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Edit Comment Close Premium member Presentation Transcript PowerPoint Presentation: FAST FASHION FAST GROWTHPowerPoint Presentation: “ We are in the fashion business not clothing. Our customers buy our products because they like it not because it is Zara .” A Quote by Miguel Diaz - Marketing ExecutivePowerPoint Presentation: THE MOST INNOVATIVE AND DEVASTATING RETAILER IN FASHION WORLD ZARA’S MISSION: ZARA’S MISSION TO PRODUCE A FASHION FORWARD PRODUCT FOR THE MASSESPowerPoint Presentation: About Zara Founded 1975 Headquarters A Coruña, Spain Industry Retail Products Clothing Parent Inditex Group Founder Amancio Ortega CEO Pablo Isla Álvarez de Tejera Website http://www.zara.comPowerPoint Presentation: • Flagship enterprise of Inditex (2001 IPO). • Sales of 3.2 billion €, EBIT of 476.1 million € in 2003 and EBIT margin of 14.8%. • HQ and central distribution in La Coruna, Spain . • Women’s, men’s and children’s wear. • Over 724 stores in 56 countries . Zara’s Facts & FiguresPowerPoint Presentation: • Design-driven; 11,000 styles per year . • Partial vertical integration i.e. Owned factories & production. • Tight coupling of market data & production decisions. The Zara Model…PowerPoint Presentation: • Twice-weekly shipments of new product to all stores. • Small batch production creates a demand and encourages impulse purchase. • Customers expect rapid inventory turnover. Learn to shop frequently (17times per year). The Zara Model Continued…PowerPoint Presentation: • Stores located on Premium Shopping Streets. • Pricing is market-based , not cost-based. Premium pricing in higher cost markets. • Powerful word of mouth supports store growth without advertising ( 3-4% of sales ). The Zara Model Continued… What Most Businesses Do ?: What Most Businesses Do ? Take Inputs Process/Manufacture Output Costs – Fixed and Variable Revenue ProfitZARA’S TRIO FOR SUCCESS: ZARA’S TRIO FOR SUCCESS Short Lead Time = More Fashionable Clothes Lower Quantities = Scarce Supplies More Styles = More Choices & More Chances Of Hitting It RightPowerPoint Presentation: ZARA LISTENS TO WHAT CUSTOMER SAYS AND WANTSPowerPoint Presentation: AND DELIVERS IT IN TIMEPowerPoint Presentation: Value offer Services Price Customer relation Communication Promotion Stores Experience Product Firm’s value offer BrandPowerPoint Presentation: THE SUPPLY CHAIN Firm Suppliers Distributors CustomersPowerPoint Presentation: SUPPLY CHAIN Wharehouse Subsidiary End customer Plant and suppliers POS Suppliers Firm Reseller Information flow Materials flow Cash flow Paper flowPowerPoint Presentation: THE VALUE SYSTEM Firm Suppliers Distributors End Customers Complementors Logistic services POS management Design Research Communities Information providers Tech systems ZARA’S Business Purpose: ZARA’S Business Purpose Conquer the world of fashion. Low cost approach . Focus on the young – that’s where fashion lives today. Mistakes are cheaper than finished good errors. Zara Customer Segment : Zara Customer Segment Approximately right Eliminate creative design Fast-response supply chain Optimise supply process for speed and cost Manage follow-up and customer flows Low cost Fashion Respond to customers want – create Demand Chain Copy trendy fashion fast Create a s tore experience Create a network/brand ZARA Customer Offer: ZARA Customer Offer Scans and Selects new fashion, designs, delivers and sells. Limited variety at any time. The product’s essence is : fresh looks! Does the brand help ?PowerPoint Presentation: • Individual distribution centers for each concept. • Enables continuous and speedy deliveries to stores: 2-6 times a week . JIT Distribution and logisticsWhy is profitability in textile so low, when margins are so high?: Why is profitability in textile so low, when margins are so high? Actual Demand Possibility of excess stock even with low demand Possibility of excess demand even with high demand ExpectedDemand Perfect forecasts do not exist in real life!Why is profitability at ZARA so high, when margins are so low?: Why is profitability at ZARA so high, when margins are so low? Actual Demand Excess stock and unmet demand are avoided by stopping production when market saturates ExpectedDemand Small batches Zara as a “Lean Enterprise” ZARA: The Lean Enterprise: ZARA: The Lean EnterprisePowerPoint Presentation: Key Success Factor LTO Scarcity Variety Market Research Proximity & Control Comm.