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A Case Study on Zara's Digital Transformation

This case study examines Zara’s current retail strategy and digital transformation. It details Zara’s current in-store and eCommerce retail strategy, the impact of digital on the retail environment and customer experience, and the growth opportunity provided by eCommerce. By providing a competitive analysis of the current market, this paper presents key opportunities, strategic questions, and possible solutions for retail brands to improve their digital strategy. This paper received First Class Honors in the Digital Marketing Strategy course at Trinity Business School.

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The successful implementation of an integrated supply chain strategy enhances total control over the operations and thus enhances speed and flexibility. The objective of this study is twofold: first to identify the constituents that mold the fast fashion retailing business model, and second to discuss how global leader of fast fashion retailing Inditex-Zara's product offering is strongly supported by integration of various supply chain operations. The findings suggest that vertical integration through ownership of various operational stages including product design and development, production operation, logistics and distribution channel; appropriate sourcing strategy to meet product needs; application of process/product modularity practices in product design, material procurement and manufacturing to ensure manufacturing flexibility; flexible logistics capability; and all of these seamlessly integrated and coordinated by a centralized IT infrastructure can significantly raise overall supply chain flexibility and responsiveness. Inditex-Zara's super-responsive supply chain reduces 'bullwhip effect', order-to-delivery lead time to stores, ensures lean inventory and high level of responsiveness to adapt and deliver products to stores with latest fashion trends and customer feedbacks at a rapid speed. Thus Inditex-Zara is able to successfully counter the negative effects of short product life cycles, high product variety, demand uncertainty and thus able to closely match product supply to the stores with market demand. This contributes to lower inventory backlogs; avoid mark-down losses and/or inventory stock out.

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INDITEX, fashion leader case study of ZARA in the transformation era:

The superiority in Inditex's Digital Transformation strategy started in 2012 by building an integrated store system with an online sales platform. Underscored in the past 2020, Inditex has been able to maintain its leadership and generate new growth.

Spanish multinational retailer INDITEX, one of the world's largest fashion retailers has eight brands: Zara, Pull&Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home, and Uterqüe.

Sold in 216 markets through an online platform. with 6,654 stores in 96 countries.

Founded in 1963, based on “customer at the center of everything we do” from scratch with a different business model called ‘Fit to Demand’, revolutionizing the fashion industry with Fast Fashion presentation.

In 1988, Inditex kicked off a fashion revolution where other players focused on mass production for a cost advantage. Instead, Zara focused on its so-called “fit to demand” business model that produced a small number of products but there are various designs and fast production to meet the needs of consumers quickly and at an affordable price. 

Zara's business model also allows it to bring more products to market, with Zara launching up to 20 new collections per year. This is in contrast to other apparel brands that are bound by the seasonal calendar The new collection may only be released four times a year.

Zara's success has enabled new competitors to copy Zara's business model, eventually designing and producing products faster and cheaper than Zara with its Ultra Fast Fashion concept. These companies include Shein, Boohoo, Fashion Nova and ASOS

Inditex’s challenges is how to stay ahead as a FAST FASHION LEADER in this transformative era?

Inditex has been innovating its digital transformation strategy since 2012 by building an integrated store system with an online sales platform by focusing on the customer as the center of recognizing and delivering what customers really want no matter where the customer is. Inditex pays close attention to detail and creates technological innovations and cutting-edge logistics investments in every part of the value chain whether they design, manufacture, or distribute products. Inditex also develops ways to improve operations and customer service and the quality of the customer experience which helps to identify and meet customer needs and also always improves the store and develops the online platform with new designs.

Starting from a change in operations which was previously tracked by consumer behavior data from sales data and fashion trends collected by store managers around the world every two weeks.

To Track products from the production process, delivery to the sale of every piece around the world instantly with the introduction of an RFID chip system on every product in 2014, Zara was able to as well as collect data from every product from both physical stores and online sales channels to create a more efficient customer shopping experience than ever before.

Zara be able to gain more understanding of what customers want and can meet their needs better , seamlessly from the data obtained. This allows Inditex's 700+ designers to create 60,000 different works. Merchants around the world receive two collections per week and this makes Zara's "fit to demand" capabilities faster and more stable and able to get ahead of competitors.

In 2017, Zara also launched a new pop-up store, fused with an online ordering service. 

Along with the Smart Mirrors service that can present and display the size of hair and jewelry that is suitable for each person including the return or replacement service to the customer as well as other services that will create a better shopping experience for customers.

Not only that, but in June 2020 Zara also announced plans for Digital Transformation. 

In the next two years, Zara plans to invest up to 1 billion Euros (about 38 billion Baht) in online business development, and another 1.7 billion Euros (about 65 billion Baht) will be investments to upgrade a platform to connect both online and storefront systems. 

This allows shoppers to have a great experience with Zara on any device, anywhere, anytime.

