Information Technology Contributes to Zara's Success

Zara's success

Founded in 1975 in Spain, Zara as the fast fashion-clothing retailer makes the major contribution to its parent company's, Inditex, income every year, and now Zara has over 1,500 stores in 81 countries, it also has overtaken its main competitors like H&M and Gap, became the world largest fast fashion clothing retailer since 2009. In the highly competitive clothing market, the secrets of Zara's success lie in its unique business model, where information technology made a great contribution.

Zara's strategy

Before studying Zara's operation system and its business model, we need know Zara's goal. What is Zara's strategy? Or another way to ask, what does Zara want to be known for? Hot and fashion best explain Zara's products, the fact in fashion clothing market is that customers' taste are changing rapidly all the time and hard to predict, and Zara's strategy is not to catch up the trend but to lead the trend. Zara will never produce dozens of similar style clothes you can see many people wear on the street, its unique design and limited quantities garments will convince the fashion-conscious customers desire to pay for the full price to get it because no one can make the guarantee the clothing will still in store on tomorrow.

Operating under differentiation strategy, Zara holds two beliefs, one is to respond to city fashion trend in the first time, and offer the newly designed clothing the picky customers want before the current fashion is fading. The other is giving the store employees authority to make decision on the prediction of clothing that will be sold well.

Zara's operation

In order to give the fastest responds to the market, Zara has its own unique and outstanding operation system. Zara's almost no advertisement principle did no harm to its revenue, on the contrary, it saves a lot of expense for Zara, which only cover 0.3% of it revenue, when compared with its competitors who at a averaged 3% to 4% (McAfee, Sjoman & Dessain, 2007). Instead, the expenditure Zara spend on opening new stores and the design of store is high. As the case article introduced, Zara's standardized ordering, fulfillment, and design and manufacturing cyclical processes created the Zara speed, which is within three weeks finishing the designing new cloth, manufacturing, and transporting new garments to local store processes. Compared with its competitors, who maybe changing their garments in store monthly or even quarterly, Zara's faster respond to the market demand will make its products can be sold at full price but also lower than comparable designer brands, this means higher margins, Zara's speed ensure them are always in the high margin position.

Porter's model apply

Value Chain

Porter's value chain theory pointed out that a company's activities, no matter they are primary activities or support activities, whether they generate revenue directly or not, every "value activity" need to be done before a product can be sent to the buyer will somewhat add value to the product or service the company offer. And value is the amount that the buyers are willing to pay a company's products or services (Porter & Millar, 1985). So for Zara, they are successful in adding values on their products. And finally create the product that customers think the price match or even exceed its value. As Porter said " a company must either perform these activities at a lower cost or perform them in a way that leads to differentiation and premium price" (Porter & Millar, 1985). Zara's business model successfully creates and enhances its differentiation image as the leader of fast fashion clothing market. In this market, the two most important gauges that customer will take into consideration are the degree of how fast and how fashion. Which means if the time saving and higher satisfaction of the new design can be done in any of the company's value activities, there will be additional value added to the product which also are the values the target customers are seeking and willing to pay for.

In Zara's firm infrastructure part, the decision making process is an adventurous but turned out to be an successful model, unlike the common sense which is manager or some knowledgeable experts making decisions, Zara gives a lot of authority to the local