& IT Key Success Factors Key Enablers Flexibility Approach: Flexibility Approach Manufacturing Process: Manufacturing Process Receipt of fabrics Purchasing of accessories (e.g. buttons) Shipment to Cutting subcontracted workshop for sewing Receipt of finished Finishing Garments (ironing, labeling, quality control) Transfer to Zara’s distribution centersWaste elimination at ZARA: Examples:: Waste elimination at ZARA: Examples: Advertising: Not necessary in a « pull » model. Discount Sales: Eliminated through quick response & the strategy that ZARA is always “below” demand. Design: Largely out-sourced to the “market” & replaced by active scanning. Product complexity: 3 types, sizes, and colours Reduces Complexity.Core Competences at ZARA: Core Competences at ZARA Scanning: Fashion trends, market trends. Fast supply chain: 1 week final production cycle, 2 day outbound logistics. IT systems: Library of models, CAD. Flexible production system: Small and flexible sewing shops in Galicia. 4P’s STRATEGY: 4P’s STRATEGY PRODUCT: Wide range of clothes for men & women. Limited Indian clothes designed by upcoming Indian designers. Summer & Winter collection. PRICE: Penetration pricing (20% less than Benetton). Staying away from promotion.4P’s STRATEGY Continued…: 4P’s STRATEGY Continued… PLACE: Set up factory in Western India – Pimpri (Maharashtra). Initially in New Delhi, Bangalore, Calcutta, Pune & Mumbai. PROMOTION: To increase awareness & concept of Fashion. Tie-up with colleges to sponsor their festivals, thereby targeting YOUTH. Major Competitors: Major Competitors BENETTON GAP HENNES & MAURITZ (H&M) – Biggest Competitor INSIDE H&M ZARA ENTRY TO INDIA: ENTRY TO INDIA OPPORTUNITIES: H uge untapped market C hanging lifestyle and clothing preferences F avourable government legislation. C heap labour and opportunities for local sourcing H igh productivity potential THREATS: L ow entry barriers C ustomer bargaining power U npredictability of consumer behaviour P roduct quality T raditionalism U norganized supply chain. C hange in government legislation No Advertising?: No Advertising? WHY? - Don’t need to. Why spoil a good thing? - Zara advertises but don’t like to pay for them ( free press is plenty). - High speed fashion can’t cope up with advertisements. (By the time an ad reaches audience, dress may be sold out or obsolete). Zara – In Sum: Zara – In Sum Taking a new & aggressive approach to fashion, Zara not only achieved high margin but turned the production design into a compelling marketing story: Limited Edition Cachet.Timing – The Primary Key: Timing – The Primary Key Zara presumes that consumers regard clothes as perishable goods. Provides “freshly baked clothes”. Catches fashion while it’s hot. Reacts rather than Predict. Designers have access to real time information. Financial Facts for first quarter of 2007: Financial Facts for first quarter of 2007 Million Euros 1Q 2007 1Q 2006 Var 07/06 Sales 2039 1715 19% Gross Margin 1150 956 20% Net Income 200 150 33% EPS (Euro cents). 32 24 33% Perceptual Mapping: Perceptual MappingPowerPoint Presentation: • Rethink the entire SCM. Planned shortages can induce more future Demand. Good store location, layout and product display can be a substitute for advertising. Faster response eliminates inventory risks. Excess capacity pays for itself by faster Response. Lessons from ZaraZARA – Where it Stands.: ZARA – Where it Stands. Ranks among the three “global winners” with Gap and H&M. The world’s fastest growing fashion retailer. Expand to 64,countries,3000stores. Sell 400 million clothes per year. Plans to open two new stores per week.Concluding Remarks: Concluding Remarks • Potential for sustainable growth. High operating income. Unique and strong business model. Ability to face weaknesses and challenges. Various opportunities of expansion. Establishing new standards for retailersPowerPoint Presentation: It's D ifficult to P redict the F uture, and E xpensive to T ryPowerPoint Presentation: Instead of P redicting the F uture, we R eact to the P resentPowerPoint Presentation: We Develop the Product You Want, When You Want It THANK YOU: THANK YOU You do not have the permission to view this presentation. In order to view it, please contact the author of the presentation.