Isla Pablo, Inditex's CEO

" Storefront will continue to play a key role in Inditex's strategy and will play a greater role in improving online sales. Due to our digitization and ability to reach customers from the best locations around the world, overall, our overriding goal between 2020 and 2022 is to accelerate the full implementation of our integrated store concept. This is driven by the idea of being able to serve our customers without interruption, wherever our customers are, on any device and at any time of the day."

S ource: www.inditex.com , Inditex Annual Report 2020 , Mahadeva Matt Mani and Paul Leinwand (2021) [Beyond Digital: How Great Leaders Transform Their Organizations and Shape the Future]

Decode ZARA step-by-step business transformation with 9 boxes of Digital Transformation Canvas

Business Transformation Case Study Decode business transformation with DIGITAL TRANSFORMATION CANVAS© from TRANSFORMER PLAYBOOK ... For More case studies click here

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Zara: An Integrated Store and Online Model (A)

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Zara: An Integrated Store and Online Model (A) and (B)

• Zara: An Integrated Store and Online Model (B)  By: Antonio Moreno
• Zara: An Integrated Store and Online Model (A) and (B)  By: Antonio Moreno and Anibha Singh
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Business Model Innovation: Zara : Creating a Disruptive Innovation

Naresh Sekar

Zara, a leading global fashion retailer, is renowned for its innovative business model, which has revolutionized the fashion industry. By implementing a fast-fashion approach, Zara has managed to significantly reduce the time it takes to design, produce, and deliver new clothing lines. This case study explores Zara’s business model innovation, detailing the timeline of key events, analyzing critical moments, and extracting valuable lessons for future innovators.

Background Information

Traditional Fashion Industry

Before Zara’s rise, the fashion industry operated on a seasonal cycle with long lead times. Designers would showcase their collections months in advance, and retailers would place orders based on these shows. This process resulted in high inventory levels, significant markdowns on unsold items, and limited responsiveness to emerging trends.

Emergence of Fast Fashion

Fast fashion emerged as a response to the inefficiencies of the traditional fashion model. It focuses on rapid production cycles, allowing retailers to quickly respond to the latest fashion trends and consumer demands. Fast fashion brands like Zara prioritize speed and flexibility, enabling them to deliver new styles…

Written by Naresh Sekar

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The restoration in Zara retailer gross sales and the robust momentum in on-line gross sales are the outcomes of the Group’s strategic dedication to high quality throughout all phases: design, product, retailer house and repair requirements.

The collections created by the design workforce have been met with an enthusiastic response from prospects within the third quarter, which marks the beginning of the autumn-winter season. This engagement with prospects was bolstered by the new expertise instruments being enabled by Inditex’s distinctive built-in store-online platform displaying how involved Zara shops are in adopting digital transformation.

Inditex Open Platform

The Group continued to make progress on this technique all through the nine-month reporting interval, growing its proprietary software program, the  Inditex Open Platform , increasing its  built-in inventory administration  system, which is now operational in 6,000 shops, and providing the ‘ Retailer Mode ’, a digital characteristic at present provided to prospects by Zara and Massimo Dutti which reinforces the power to interact with trend in shops.

As a part of this transformation, the Group’s manufacturers proceed to open bigger  shops outfitted with next-generation expertise , absorbing smaller items within the course of. As of the October shut, the Group had 7,197 shops positioned in prime procuring areas everywhere in the world.

Zara retailer on Wangfujing

Throughout the nine-month reporting interval, the Group opened shops in 25 markets, of notice was the launch in October of the enduring  Zara retailer on Wangfujing (Beijing) , one of many Chinese language capital’s most important shopping streets. With over 3,500 sq. metres unfold over 4 storeys, this new flagship retailer is now our largest in Asia.

The shop, which meets all the Group’s newest  eco-efficiency requirements , showcases the strategic integration of retailer and on-line gross sales with a devoted space for the fulfilment of on-line orders.

Retailer opening within the Kingdom Heart in Riyadh

Different highlights for Zara included retailer opening within the Kingdom Heart in Riyadh (Saudi Arabia) and the reopening within the Bahía Sur procuring centre in Cadiz (Spain). Pull&Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Dwelling and Uterqüe in the meantime launched new shops in  China, Russia, Romania, Colombia, Mexico, the Philippines, Indonesia and Kazakhstan , amongst different locations, and reopened current shops in nations corresponding to The Netherlands, Germany and France throughout the reporting interval.

In parallel, all of the  Inditex manufacturers continued to increase the attain of their on-line sales platforms , to the extent that their numerous collections at the moment are accessible on-line in additional than  200 markets .

Zara’s on-line gross sales

Zara’s on-line gross sales are already  built-in into its native retailer networks in some  85 markets , complemented by on-line gross sales in 106 extra markets by way of Zara.com/ww. Zara.com launched in 12 new markets, together with Chile, Georgia, Kazakhstan, Montenegro, Costa Rica, Honduras, Guatemala, Nicaragua, El Salvador and Tunisia throughout the quarter. Subsequently, throughout the fourth quarter, the built-in platform has been launched in Iceland, Puerto Rico, Panama and Cyprus, having been rolled out in Argentina, Peru, Uruguay, Paraguay, Bosnia-Herzegovina, Albania or Algeria throughout the first two quarters of the yr.

