Zara is a Spanish Retailer known for its fast fashion business model that is unique among its peers. Unlike peers, Zara has adopted vertical integration as its business strategy. This means that while competitors tend to outsource majority of their operations to specialists, Zara owns a large part of its manufacturing and also its stores. This allows Zara to do many things differently. For example, it is able to offer a product within 25 days of it being designed, while the industry average is 6 to 9 months. It is able to sell 90% of its inventory at 85% of the full ticket price compared to an industry average of 80% of inventory at 60% of full ticket price. All this and much more has led to an unassailable industry position for Zara. What is very interesting to me at FastUp is the operational result of Zara pursuing it’s strategy and why it’s industry position is unassailable. If you look under the covers, Zara’s operational strategy is all about responding to market trends quickly.
| Zara Characteristics | Industry Average Characteristics |
|---|---|
| Vertical Integration | Outsourcing |
| 85% of capacity filled during season | Pre-load as much capacity as possible |
| 11,000 designs per year | 3000 designs per year |
| 10% unsold inventory | 17% unsold inventory |
| 12 inventory turnovers per year | 3 to 4 inventory turnovers per year |
