Zara

There are many factors that contribute to the success of Zara’s model. By employing 200

designers with the expected of adapting haute-couture for the mass market, Zara sits on the

cutting edge of design. Zara produces about 11,000 styles each year, which is 5x’s more than

other retailers, encouraging commercial-oriented experimentation. With in-house manufacturing

Zara has the ability to control the production quality, efficiency and timeframe due to its in-house

capabilities. With this type of production processes in place fabric procurement and garment

assembly time is dramatically reduced, so Zara can respond to customer demand, limiting price

reductions/on-sale items and quantity on items that are not selling. Normally markdowns for

retailers in Zara’s category are 30% to 40% as opposed to Zara’s average of 15% to 20%. In-

House manufacturing allows for production capacity to be easily modified in response to market

demand. Zara only commits to production of 50-60% of its garments in advance, allowing them

to manufacture items on a rolling basis during the season. Another strategy used by Zara is to

create unsatisfied demand on purpose in order to create a culture where the customer thinks that

he or she must get it today or else not find it tomorrow. Distribution is another key component of

Zara’s success. Shipments are made out of the distribution center twice a week so no inventory

is held centrally, and there is almost no inventory at stores that is not selling on the floors. Each

store receives new inventory several times a week. The freshness in assortment of merchandise

makes customers visit the store more regularly in anticipation of newly replenished stock.