The remainder of the manufacturers having been following go well with, deploying their built-in on-line choices in a bunch of markets, together with  Serbia, Ukraine, Israel, Colombia, Saudi Arabia, Kuwait, Qatar, United Arab Emirates, Egypt, South Africa and Morocco , whereas Lefties launched its on-line platform in Spain and Portugal.

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ZARA: Achieving the “Fast” in Fast Fashion through Analytics

How does fast fashion make any business sense? Zara uses intensive data and analytics to manage a tight supply chain and give customers exactly what they want.

Introduction

Zara’s parent company Inditex has managed to thrive in the last decade while several other fashion retailers have faced declining sales or stagnant growth. Inditex has grown over 220% in annual revenue since 2004, more than its key competitors like H&M, Gap, or Banana Republic (1).

The value of a fast fashion brand is to bring the latest designs and “trendiest trends” into the market as quickly as possible, preferably as soon as they became hot on the catwalk, and to provide these at a reasonable price. The traditional fashion industry is not well equipped to provide such value as it operates on a bi-annual or seasonal basis, with long production lead times due to outsourced manufacturing to low cost-centers. Zara has turned the industry on its head by using data and analytics to track demand on a real-time, localized basis and push new inventory in response to customer pull. This enables them to manage one of the most efficient supply chains in the fashion industry, and to create the fast fashion category as a market leader.

Pathways to a Just Digital Future

How Zara Uses Data

Inditex is a mammoth retailer, producing over 840 million garments in a year, the majority of which are sold by Zara (2). Every item of clothing is tagged with an RFID microchip before it leaves a centralized warehouse, which enables them to track that piece of inventory until it is sold to a customer (3). The data about the sale of each SKU, inventory levels in each store, and the speed at which a particular SKU moves from the shelf to the POS is sent on a real time basis to Inditex’s central data processing center (see picture below). This center is open 24 hours a day and collects information from all 6000+ Inditex stores across 80+ countries and is used by teams for inventory management, distribution, design and customer service improvements (4).

Zara’s Data Processing Center receives real-time data from around the world (4).

When the apparel arrives in store, RFID enables the stockist to determine which items need replenishing and where they are located, which has made their inventory and stock takes 80% faster than before (3). If a customer needs a particular SKU, salespeople are able to serve them better by locating it immediately in store or at a nearby location. Moreover, every Zara location receives inventory replenishments twice a week, which is tailored to that stores real-time updates on SKU-level inventory data.

The sales tracking data is critical in enabling Zara to serve its customers with trends that they actually want, and eliminate designs that don’t have customer pull. Zara’s design team is an egalitarian team of over 350 designers that use inspiration from the catwalk to design apparel on daily basis. Every morning, they dive through the sales data from stores across the world to determine what items are selling and accordingly tailor their designs that day. They also receive qualitative feedback from empowered sales employees that send in feedback and customer sentiment on a daily basis to the central HQ e.g., “customers don’t like the zipper” or “she wishes it was longer” (1).

At the start of the planning process, Zara orders very small batches of any given design from their manufacturers (even just 4-6 of a shirt per store). The majority of Zara’s factories are located proximally in Europe and North Africa, enabling them to manufacture new designs close to home and ship them to their stores within 2-3 weeks. They then test these designs in store, and if the data suggests the designs take off, Zara can quickly order more inventory in the right sizes, in the locations that demanded it. Such store-level data allows Zara to be hyper-local in serving their customer’s needs – as tastes can vary on a neighborhood level. As Inditex’s communication director told the New York Times,

“ Neighborhoods share trends more than countries do. For example, the store on Fifth Avenue in Midtown New York is more similar to the store in Ginza, Tokyo, which is an elegant area that’s also touristic. And SoHo is closer to Shibuya, which is very trendy and young.” (5)

Unlike other retailers that may order inventory based on their hypotheses about tastes at a regional level, Zara is tailors its collections based on the exact zip code and demographic that a given location serves (5).

Zara’s Results vs. Competitors

Zara sells over 11,000 distinct items per year versus its competitors that carry 2,000 to 4,000. However Zara also boasts the lowest year-end inventory levels in the fashion industry. This lean working capital management offsets their higher production costs and enables them to boast rapid sales turnover rates.

