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Harvard
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Business & Marketing
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English (U.S.)
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B203A TMA Assignment: Managing Marketing Channels - Zara

Essay Instructions:

The same philosophy that has produced such good results for Zara has led parent company Inditex to diversify. Its other chains now include underwear retailer Oysho, teen-oriented Bershka and Stradivarius, children's Kiddy's Class, menswear Massimo Duti, and casual and sportswear chain Pull & Bear. Recently, Inditex opened its first nonclothing chain, Zara Home. Each chain operates under the same style of vertical integration perfected at Zara. Making speed the main goal of its supply chain has really paid off for Inditex. In only three years, its sales and profits more than doubled. Last year, revenues increased over 15 percent over the previous year to $14.5 billion. Not bad considering retail revenue growth worldwide averages single digits, and many major retailers were feeling the effects of slowing economies worldwide. Perhaps more importantly, Inditex's total profits grew by 25 percent last year to $1.8 billion. Most of this performance was driven by Zara, now ranked number 64 on Interbrand's list of top 100 most valuable worldwide brands. Although Inditex has grown rapidly, it wants more. Last year it opened 560 new stores worldwide (most of those were Zara stores) and plans to do the same this year. That's even considering an entry into the fast-growing Indian market. Global retailers are pushing into India in droves in response to India's thirst for premium brands. Zara can really capitalize on this trend. With more than one ribbon-cutting ceremony per day, Inditex could increase its number of stores from the current 3,890 to more than 5,000 stores in more than 70 countries by the end of this decade. B203A – TMA –Second 2015-16 Page 4 European fast-fashion retailers have thus far expanded cautiously in the United States (Zara has only 32 stores stateside). But the threat has U.S. clothing retailers rethinking the models they have relied on for years. According to one analyst, the industry may soon experience a reversal from outsourcing to China to "Made in the USA": U.S. retailers are finally looking at lost sales as lost revenue. They know that in order to capture maximum sales they need to turn their inventory much quicker. The disadvantage of importing from China is that it requires a longer lead time of between three to six months from the time an order is placed to when the inventory is stocked in stores. By then the trends may have changed and you're stuck with all the unsold inventory. If retailers want to refresh their merchandise quicker, they will have to consider sourcing at least some of the merchandise locally. So being the fastest of the fast-fashion retailers has not only paid off for Zara, the model has reconfigured the fashion landscape everywhere. Zara has blazed a trail for cheaper and cheaper fashion-led mass-retailers, has put the squeeze on mid-priced fashion, and has forced luxury brands to scramble to find ways to set themselves apart from Zara's look-alike designs. Leadership certainly has its perks.

Essay Sample Content Preview:

Managing Marketing Channels
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Managing Marketing Channels
Using fast fashion as a strategy has an effect on the supply chain. An efficient supply chain will lead to positive results just as is the case in Zara. Amancio Ortega, the founder of Zara in Spain understood from experience that a good supply chain would be effective in the fashion industry. The definition of a good supply chain does not only focus on the speed of production but on many other aspects such as the consumer needs, the competitors and the amount of demand. An effective supply chain has control over all aspects of supply which is the case in Zara. The system is designed in such a way that the owner has control over the designing, production, distribution and retailing (Vrijhoef, 2011, pp. 400). Each of this aspects is important in creating an effective supply chain. This is one of the main reasons why some companies do not succeed; as a result of a bad supply chain where focus is put on some aspects of the chain and ignored in others.
The system is divided in such a way that there exists a team that has its unique functions and each team reports to a different team. The first team deals with the new trends in the market and identifies anything that may have caught the attention of consumers. This is then reported to the designers who are expected to work at a faster pace than other companies. This is made possible by having a team of about 300 professionals. By having its own access to most of the products needed, Zara makes the supply chain more effective by avoiding slow suppliers which is the case in most companies. The warehouses, where the clothes are stored after production have minimized human labor making it faster and more efficient in completing the supply chain.
Disadvantages of ‘fast fashion’ in Zara
Fast fashion, as observed, involves spotting new trends in the market and making them available to the public before other providers. It is reported that the time taken by other companies to produce a new design is almost three times as long as what Zara takes. The direction for production comes from predictions made by store managers mainly, who analyze the demands of the consumers and describe something that could be made to meet the needs of the consumers. The main disadvantage may be predictions that may be overstated or understated. Overstatement could occur in situations where the store managers think that there is high demand for a product which ends up getting negative response. This could lead to losses where the company may have produced large batches of the product (Skjott-Larsen, 2007, pp. 353). Understatement could be in cases where the product is produced in smaller batches but appeals more to the consumers which would mean loss of potential profits.
This is definitely very rare based on the fact that these segments are run by professionals and the predictions are almost always right. The advantages of fast fashion include being ahead of the market, getting more profits and attracting more consumers throughout all seasons. This is something that is not experienced by other companies. Based on the fact that Zara is always producing something new that meets the demands of the ...
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