somewhere in that 5.04 billion is there profit potential. This does not calculate any exact revenue number for Zara’s gross profit, but what it does show is that Italy’s apparel consumption has very promising benefits that far outweigh any risks for Inditex’s net margin. Italy’s apparel market has 61% of independent stores versus 45% in Spain, giving Zara an upper advantage in competing with other larger lower priced, quality fashion chain stores (19). Overall, Italy’s fashion-forward target-market, larger spending capita, nearby proximity to Zara’s headquarters and apparel production resources makes for an exceptionally assuring option for Inditex’s future expansion of Zara.

Further Expansion into Europe:

Zara’s business model relies heavily on its main distribution center, and production turn-around time. Inditex can better accomplish these essential tasks by opening stores close enough to where operating and logistics costs are kept to a minimum. Exhibit 7 shows us that, similar to Italy, other...