At Zara, only 15% to 25% of a line is designed ahead of the season, and over 50% of items are designed and manufactured in the middle of a season based on what becomes popular (2). This is in direct contrast to a close competitor like H&M where 80% of designs are made ahead of the season, and 20% is done in real-time during the season (6). Most other retailers commit 100% of their designs ahead of a season, and are often left with excess inventory that they then have to discount heavily at season-end. Instead, Zara’s quick replenishment cycles create a sense of scarcity which might actually generate more demand:

“With Zara, you know that if you don’t buy it, right then and there, within 11 days the entire stock will change. You buy it now or never.” (5)

• https://www.bloomberg.com/news/articles/2016-11-23/zara-s-recipe-for-success-more-data-fewer-bosses
• http://www.digitalistmag.com/digital-supply-networks/2016/03/30/zaras-agile-supply-chain-is-source-of-competitive-advantage-04083335
• http://static.inditex.com/annual_report_2015/en/our-priorities/innovation-in-customer-services.php
• http://www.refinery29.com/2016/02/102423/zara-facts?utm_campaign=160322-zara-secrets&utm_content=everywhere&utm_medium=editorial&utm_source=email#slide-11
• http://www.nytimes.com/2012/11/11/magazine/how-zara-grew-into-the-worlds-largest-fashion-retailer.html?pagewanted=all
• https://erply.com/in-the-success-stories-of-hm-zara-ikea-and-walmart-luck-is-not-a-key-factor/

Student comments on ZARA: Achieving the “Fast” in Fast Fashion through Analytics

Great post Ravneet – I had never read about Zara’s extremely quick supply chain or hyper-local testing. I have a question for you about fast fashion in general, but especially for Zara since it produces and sells more distinct items than its competitors: it seems that many designers are not fond of the “runway-inspired” fashions sold at these stores and some have even sued stores for copying their designs. Do you think Zara and other brands like it are doing anything wrong, and if not, what recourse do designers have for “imitations” of their work?

Thanks for the post Ravneet. Zara and H&M are beacons of hope for a mostly distressed industry. Do you think Zara’s advantage could be sustained in the event of a full-on assault by the Amazons of the world?

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How Zara became the undisputed king of fast fashion?

Zara is one of the biggest international apparel brands. Zara invites customers from around 93 markets to its organization of 2000+ stores in upscale markets on the planet’s biggest urban communities. With these stores, Zara generates 18 billion Euros annually.

The brand has been fruitful in keeping up its central goal to give quick and reasonable designs in the world of fashion. Zara’s way to deal with configuration is firmly connected to its clients. This story is about how Zara became the undisputed king of Fast fashion.

Fashion is the imitation of a given example and satisfies the demand for social adaptation. . . . The more an article becomes subject to rapid changes of fashion, the greater the demand for cheap products of its kind. — Georg Simmel, “Fashion” (1904)

History of Zara: The Long Story Cut Short

Amancio Ortega launched the first Zara store in 1975 in Central Street in downtown A Coruna, Galicia, Spain. The main Store included low-value look-a-like designs of famous and better-quality dress styles. The store ended up being a triumph and Ortega Began opening more Zara stores throughout Spain.

During the 1980s, Ortega began changing the plan, assembling and dissemination cycle to diminish lead times and respond to new patterns in a snappier manner in what they called “Moment Fashions”.

In 1980 the company started its international expansion through Porto, Portugal in the 1990s, with Mexico in 1992. Since then Ortega has continued to grow and create brands such as Pull & Bear, Bershka , and Oysho . It has acquired groups like Massimo Dutti and Stradivarius . Even though these brands have been contributors to their parent group Inditex’s success, Zara is still the principal growth driver.

Zara’s Customer-driven Value Chain

Product line-up:.

Unlike other Inditex chains, Zara has focused on manufacturing fashion-sensitive products internally. The latest designs were continuously in production as per changing customer’s preferences. Many competitors were producing just a few thousand SKUs whereas Zara was producing several hundred of thousands of SKUs in a year. These SKUs varied as per color, size, and fabric.

Zara’s designs are not dependent on design maestros. Instead, its designers carefully observe the catwalk trends and try to implement them for the mass market. The design team continuously creates variations in a particular season. Thereafter expanding on successful designs.

Fast Supply Chain:

Zara’s flexible supply chain allows it to dispatch new ranges to shops two times per week from its central distribution center that is an approximately 400,000-square-meter facility located in Arteixo, Spain. This kind of business system called vertical integration eliminated the need for local warehouses. The strategy here was to reduce the “bullwhip effect”. Let’s see what the bullwhip effect is:

The bullwhip effect is a distribution channel phenomenon in which demand forecasts yield supply chain inefficiencies. It refers to increasing swings in inventory in response to shifts in consumer demand as one moves further up the supply chain. Wikipedia

It was a matter of a few weeks and a new design was on the shelf for the customers. Isn’t cool? These designs of clothes and accessories were quickly moved to fancy stores in prime locations but at a cheap price. This strategy has attracted a lot of fashion yet money conscious customers.

We want our customers to understand that if they like something, they must buy it now because it won’t be in the shops the following week. It is all about creating a climate of scarcity and opportunity. Luis Blanc, one of the former Inditex’s international directors

Zara’s Retailing Strategy

Zara instead of focusing on improving its manufacturing efficiency focused on improving its retail strategy. This retailing strategy was about following fashion trends quickly even it means there is an unmet demand. As was previously discussed, this also helped Zara in creating a FOMO for its products. The two components of its retailing strategy were dependent on its upstream operations: Merchandizing and Stores.

Read: The Torchbearers of Sustainable Fashion

Merchandising.

