CIS 2200 CH.2 (Zara: Fast Fashion from Savvy Systems)

What made Zara special?

Look like high fashion but comparatively inexpensive.
• Average item price is $27.
• Chain described as “Armani at moderate prices.

Excess inventory in the retail apparel industry is the…

kiss of death

vertically integrated

When a company controls multiple stages of the supply chain

contract manufacturing

Outsourcing production to third-party firms. Firms that use contract manufacturers do not own plants or directly employ the workers who produce the requested goods.

Advantages of contract manufacturing

lower costs and increased profits.

Disadvanatges of Contract Manufacturing

sweatshop labor, poor/unsafe working conditions, child labor, and environmental abuse.

What do Zara store managers use to track the demand of certain items?

Windows PDAs (personal digital assistants, now touch-screen iPads and iPods

What are the PROS of using

• Used to gather customer input and feedback.
• Tells the firm what customers at a given location want to see on shelves.
• Managers are motivated to use these systems

point-of-sale-system (POS)

A transaction processing system that captures customer purchase information. Tells the firm what’s selling.

How does Zara efficiently design their products to meet public demand?

• Customer demand and sales data dictate the designs that Zara develops.

• Zara’s design staff relies heavily on young and fresh designers from design school, rather than star designers.

• Individual bonuses are tied to the success.eams are regularly rotated

Why does Zara best seller items for a limited time?

• Encourages exclusivity

• incentivizes customers to purchase items at the full price, as 85 percent of Zara products are sold without a discount compared to the industry average markdown
  ratio of 50 to 70 percent

• Encourages customers to visit often.

• Reduces the rate of failed product introductions

vertical integration

When a company owns multiple stages of the supply chain. Ex: Raw materials, manufacturing, Assembly, etc

Pros of Zara being vertically integrated

The majority of Zara’s merchandise is produced in-house, with an eye on leveraging technology in areas that speed up complex tasks, lower cycle time, and reduce error.

RFID (radio frequency identification)

Small chip-based tags that wirelessly emit a unique identifying code for the individual item.

omnichannel

Approach to retail that offers consumers an integrated and complementary set of shop, sales, and return experiences.

operations

Organizational activities that are required to produce goods or services

How does E-commerce play a big role in Zara’s sales?

E-commerce is estimated to make up ten percent of Zara sales and grew twenty-three percent in 2018