Zara: Fast Fashion from Savvy Systems
Both Zara and The Gap are retail online clothing giants in the fashion s industry. Zara, now worldwide, was founded in Spain. The Gap, also now worldwide, is a US Corporation. Both companies made a critical strategic decision on the future growth of their companies, with Zara taking the lead to move their significant marketing online. Gap later followed. Both still make retail sales but are positioned on the Internet. Zara currently has over 1M hits on its website each month. Read this chapter to understand how early the use of IT, particularly data collection and analysis, helps gain a competitive advantage. How did Zara use data to make early decisions about its business operations? How did Zara's use of data compare to Gap's?
Introduction
Learning Objective
After studying this section you should be able to do the following:
- Understand how Zara's parent company Inditex leveraged a technology-enabled strategy to become the world's largest fashion retailer.
The poor, ship-building town of La Coruña in northern Spain seems an unlikely home to a tech-charged innovator in the decidedly ungeeky fashion industry, but that's where you'll find "The Cube," the gleaming, futuristic central command of the Inditex Corporation (Industrias de Diseño Textil), parent of game-changing clothes giant, Zara. The blend of technology-enabled strategy that Zara has unleashed seems to break all of the rules in the fashion industry. The firm shuns advertising and rarely runs sales. Also, in an industry where nearly every major player outsources manufacturing to low-cost countries, Zara is highly vertically integrated, keeping huge swaths of its production process in-house. These counterintuitive moves are part of a recipe for success that's beating the pants off the competition, and it has turned the founder of Inditex, Amancio Ortega, into Spain's wealthiest man and the world's richest fashion executive.
Figure 1.1
Zara's operations are concentrated in Spain, but they have stores around the world like these in Manhattan and Shanghai.
The firm tripled in size between 1996 and 2000, then its earnings skyrocketed from $2.43 billion in 2001 to $13.6 billion in 2007. By August 2008, sales edged ahead of Gap, making Inditex the world's largest fashion retailer. Table 1.1 "Gap versus Inditex at a Glance" compares the two fashion retailers. While the firm supports eight brands, Zara is unquestionably the firm's crown jewel and growth engine, accounting for roughly two-thirds of sales.
Table 1.1 Gap versus Inditex at a Glance
| Gap | Inditex | |
|---|---|---|
| Revenue | $14.5 billion | $14.7 billion |
| Net Income | $967 million | $1.68 billion |
| Number of Stores | 3,149 | 4,359 |
| Number of Countries | 6 | 73 |
| Biggest Brand | Gap | Zara |
| Number of Other Brands | 4 | 7 |
| Based in | San Francisco, USA | Arteixo (near La Coruña), Spain |
| First Store Opened | 1969 | 1975 |
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