Merchandising is the promotion of goods and/or services that are available for retail sale. It includes the determination of quantities, setting prices for goods and services, creating display designs, developing marketing strategies, and establishing discounts or coupons. Investopedia

• Zara placed emphasis on the freshness of its designs. It wanted to create a sense of exclusivity. It never focused on creating bulk items of one design. Zara had confidence in its fast supply chain of twice a week shipment to the store with the latest designs. Thre quarter of its merchandise gets replaced in just a month. How about that?

The success of your business is based in principle on the idea of offering the latest fashions at low prices, in turn creating a formula for cutting costs: an integrated business in which it is manufactured, distributed, and sold. Amancio Ortega

Fun Fact : An average customer visits a Zara store 17 times in a year where the number is 3-4 times for its competitors.

• Zara understood the importance of store locations very well. Zara prices are not expensive but its store location and design made its products look expensive. The brand wanted its customers to have a premium feel at a reasonable price.

We invest in prime locations. We place great care in the presentation of our storefronts. That is how we project our image. We want our clients to enter a beautiful store, where they are offered the latest fashions. Luis Blanc, one of the former Inditex’s international directors

Store Operations

Zara has stores in most upscale markets and shopping centers in the world. You name it and they have a store there. Champs Elysées in Paris, Regent Street in London, and Fifth Avenue in New York to name a few. As per its latest annual report the value of these properties is valued at almost 8 billion Euros. But the way these stores are managed is a strategy to learn for all retailers.

• We all love grand stores with a lot of variety. Zara has emphasized on creating a grand image of its stores. Imagine a big store at a posh location. How much impressed you would be. The average size of Zara stores has continuously increased over the years. In 2001 the average store size was 910 sq.m whereas in 2018 the size has more than doubled.

Zara’s average store size has increased by 50%: from 1,452m2 in 2012 to 2,184m2 in 2018. That growth has been driven by new store openings – larger flagship stores – as well as the fact that many of the new openings have entailed the absorption of one or more older, smaller units in the same catchment area. Inditex Annual Report

• Zara has tried to standardize the in-store experience with its store window displays and interior presentations. As the season progresses, Zara consistently evolves its interior themes, color schemes, and product placements. All these ideas come from the central team in Spain and regional teams implement with necessary region-based adaptations. So much so that the uniforms of the staff were selected twice in a season by a store manager from the latest collection.

Anti-Marketing Approach of Zara

Zara has able to maintain profitability ~13% whereas its major competitor like H&M is at 6% . This has been possible not only because of its efficient supply chain we discussed above but also because of its no advertising or limited advertising policy.

This is what makes Zara really one of a kind. The organization just spends about 0.3% of deals on promoting and does not have a lot of advertising to discuss. The usual trend in the industry is to spend 3.5% on advertising. Zara never shows its clothes at expensive fashion shows also. It first shows its designs at stores directly. But why does not Zara believe in advertising? There are primarily two reasons:

• First, as we discussed it saves Zara a lot of money. So much so that it has now one of the highest profitability.
• Second, it brings exclusivity and prevents overexposure of a design. Customers feel like if they purchase a shirt at Zara, five others won’t have that equivalent shirt at work or school.

Read: Viral Marketing over the Long-Haul ft. Burger King

Zara is a perfect case study to learn the perfect operations strategy, perfect marketing strategy, perfect pricing strategy, and whatnot. It’s all strategies are so perfect. It is also a perfect example to understand how a traditional brand is evolving itself with time to stay relevant.

As per its annual report , In 2018, Zara launched its global online store, marking a milestone in its commitment to having all of its brands available online worldwide by 2020. Zara continued to earn global accolades for its collections and initiatives, its integrated shopping experience, and its commitment to sustainability, with over 90 million garments put on sale under the Join Life label.

Zara is just not a brand of fast fashion. Its much more than that now. And that’s why it’s actually the true king of fast fashion.

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Zara: Technology and User Experience as Drivers of Business

The Spanish clothing retailer Zara became a market leader thanks to a business model that leans heavily on technological innovation and user experience. One of the keys to Zara’s success is big data. For example, the company uses neighborhood-level average weight statistics to determine which garment sizes to ship to each store. Each location carries a different selection: stores in business districts are stocked with officewear, while stores in popular leisure areas tend to focus on clothes for younger women. Data analysis allows Zara to personalize the customer experience and minimize its inventory. The company has also developed an unparalleled e-commerce model. The next challenge in Zara’s sights is energy sustainability.

Zara is the leader in its market, thanks to a pioneering technological strategy. By adapting to new tools—including big data—the Spanish clothing retailer has managed to outpace its direct competitors. Despite being one of the last fashion companies to take up e-commerce, Zara has achieved a universal shopping experience that encompasses both its brick-and-mortar locations and its online stores. Other companies have tried to emulate this experience, but never with the same results.

Zara’s success is based on a rather unusual premise: its founder, Amancio Ortega, has managed to become one of the world’s richest people without monopolizing a sector. The clothing retailer’s business model leans heavily on technological innovation and user experience. The firm has doubled in size in just ten years, shattering the forecasts of analysts who thought the firm could never achieve such a feat without overhauling its business plan to centralize its processes.

