Management Cases for Critical Thinking 381 Inside and out, Zara's stores are designed to strengthen the brand. Inditex considers this to be very important because that is where shoppers ultimately decide which fashions make the cut. In a ZAR faux shopping street in the basement of the company's headquarters, stylists craft and photograph eye-catching layouts that are e-mailed every two weeks to store managers for replication. Zara stores sit on some of the glitziest shopping streets- including New York's Fifth Avenue, near the flagship stores of leading ... international fashion brands-which make its reasonable prices stand out. It's all part of the strategy. "Inditex gives people the most up-to- Nano Calvo/VWPics/Redux Pictures date fashion at accessible prices, so it is a real alternative to high-end fashion lines," said Luca Solca, Managing Director, Luxury Goods with Sanford C. Bernstein in London. That is good news for Zara, as many shoppers trade down from higher-priced chains. A Single Fashion Culture The Inditex group began in 1963 when Amancio Ortega Gaona, founder and former chairman of Inditex, got his start in textile man- Case 2 Zara International | Fashion at the Speed ufacturing. After a period of growth, he assimilated Zara into a new of Light holding company, Industria de Diseno Textil. Inditex has a tried-and- true strategy for entering new markets: start with a handful of stores In this world of "hot today, gauche tomorrow," no company and gain a critical mass of customers. Generally, Zara is the first Indi- does fast fashion better than Zara International. Shoppers tex chain to break ground in new countries, paving the way for the in a growing number of countries-more than 7,000 stores group's other brands, including Pull and Bear, Massimo Dutti, and in 50 countries across 96 different markets-are fans of Bershka. Zara's knack for bringing the latest styles from sketchbook Inditex farms out much of its garment production to specialist to clothing rack at lightning speed and reasonable prices. companies, located on the Iberian Peninsula, which it supplies with its own fabrics. Although some pieces and fabrics are purchased in Asia- In Fast Fashion, Moments Matter many of them not dyed or only partly finished-the company manu- Zara's parent company Inditex is known for year-on-year strong sales factures about half of its clothing in its hometown of A Coruna, Spain. gains. Low prices and a rapid response to fashion trends have pushed Inditex CEO and chairman Pablo Isla believes in cutting expenses it into the top ranks of global clothing vendors. The chain specializes wherever and whenever possible. Zara spends just 0.3% of sales on in lightning-quick turnarounds of the latest designer trends at prices ads, making the 3-4% typically spent by rivals seem excessive in com- tailored to the young-about $27 an item. Former Louis Vuitton fash- parison. Isla disdains markdowns and sales as well. on director Daniel Piette described Zara as "possibly the most innova- H&M, one of Zara's top competitors, uses a slightly different strat- tive and devastating retailer in the world." egy. Around one-quarter of its stock is made up of fast-fashion items Inditex shortens the time from order to arrival using a complex that are designed in-house and farmed out to independent facto- system of just-in-time production and inventory management that ies. As at Zara, these items move quickly through the stores and are keeps Zara ahead of the competition. Their distribution centres can replaced frequently with fresh designs. But, unlike its rival Zara, H&M have items in European stores within 24 hours of order receipt, and also keeps a large inventory of basic, everyday items sourced from in North American and Asian stores in under 48 hours. "They're a inexpensive Asian factories. fantastic case study in terms of how they manage to get product to their stores so quickly," said Stacey Cartwright, former executive vice Fast Fashion on the Move president and CFO of Burberry Group PLC. "We are mindful of their Inditex launched its Zara online store in North America by offering techniques." free two-to-three-day shipping and free returns on the model of uber- The firm carefully controls design, production, distribution, and successful e-retailer Zappos. The Zara iphone app has been down- retail sales to optimize the flow of goods, without having to share loaded by more prospective clients in the United States than in any profits with wholesalers or intermediary partners. Customers win with other market, according to Isla-more than a million users in just three access