Business Model for Zara

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Most Zara’s owned factories are located around its headquarter in Arteixo, Spain where Zara has its main centralized distribution system. Except the distribution center in Arteixo, Zara’s distribution center located at Argentina, Brazil, and Mexico as well. All of Zara’s cloth no matter from internal or outsource, passed through distribution center which operated on a dual shift basis and featured a mobile tracking system which can handle 45,000 folded garments per hour. (Luis, 2006) Orders were received from store twice a week, and then distribution center would make arrangement to transport these goods. If there is a shortfall of a particular cloth, the allocation decisions would make by the distribution center. The shipment was made by a third-party. Approximately 75 per cent of Zara’s products were delivered by truck within the Europe. Other 25 per cent was delivered by air through KLM and DHL. (Luis, 2006) Normally, products could be delivered 24-36 hours within Europe and 24-48 outside Europe. Even though the cost of shipment by air and truck is higher than ships, it accorded with Zara’s business model. By saving deliver time, Zara was able to accelerate its lead time and provide more selections to customers and make quick respond to market.

Zara’s retailing store and management is different from its competitors as well. Zara spent only 0.3 per cent of its revenue on media advertising, compared with 3 percent to 4 percent for most specialty retailers. (Luis, 2006) Zara normally located its store in the big shopping plaza at the attention getting position. Its store always had fancy decoration. The window show is centralized. The prime location and window display were used to promote its market image. The turnover rate in stores is rapid as well. It created the sense of scarcity. Because the shipments are relatively small, the products would not stay in store for long time.

Reference:

Luis, P. C. a. J., 2006. ZARA:Fast Fashion. 21 12, p. 10.

ZARA, n.d. Zara Official. [Online]

Available at: https://www.pinterest.com/zaraofficial/

[Accessed 05 12 2015].

Chemawat, P., 2006. ZARA:Fast Fashion. 21 12.

Dutta, D., 2002. Thirdeyesight. [On line]

Availableat: http://thirdeyesight.in/articles/ImagesFashion_Zara_Part_I.pdfhttp://thirdeyesight.in/articles/ImagesFashion_Zara_Part_I.pdf

[Accessed date : 24 11 2015].

Lu, C., n.d. Tradegecko. [Online]

Available at: https://www.tradegecko.com/blog/zara-supply-chain-its-secret-to-retail-success

[Accessed 01 12 2015].