Beruflich Dokumente
Kultur Dokumente
ZARA
SUBMITTED TO: SUBMITTED BY:
Prof. Subir Guha Kangna Sood
Neha Chauhan
Akanksha Chaudhary
Ankit Israni
Azizul Rub
INTRODUCTION
Jose Maria Castellano Rios was the Chief Executive Officer of
the Spanish apparel company Inditex.
On January 15, 2002 he stepped to the podium to receive the
International Retailer of the Year award from the National
Retail Federation.
This year had been a down year for retailers. Retail
consolidations and bankruptcies were occurring at the fast
pace. But Inditex and its flagship company Zara managed to
show impressive growth and strong profitability.
2001 had been a landmark year for Inditex, for the founder
Amancio Ortega Gaona and for Castellano.
HISTORY OF ZARA
Mr. Gaona was a native of Galicia and he had worked as a clerk
at a ladies apparel retailer before starting his own housecoat
manufacturing business in 1963.
Financial Statistics
Days Inventory (fye) 35.6 33.8 34.2
Net Working Capital -123.4 -133.7 -204.9 -234.3 -273.9
Operating Statistics
Total Retail Sales (millions) 1,525.50 1,998.80 2,606.50
Average Sales per Store (millions) 2.04 2.17 2.41
Total Retail Stores 748 922 1080
Average Sales per Sq. Meter 4,752.34 4,534.69 4,853.82
Total Selling Sq. Meters 321000 441000 537000
Same Store Sales 11% 5% 9%
Inditex-Net Sales & EBIT by concept
Net Sales
(Euro in millions) 1998 1999 2000
Zara 1,304.20 1,603.40 2,044.70
EBIT
(Euro in millions) 1998 1999 2000
Zara 213.0 248.40 327.9
Massimo Dutti
- Price
+ Causal
Bershka
Gap
Stradivarius
Pull and Bear
H&M
Next
- Young Mango Zara + Young
Benetton
Cortefiel
Massimo Dutti
+ Formal
THE TEXTILE AND APPAREL INDUSTRY
In 1999, the global textile and apparel industry accounted for
5.7% of the production value of the world manufacturing
output and more than 14% of the world employment.
The clothing market in the major countries was estimated at
about $580 billion, with US accounting for about $180 billion
and Western Europe about $225 billion, Eastern Europe about
$14 billion, Latin America about $45 billion and some parts of
Asia represented areas for potential market growth as income
levels rose and markets matured out of a highly fragmented
stage dominated by independent retailers.
The production of textile is capital intensive. Textile
manufacture tend to be highly specialized, depending on
the raw materials (natural or synthetic or blend), whether
the cloth is woven, knitted, matted or fused, the dying or
painting, treatment and finishing and the overall
performance characteristics desired for the end product
such as how well it accepts and hold dye, how well it
insulates and machine wash ability.
Apparel production involves the procurement of fabric, the
preparation of designs including samples and patterns, the
cutting of fabric and the sewing and finishing of garments. For
knitwear, the production process is modified to incorporate
the procurement of yarn and the knitting process.
In terms of production, the apparel industry could be
roughly broken down into three tiers of quality:
a high quality segment items that incorporate fashion
elements and emphasize quality of material and
workmanship such as ladies suits
a medium quality segment quality of material and
workmanship had to be acceptable but where there was
little differentiation among producers and relatively little in
terms of a time-sensitive fashion component (cardigans,
khakis)
a low quality segment product competed on price
Design centers were light and modern, with pop music playing
in the background.
The store specialists work in same rooms, review daily
detailed printouts of store sales and gather the feedback from
store managers. Each store specialist is responsible for a
group of stores by region and visit them periodically.
Based on the samples, the initial collection for the season was
finalized and shown within Zara.
Production Sourcing and Scheduling
Fabric procurement
Based on styles and sizes, the Zara factories cut the fabric.
The cut fabric pieces were marked and bundle for sewing.
Store mangers asked for items that they wanted in their store,
but the final allocation were made centrally, taking into
account current store sales and inventory information.
Before 2001, they had a single tag that showed all of its
different prices by country. This simplified the tagging
procedure and also permitted goods to be moved from store
to store without retagging and also permitted goods to be
transshipped between one country to another without
retagging.
At the beginning of 2002, Zara switched to a system of local
price marking in the stores, using a device that read the bar
code and printed the appropriate local price.
Growth Strategy
Most of the stores are company owned although in some
markets (e.g the Middle East) Zara had opened a small
number of stores through franchises and in some other
markets (e.g Japan) Zara had opened stored through
alliances.
Zara did not establish local distribution centers and
warehouses when it entered a market or engage in store-
opening promotions.
Zara had about 450 stores in 33 countries.
ZARA- STORE LOCATIONS : 2000
Company Owned Franchise Joint Venture Total
Spian 220 220
Portugal 32 32
Belgium 12 12
France 63 63
United Knigdom 7 7
Germany 6 6
Poland 2 2
Greece 15 15
Cyprus 2 2
Israel 9 9
Lebanon 2 2
Turkey 4 4
Japan 6 6
United States 6 6
Canada 3 3
Mexico 23 23
Argentina 8 8
Venezuela 4 4
Brazil 5 5
Chile 2 2
Uruguay 2 2
Kuwait 2 2
Dubai 2 2
Saudi Arabia 5 5
Bahrain 1 1
Qatar 1 1
Andorra 1 1
Austria 3 3
Denmark 1 1
Total 410 27 12 449
A SOURCING DILEMMA
Zara was on the right track for a continuation of the measured
and organic growth off its business model and unique
positioning.
Textiles Clothing
Tunisoa 1.76 NA
30
25
13.6
20
10.12
hourly wages ($)
15 Clothing
6.79 Textiles
10
15.81
3.7 12.97
5 2.12 8.49
1.36 4.51
0 2.98
0.43 1.76 1.89
0 0.62
0
PRODUCTION MOVEMENT
Production Allocation
1998 1999 2000
In-house 53% 50% 44%
External 47% 50% 56%
100% 100% 100%
Origin of Production
1998 1999 2000
Spain 29% 25% 20%
Portugal 27% 24% 22%
European union 10% 9% 5%
Rest of Europe 8% 11% 15%
Asia 19% 23% 29%
Rest of World 7% 8% 9%
100% 100% 100%
OUTSOURCING BENEFITS AND
RISKS
Some of the motivations for outsourcing are
1. Unit cost
2. Transportation cost
4. Handling cost
6. Cost of financing
CRITERIA
Component forecast accuracy is not necessarily the same as
the finished product forecast accuracy
increasing flexibility