Zara Business Performance - Essay Example

Zara’s main target customers have always been young, price-conscious people who are very sensitive to the latest fashion trends. According to the article ‘Analyzing Zara’s Business model’ its product line is divided into 60% for women, 25% for men, and 15% fast growing children (Analysing Zara’s business model, 2011). The main customers of Zara are middle-class urban women for whom fashion means everything. The customers of this particular brand want trendy, fashionable, and unique outfits at an affordable price and up to date with the new upcoming fashion trends.

Another unique characteristic of this particular brand is that they take very less time in identifying and bringing their products to shelves which is within 30 days whereas others may take around 3-4 months (Analysing Zara’s business model, 2011). This is possible mainly due to their control of the garment supply chain from design to retail, unlike many other competitive stores. It is possible as most of the manufacturing is being done in-house. 50% of the products are produced in the house whereas 46% are framed out into ready-to-cut pieces (Roux, 2002).

Zara’s core mission has always been a blend of creativity, quality, and rapid response to market demands. To achieve this a business model was framed that depended on two main points. One is a quick response to changing fashion and the second is the involvement of employees on a large scale. For instance, a store manager could decide which clothes to put on sale in that particular store according to the response of customers shopping there. The variety of clothing also becomes a main selling point of the brand. In the article Reign of Spain, the author talks about how a model never stays in the shop for more than four weeks. This increases the visits of customers, Zara’s 17 times a year whereas for other similar competitive stores it's only 3 to 4 times a year (Roux, 2002). In around four to five weeks new collections are available. Its design team comprises around 2 thousand designers which produce 12,000 models each year for sale which are designed keeping in mind customer preferences, wishes, and demands. Since every four weeks, the stores are hit by new models the quantity produced of each model is very making it a unique piece that makes customers rush to stores to grab them before they run out this has made its customers into serious impulse buyers. Unlike other brands, Zara spends very less on advertisement which is around 0.3% of its total revenue, unlike other competitors which spend around 3-4%. Instead, they spend heavily on their stores which are located in prime locations of cities. The company is built upon a vertically integrated demand and supply chain while most textile chains rely on outsourcing and cheap labor in China. Vertically integrated companies that are linked together by a single owner give Zara greater control over the whole process from manufacture to retail which helps it fulfill the main idea of its business plan which is to respond quickly to demands and fashion trends.

The operational cycle of Zara includes three main basic steps ordering, fulfillment, and design and manufacturing. Each store places order twice a week to headquarters to replenish items and for new stocks. These orders are sent to stores in two days. The design and manufacturing go throughout the year. New models are continuously hitting stores, unlike other competitive firms that launch collections for just summer, spring, fall, and winter.

Another competitive clothing retail company is GAP. GAP is an American multinational company founded by Donald G. Fisher and Doris F. Fisher in 1969. It spends heavily on advertising in an article it is said that Annual measured-media spending for the company rose 13% from $302 million to $340 million, according to Kantar Media (Zmuda, 2013). New arrivals hit Gap stores at the start of every season summers, fall, winters, and spring. The manufacturing of GAP is spread throughout America and even outside it. It mainly outsources its manufacturing department. Many litigation cases against GAP came up when 18 manufacturers filed cases against it, leading to a 20-million-dollar settlement (Engler, 2004).

Despite having strong competitors like H&M, GAP, and MANGO, Zara continues to be the biggest fashion retailer in the world. It is mainly due to the effective business model of Zara that the company keeps on making profits. In a recent article on BBC, it is said that Zara-owner Inditex’s profit rise by 22% (BBC News - Zara-owner Inditex's profits rise by 22%, 2013).