The world of retail is flooded with hundreds of companies, but few have yet to be noticed like Zara. Zara has captured the public’s attention due to its efficient and unique business structure and turn around efficiency. Owned by the Inditex Group and opened in 1975, Zara has over 1,560 stores in 70 different countries with over 10,000 new design launches each year. Louis Vuitton’s fashion director has referred to Zara as, “possibly the most innovative and devastating retailer in the world.”
The Inditex Group is made up of eight different retail sale formats, one including Zara. Inditex operates on a fashion philosophy that boasts, “creativity and quality design together with a rapid response to market demands.”
More specifically, Zara operates with a lean organizational structure, which emphasizes high performance. The lean organizational structure also works to reduces the number of managerial hierarchy levels and decentralize decision-making. This model limits the business’s focus on redundant administrative procedures. From design to delivery it takes the company only five weeks for a garment and only two weeks for an existing model. This method shortens the product life cycle, which allows for greater success in meeting consumer needs. Customer satisfaction is of extreme importance to Zara and the consumer’s purchases truly shape almost all of Zara’s business decisions. Zara and its lean organization thrive on the use of information technology. Zara shops use this technology to report directly to their production centers and designers in Spain. Additionally, store managers use PDAs to check on the latest clothing that’s been designed and place their orders based on the demand they see in their store.
Moreover, Zara is also a vertically integrated company. Vertical integration describes a company that has control over several or all of the production and distribution steps involved in the creation of their product. The retailer operates with a vertically integrated demand and supply chain while most other textile chains rely on outsourcing and cheap labor, whereas Zara owns its on textile dye house.
Zara has set up a well-oiled machine based on customer demand and fast turnaround. The question we must now ask is, “how sustainable will Zara’s business model be in mostly un-penetrated markets like America?”