Business Story Of ZARA: A journey from 30 euros to over 6900 stores

Thought of fashion and haven’t heard about Zara?

Well, that’s quite impossible. There is a wide range of options available when it comes to fashion hence it is important for a brand to catch the attention of consumer and ZARA is the fastest fashion brand which never goes unnoticed. The Spanish-originated fashion brand is the flagship of the Inditex group. It produces a wide range of clothing accessories which include kids wear swimming suits shoes etc.

Index:

FOUNDER OF ZARA

Amancio Ortega is the founder and former chairman of Inditex which is the parent company of ZARA. With a net worth of 64 million dollars, he was the 2nd wealthiest person in Europe, as of December 2019. He
left his schooling at an early age of 14 and worked as a store hand for a local shirt maker and learned to make clothes by hand. Later in 1975, he opened his first ZARA store with his wife Rosalía Mera.

LOGO OF ZARA

The latest eye-catching logo was designed by Baron & Baron with all the letters superimposed on one another. In the modern version, the font is elongated Mostly the legs are connected (“AR”) or crossed (“ZA”
and “RA”). The letter “Z” has a thickening on serifs, which sets it apart from the rest.

The old logo of ZARA was simple but elegant. It had more spacing in between letters than normally offered. Overall, it was decent and at the same time attractive.

BUSSINESS MODEL OF ZARA:

Zara is known for its fast-fashion trend. ZARA focuses more on trending style than on the quantity of production. It manufactures over more than 12000 styles per year. This creates more demand and artificial
scarcity of particular trending fashion. The lesser the availability more is the desire for the product. Besides that, by producing less volume it cuts down on its discount as well.

It also opens its showroom around the high-end fashion showroom which attracts customers without spending much on marketing.

MANUFACTURING OF CLOTHING PRODUCTS:

ZARA has a team of 300 highly qualified and experienced designers who keep leafing through trend forecast books for the upcoming trend in the market. After the design is fixed a team of professional pattern cutters put the first prototype which is sent to the factory. The factory produces fabric accordingly. These fabrics are further sewed and sent back to the headquarter where quality and quantity are verified and the
product is ironed if required.

VALUATION:

This statistic presents the brand value of ZARA worldwide from 2016 to 2019. In 2019, the ZARA brand was valued at approximately 18.4 billion U.S. dollars. In comparison, the brand’s valuation was around
10.1 billion U.S. dollars in 2016.

Branding Value of ZARA:

One can observe the drastic increase of ZARA brand value in the graph below.

REVENUE OF ZARA:

The Spanish fast-fashion store Zara generated online net sales of around US$ 2 billion in 2018. For 2019, the revenue of up to US$2.5 billion.

COMPETITOR ANALYSIS:

H AND M:

H AND M has been quick to internationalize allowing the company to gain sales in counties outside its native Sweden also more attentive in terms of entering new markets and trends to entry one country at a time, as opposed to ZARA who multitasks globally

MANGO:

MANGO is known for its excellent business model and supply chain management has approximately the same number of countries worldwide, as Zara. The product quality and designs are the same as
ZARA, however, the organizational strategy is based on a franchising system, unlike ZARA.

GAP:

GAP is present worldwide like ZARA. It is known for its American style culture and the majority of its store is located in the US GAP is identified as higher quality but the more expensive retailer. It is also based on a franchising system. GAP has introduced a web-based store and it is investing heavily in online sales.

IS COMPANY PROFITABLE?

Even as the sale rose by 7.5% the stock in trade dropped by 5% through October, as reported on 11th December 2019 i.e. Wednesday. The stores had to be replenished quickly and there was a rising risk of oversupply as the trend could shift at any time. “Our business model has always been based on very low inventory,” Inditex Chairman Pablo Isla informed on a conference call. “Thanks to RFID and full stock integration, now we are able to run the company with even less.”

Zara posted 45.54 percent growth in its profit after tax to Rs 104.05 crore from the Indian market in the 2020 fiscal, according to its Indian partner Trent Ltd’s annual report. It had posted a profit after tax (PAT) of Rs 71.49 crore in the 2019 fiscal.
Besides, the company posted a 9.24 percent growth in sales to Rs 1,570.54 crore during the year as against Rs 1,437.87 crore of the previous fiscal.

Future plans of ZARA:

According to the reports, ZARA is making a conscious effort to be sustainable by the end of 2025. Inditex company does not support the use of plastic and is planning to make 100 percent toxic-free and eco-friendly products. It has also planned to improve its business in the online platform. Previously ZARA didn’t give much importance to advertisement and forecast but now it’s focussing more on consumer feedback.

AMAZING FACTS ABOUT ZARA:

None of ZARA’s company assembly is owned by the company. Most of the workers are mother grandmothers’ teenage girls adding to their household income.
Is known mostly due to its eco-friendly production. It’s headquartered in Spain drags most of the energy from solar panels and wind turbines.
The most common and amazing fact is that the product reaches the stores after 15 days of design formation.

Merchandise is delivered to its store twice a week.

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FAQS

Who is Founder of ZARA?

Amancio Ortega is the founder and former chairman of Inditex which is the parent company of ZARA. With a net worth of 64 million dollars, he was the 2nd wealthiest person in Europe, as of December 2019. He left his schooling at an early age of 14 and worked as a store hand for a local shirt maker and learned to make clothes by hand. Later in 1975, he opened his first ZARA store with his wife Rosalía Mera.

What the Business model of ZARA?

Zara is known for its fast-fashion trend. ZARA focuses more on trending style than on the quantity of production. It manufactures over more than 12000 styles per year. This creates more demand and artificial scarcity of particular trending fashion. The lesser the availability more is the desire for the product. Besides that, by producing less volume it cuts down on its discount as well.