Zara Report
Zara is one brand among six that belong to a Spanish company called Inditex. Being one of the most
recognized brands in the entire world, Inditex is a leading organization in this industry and being a
perfect model of a buyer-driven company implies that the needs and wants of the customers shape the
supply chain of Inditex. Roughly 30% of the world's clothing is exported; however, recognition has soared
in developing countries such as the Central African Republic, C.A.R., for their contribution to the
"sweatshop industry," where goods are produced by workers for less pay. Companies, for their part, such
as Inditex, have offices in over 30 developed countries and are often the main driver in the
administration of global supply chains. These companies are determining the inflow of products into
developed countries, contributing a significant share to the sales of the 1990s, all through direct imports.
The majority of small stores were wiped out and were replaced by mega retail chains, thus affecting the
overall retail sales in the US, Western Europe, and a few other international markets. As the garment
retailing business started to globalize, European chains became the "biggest investors", sourcing in
countries where wage rates provided the best price advantage.
Although Inditex faces local competition in most of its 52 markets, analysts say that Zara differs from
other global retailers who outsource most of their production and own few stores. Here, Inditex had to
struggle with other top clothing retailers who were retailing out of the UK, Germany, and Japan, which
together represented 86% of Inditex's stores. By this decade the great majority of the world's retail
brands had become global except that, unlike most brands, Zara did not rely on great advertising, and it
also wasn't employing an enormous design team. 80% of Inditex's employees work in shops, while only
8.5% are engaged in the production process. It is very important that investments were measured in
millions from the opening of new shops and expansion of operations.
In the early 1990s, Inditex opened the first Zara stores in Spain. By now, within a few years, the company
had already stepped into other international markets and invested millions into manufacturing, logistics,
and information technology. By 2002, Inditex operated six clothing chains—Zara, Massimo Dutti, Pull &
Bear, Bershka, Stradivarius, and Oysho. Each of these chains was operating as a separate business unit of
the larger group; Zara was the largest and most internationalized chain.
Zara had 507 stores worldwide. 40% of the stores were in Spain. These stores were relatively small in
size. On average, the selling space was less than 100 square meters. However, Zara's store sizes increased
over time. In 2001, the average store size of Zara was 910 square meters; in 2002, new stores that
opened were 1,376 square meters on average. There were 282 stores in 32 countries under the outside
Spain heading, equal to 55% of the firm's international stores. Most of Zara's planned new stores in 2002
were to be outside Spain.
Zara implemented its international manoeuvres using three different methods: company stores, joint
ventures, and franchises. By the end of 2001, Zara's 231 company-owned stores were located in 18
countries outside Spain, including 20 in Germany and Japan managed by the company through joint
venture arrangements. Although these forms had differences and created some difficulties, Zara always
followed one business system in all its countries of operation. The prices for Zara products were higher in
the countries outside Spain, which had an impact on how the brand of Zara appears in international
markets. In this way, Zara was able to reassign merchandise from one market to another when local
demand required it.
Inditex was aiming to open between 55 and 65 new Zara stores in 2002, with almost all to be opened
outside Spain. Key to the group's overall expansion of Inditex, Zara accounted for exactly two-thirds of
the floor space consolidated occupied by the company. While there was hardly any room left for
expansion in Spain, Zara was penetrating the markets in other parts of the world rendering it one of the
leading market players in the world apparel market.