As the flagship brand of the Inditex group, Zara is synonymous with clothing and fashion. The aim of Ortega’s company is to give society what it wants as quickly as possible. Zara therefore changes its collections every two weeks. To put this strategy into perspective, look no further than Mango or Gap: these competitors renew their collections about six times a year. Although most fashion experts consider Zara’s model to be unsustainable—due to its supposed high cost—the company has managed to grow steadily year after year, leaving its competitors in the dust.

Another key element of Zara’s business model is how it manages its stores and manufactures its garments. The same strategy is applied for all locations across the globe, from Argentina to Australia. Zara produces its clothing in limited runs—no more than 8,000 pieces for any particular design. This system allows the company to change its collections quickly. If a particular design sells well, the company manufactures more garments in similar styles, but never exactly the same as the one that originally flew off the shelves. Moreover, thanks to Zara’s sister brands—Bershka, Pull&Bear, etc.—the Inditex group is able to cover all age ranges and styles and maintain an even bigger presence in the textile industry.

Zara’s business model leans heavily on technological innovation and user experience, allowing the firm to double in size in just ten years.

Just like a tech firm

If Zara’s approach is all about manufacturing clothes, how did it become such a clear market leader? And why are its competitors unable to catch up? These questions must be answered from multiple angles. There is no single explanation, just an answer that, a priori, is difficult to imagine. We must come to realize that Inditex is actually a large tech firm. For more than 30 years, Amancio Ortega has been making investments on a scale not seen anywhere else in the fashion industry. In this sense, the company has a five-year lead over all of its competitors. Among other advantages, it has logistical mechanisms that would be nearly impossible for any other firm to copy.

Arteixo, in the Spanish region of Galicia, is the company’s operations hub. This small town is the nerve center for the vast majority of Inditex’s decisions and processes—including tech-related matters, for which the company has built a specific facility. From this headquarters, technology allows Zara’s executives to monitor each store’s ambient temperature, energy consumption, and much more. Indeed, this is one of the keys to Zara’s success: big data. Thanks to data analysis, the company even knows the average weight of residents in each store’s neighborhood. The company uses these figures to determine what sizes of each garment to ship to each establishment. In short, Zara has the predictive capacity to determine what sorts of products will be easiest to sell.

The immediate result of this good technology use is savings in inventory—a major expense for many fashion companies. The company’s investment in big data also allows it to personalize the customer experience. In Madrid, for example, Zara has two stores with barely any overlap in terms of the clothes they sell. The business-oriented location on Paseo de la Castellana is amply stocked with suits and shirts, while the Gran Via store focuses on knitwear for women between the ages of 20 and 40. Data analysis provides the rationale for these strategies . Zara understands the peculiar demand of each neighborhood and knows how to satisfy it. The company is in close contact with the customer’s needs and offers a practically personalized user experience.

The immediate result of this good technology use is savings in inventory—a major expense for many fashion companies.

A nearly physical online experience

It took Zara longer than most other fashion retailers to enter the online channel. Once it overcame this barrier, however, it designed an unparalleled model. Inditex does not view the Internet as a separate channel from its physical stores; it is equally important. Inditex offers its customers the same services through both e-commerce and its traditional establishments. For example, even if a garment is out of stock, the customer can still purchase it and either have it delivered or pick it up at the store. Other firms have tried—without the same success—to copy this omnichannel model.

One of the major challenges that Zara will have to face in the future—besides competing with more e-commerce vendors—is energy sustainability. Statistics clearly show that the textile industry is the second biggest source of pollution worldwide. Technology and big data are now allies: they can find key areas for energy savings and identify recycled materials that offer the same characteristics as new ones. Zara is investing considerable resources in this endeavor. The company is working with universities in Galicia and companies in Switzerland to become more environmental friendly, as this factor will only become more crucial over the coming years.

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Award winner: SHEIN vs Zara: Digital Transformation in the Fast-fashion Industry

This case won the Strategy and General Management  category at The Case Centre Awards and Competitions 2024 . #CaseAwards2024

Author perspective

Instructor viewpoint, who – the protagonist.

Chris Yangtian Xu , founder of SHEIN .

In May 2021, SHEIN overtook Amazon as the most downloaded shopping app on the US iOS and Android app stores.

SHEIN was disrupting the fast-fashion market with its Instagram-style clothing, and online only presence.

Producing up to 6,000 products per day and creating new items in as little as three days, in comparison, SHEIN’s competitor Zara had a two-to-three-week turnaround.

SHEIN’S most important target market was Gen Z, with a 2020 survey of 9,800 American teenagers finding that the Chinese fashion company had surpassed Amazon as the respondent’s most popular online clothing stores. SHEIN’s social media presence and low prices met their needs.

SHEIN’S low-profile media strategy and online-only existence meant there was a lack of scrutiny.

But with a series of articles in the Wall Street Journal and the Financial Times on the Chinese apparel maker in mid-2021, questions were asked of SHEIN.