to new fashions while they're still fresh off the runway. Twice months. a week Zara's finished garments are shipped to physical distribution Over the years, Zara has evolved both its name-from Zorba to centres, which all simultaneously distribute products to stores world- Zara-and its fashion ethos. The brand has built its reputation by trend wide. These small production batches help the company avoid the risk spotting and delivering those trends to customers at warp speed. of oversupply. Because batches always contain new products, Zara's Zara's founder, Amancio Ortega's quick thinking served him well when stores perpetually energize their inventories. Most clothing lines are the coronavirus hit Spain. He instructed 11 of his factories in Spain to not replenished. Instead they are replaced with new designs to create mmediately switch to making personal protective equipment (PPE). scarcity value-shoppers cannot be sure that designs in stores one day Zara also delivered washable, splash-proof, stylish turquoise hospital will be available the next day. gowns to medical workers. Store managers track sales data with handheld devices. They can Yet, questions remain: Is Zara expanding too quickly-opening reorder hot items in less than an hour. Zara always knows what's sell- about 400 stores per year? Will Inditex's rapid expansion bring undue ing and what's not. When a look doesn't pan out, designers promptly pressure to its business? Will the rising number of overseas stores put together new products. New arrivals are rushed to store sales increase cost and complexity and strain operations and raise concerns floors still on the black plastic hangers used in shipping. Shoppers who of exploitation of foreign workers? Will its existing logistics system are in the know recognize these designs as the newest of the new; soon carry it into another decade of intense growth? Can fast-fashion win after, any items left over are rotated to Zara's standard wood hangers. the long-term retailing race?382 Management Cases for Critical Thinking Case Analysis Questions 1. Discussion In what ways are elements of the classical and behavioural management approaches evident in how things are done at Zara International? How can systems concepts and contingency thinking explain the success of some of Zara's distinctive practices? 2. Discussion Zara's logistics system and management practices can handle the current pace of growth, but they will need updating at some point in the future. How could quantitative management approaches and data analytics help Zara executives plan for the next generation of its logistics and management approaches? 3. Problem Solving As a consultant chosen by Zara to assist with the expansion of its U.S. stores, you have been asked to propose how evidence-based management might help the firm smooth its way to success with an American workforce. What areas will you suggest be looked at for evidence-based decision making, and why? 4. Further Research Gather the latest information on competitive trends in the apparel industry, and on Zara's latest actions and inno- vations. Is the firm continuing to do well? Are other retailers getting just as proficient with the fast-fashion model? Is Zara adapting and innovating in ways needed to stay abreast of both its major competi- tion and the pressures of a changing global economy? Is this firm still providing worthy management benchmarks for other firms to follow? What is the environmental impact of fast fashion? Sources: "Inditex: Who We Are: Concepts: Zara," Inditex, inditex.com (accessed 2/21/12); "Zara Grows as Retail Rivals Struggle," Wall Street Jour- nal (March 26, 2009); "Zara, a Spanish Success Story," CNN (June 15, 2001); Inditex Press Dossier, inditex.com (accessed 3/14/10); Cecile Rohwed- der and Keith Johnson, "Pace-setting Zara Seeks More Speed to Fight Its Rising Cheap-Chic Rivals," Wall Street Journal (February 20, 2008), p. B1; "The Future of Fast Fashion." The Economist (June 16, 2005) economist. com (accessed 4/4/06); "Zara: Taking the Lead in Fast-Fashion," Business- Week (April 4, 2006); "Shining Examples," Economist (June 17, 2006); "Zara Launches Online Shopping in the USA," College Fashion. Posted 9/7/11. collegefashion.net (accessed 2/23/12); Susan Berfield and Manuel Baigorri, "Zara's Fast Fashion Edge," Bloomberg BusinessWeek (November 14, 2013): businessweek.com (accessed 5/19/14); "Fast fashion was always a problem. Now, COVID-19 has deepened the inequity between garment workers and fashion labels rebranding themselves as saviours." Nishita Jha, BuzzFeed, May 14, 2020, 19 tentree Tentree