How could a Chinese player quickly emerge from this competitive space? What was the role of digitisation in its business model? Issues about product quality, potential environmental impact, and sustainability were also raised.

SHEIN’s main markets could be found in Southeast Asia, the US, Europe and the Middle East.

In 2021, it served more than 200 countries and regions worldwide with a cross-border e-commerce business model.

By 2021, SHEIN had positioned itself as “an international B2C fast fashion e-commerce platform” that focused on women’s wear, but also offered men’s apparel, children’s clothes, accessories, shoes, and other fashion items.

“Each new design is basically a bet because SHEIN can estimate how well a product is going to do, but it doesn’t know for sure until it sells. Compared to its fast fashion competitors, SHEIN is able to take more bets, but at a lower risk. It’s able to place very small initial orders with these factories, about 100 or even smaller.” Matthew Brennan, a Beijing-based writer and analyst of Chinese technology.

SHEIN’s top executives had a number of things to consider as they looked ahead to the future.

Should it have a physical presence and become a player both online and offline? Should SHEIN start penetrating the Chinese market? Should it expand to other new lifestyle areas such as furniture or home decoration?

There were many things to consider.

AUTHOR PERSPECTIVE 

This is the first award win for Shuqing and Guoli, and HKU Business School, University of Hong Kong’s inaugural success. Meanwhile, INSEAD are the first school to win more than 100 Case Awards.

Winning the award

Shuqing and Guoli said: “The award means a lot to us, signifying that the case has been well-received in our academic community. We hope the case can assist educators in effectively teaching and motivating their students to think strategically. Additionally, the award indicates an increasing interest in Chinese players, such as SHEIN.”

Case popularity

Shuqing and Guoli continued: “We believe the case has addressed several important strategic questions, including digital transformation, business model comparison, competitive advantages, core competence, tech strategy, value innovation, and sustainability. Professors can use the case to cover various topics.”

Writing the case

They added: “When we started writing the case, very few people knew about SHEIN, and the company kept a very low profile with limited information in the public domain. There is much more data nowadays as SHEIN is preparing for its IPO.”

Case writing advice

Shuqing and Guoli commented: “Pay attention to the strategic dilemmas that companies face and introduce strategic frameworks they can use to guide their decisions.”

Teaching the case

Shuqing and Guol concluded: “It is one of our favourites. We use this case to teach various topics, including competitive dynamics, core resources and capabilities, digital and tech strategy, value innovation, global strategy, CSR, and sustainability. The strategic choice questions at the end of the case serve as an excellent starting point for engaging with students.”

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Home » Management Case Studies » Case Study of Zara: Use of Technology to Improve Operational Responsiveness

Case Study of Zara: Use of Technology to Improve Operational Responsiveness

Fashion giant, Zara, forms part of the retail group ‘Grupo Inditex’ which is one of the “largest, fastest growing and successful” clothing retailers across Europe. Grupo Inditex is formulated by an amalgamation of major high street names from across Europe, including Zara, Pull and Bear and Bershka, in total boasting 3825 stores across 68 countries. Zara’s success story begins by offering a product range capable of catering for men, women and children, providing affordable and stylish clothes whatever the season. Coupled with this, is their keen eye for discovering new fashion trends and translating these trends from the catwalk to the high street, both quickly and affordably. Zara boasts a marketing strategy of firstly product variety with a focal point of ensuring speed to market. At present, Zara launch 10,000 new articles per year across their portfolio of stores. Finally, store location, as any marketing is left to store location rather than advertising. Opting for a strategy of minimal advertising provokes the consumer into having to visit their stores. Securing a foothold in as many markets as possible with the intended outcome of building brand awareness and an increased market share has resulted in Zara developing their brand, launching Zara Home. Zara opened their first store in Spain in 1975 and have since expanded internationally, opening their first international store in Portugal in 1988, and later opening a further store in New York, US, in 1989. Today the Zara name is recognized throughout the entire world.

Use of Technology to Improve Operational Responsiveness

Identification of fashion trend at Zara is part of the culture. A point-of sale (POS) system is used in the stores and the information gathered is sent to Inditex. Also, the POS technology has allowed to tight up the links between vendors and led to improvements in the ordering process, in deliveries and in the distribution system as a whole, thus contributing to increase the level of responsiveness of ZARA. Moreover, managers consult personal digital assistant on daily basis to check the availability of new designs and to place their orders to what they think will be much appreciated by their customers. By so doing, the store managers assist shape designs.

Information and communication protocols at Zara are radically different from its competitors. The company spends less than 0.5 percent of total revenue on information technology and employees in the IT department account for only 0.5 percent of the company’s total workforce. This differs from their competitors who spend about 2 percent of their total revenue on information technology and have 2.5 percent of their total workforce dedicated to IT.

Zara makes use of human intelligence and information technology such as their PDA devices to come up with a hybrid model for flow of information from stores to the headquarters. For instance, the company’s managers utilizes handheld devices to send formalized information concerning feedback from customers and ordering needs straight to in-house designers. Apart from keeping Zara’s designers informed on fast-changing demand and trends, this technique also provides the company with imminent on less-desirable products. Unlike Zara’s hybrid model (which combines IT application and human intelligence), competitors rely mostly on information technology.

The hybrid model results into well managed inventories , reduced costs from obsolete products, linkages between supply and demand, nevertheless, there is still room for upgrading in their IT processes to realize more reliable management of inventory levels. Therefore, this unique approach of human astuteness assisted IT solution provides cost advantages to the company’s operations and assists Zara to abide by her primary principle to be in a position to quickly respond to changes in consumer demand.

The SKU system allows the gathering of data to help identifying and producing garments sought by customers, and in the right quantities, thus improving the ordering system at the distribution center. ZARA, then, successfully maintain control of its inventory while keeping inventory costs at a lower level.

Zara also made considerable investments to improve its logistics system and to develop its IT infrastructures. ZARA chose to implement a Just-In-Time (JIT) manufacturing system as well as to invest in a sophisticated telecommunication system, thus improving the information flow between headquarters and supply, production and sales sites and thus avoiding any type of bureaucratic structure. Furthermore, this system allows ZARA to take appropriate and quicker decisions due thanks to the information flow being very fluent. The JIT system allows ZARA to improve quality , to diminish manufacturing time, to eliminate waste , to increase productivity and to have better relationships between suppliers, thus improving its overall responsiveness.

The use of a consumption information system linking together the merchandising and the back-end processes is an original technique used by ZARA that permits designing teams to possess relevant information about customers’ preferences. This technology contributes without doubt to ameliorate the responsiveness of ZARA: indeed, the data gathered by this system allow teams to propose new designs that match consumers’ expectations, and in a timely manner.

A high-tech mobile tracking system speeds up the distribution system by proceeding high numbers of garments in a short period of time, thus minimizing intervention of labor force while increasing productivity. As garments did not stay for a long time in the warehouse, the company is able to cut down storage costs.

Zara’s capabilities, concepts and strategic planning as demonstrated through their business model , tend to be heading in the right direction. Their concentration on core operation as well as production capabilities, resistance to outsourcing, and focus on the fashion pulse have made this company one of the most victorious clothing retails.

Related posts:

• Case Study: Zara’s Operational Model
• Case Study of Zara : Application of Business Intelligence in Retail Industry
• Case Study: The International Growth of Zara
• Case Study of Zara: A Better Fashion Business Model
• Case Study of Zara: Sustainability in Fast Fashion Industry
• Case Study of FedEx: Leveraging Information Technology to Grow Business
• Case Study: Zara’s Entry into Indian Retail Fashion Market
• Case Study of Air Asia: Information Technology Implementation for Business Success
• Case Study: Zara’s Supply Chain Success Story
• Case Study on Information Technology Management: Frito-Lay’s Long-Term IT Plan

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Dual transition of net zero carbon and digital transformation: case study of uk transportation sector.

1. Introduction

2. theoretical background, 3. research methodology, 3.1. systematic review steps.

• Produce a research question.
• Create inclusion and exclusion criteria.
• Identify key terms.
• Produce a qualitative analysis of the literature with the specified criteria.
• Outline the findings of the literature review and relate them back to the research question.

3.2. Research Question

3.3. reliability of inclusion and exclusion data, 3.4. general analysis of key words, 3.5. the search timeframe, 3.6. data extraction, 4. literature review, 4.1. carbon reduction and bim, 4.2. bim in transportation design, 4.3. bim uptake and usage in transportation, 4.4. bim in transportation construction, 4.5. digital twins and bim, 5.1. design criteria, 5.2. software modelling, 5.3. pavement design, 5.4. carbon calculation tool (cct), 5.5. carbon emissions data, 5.6. bim workflow, software deliverables, 5.7. data links, 6. discussion, 6.1. software usage, 6.2. approach to net zero carbon, 6.3. carbon calculator tool, 6.4. civil 3d system, 6.5. digital twin, 7. conclusions and recommendations, 7.1. industry, 7.2. company, 7.3. policy, 7.4. limitations and future research, author contributions, institutional review board statement, informed consent statement, data availability statement, acknowledgments, conflicts of interest.

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Manifold, J.; Renukappa, S.; Suresh, S.; Georgakis, P.; Perera, G.R. Dual Transition of Net Zero Carbon and Digital Transformation: Case Study of UK Transportation Sector. Sustainability 2024 , 16 , 7852. https://doi.org/10.3390/su16177852

Manifold J, Renukappa S, Suresh S, Georgakis P, Perera GR. Dual Transition of Net Zero Carbon and Digital Transformation: Case Study of UK Transportation Sector. Sustainability . 2024; 16(17):7852. https://doi.org/10.3390/su16177852

Manifold, Joel, Suresh Renukappa, Subashini Suresh, Panagiotis Georgakis, and Gamage Rashini Perera. 2024. "Dual Transition of Net Zero Carbon and Digital Transformation: Case Study of UK Transportation Sector" Sustainability 16, no. 17: 7852. https://doi.org/10.3390/su16177852

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