Zara & Fast Fashion Operating Models – 17 January 2019

Inditex, the owner of fashion brand Zara, released on its official website that in the first three quarters in 2018, it has generated revenue of EUR 18.4bn, up by 3% YoY, and had a 4% rise YoY in net profits to EUR 2.4bn. What is your comment on Zara’s performance in 2018, in the Chinese market in particular?

Zara has outperformed other fast fashion brands in 2018. Is that what you meant?

You mentioned that Zara has obtained the largest market share in comparison with other fashion brands. How did its market share change over these years?

Can you introduce the user persona in Zara, H&M, Uniqlo and Gap respectively?

It is said that because of consumption upgrading, Chinese customers valuing cost performance or comfortableness may go to Uniqlo or Gap instead, which offer cheaper but quality basic essential pieces, while those highlighting brand awareness or design would buy superior entry-level luxury or even luxury products. In that case, Zara’s future performance may not be thought to be promising. What is your comment on that?

The Post-95s may also know other fast fashion brands such as Topshop. Will they continue buying products from Zara after they are 25 in your mind?

It is known that H&M entered the beauty product sector several years ago and developed products such as nail polish, eye shadow and lip gloss which have been popular among young customers. Why did Zara not follow H&M until H2 2018?

Since 2017, it has been common to see fast fashion stores closed in China and many foreign brands may exit the Chinese market. C&A closed its first flagship store in Chengdu. In last December, Forever 21 has stopped operation of its many stores in Tianjin and Hangzhou. In February 2017, Zara has shut down its biggest flagship store in China. Why did Zara do that?

Why did Zara establish two stores so close to each other in Chengdu? How does Zara differ from other fashion brands such as Uniqlo and H&M in strategies to open stores?

You mentioned that Zara has established only 2,000-odd stores globally, among which 210 are in China. The number is smaller than that of other clothing brands. Does it mean that its offline stores may contribute to a smaller proportion of revenue in comparison with that of other fashion brands?

Does that mean the store on Tmall has a higher margin than those offline or Zara’s official app?

What about the brand’s online and offline sales beyond China?

Let’s take a look at supply chain management. Nowadays many fast fashion brands have increased the frequency of releasing new products from four to 11-15 times a year. It is said that at Zara, it only takes two weeks to design, produce and deliver a new product to stores, which is nearly half the time spent at H&M. Not to mention that most brands in the industry need 3-6 months to complete the same process. What are the main reasons behind Zara’s highly efficient supply chain?

The efficient supply chain helps Zara keep a healthy inventory and provide what consumers want. Are there any drawbacks?

How efficient is the product transfer from one store to another?

Zara boasts a giant designer centre and a headquarter-based business team composed of designers, market analysts and purchasers. There are said to be 40,000 new styles designed every year, around 12,000 of which will be released to the market. At Zara, it takes only 20 minutes to redesign a sample style, such as changing its material or sewing method to make the design simpler. Unlike its competitors, the brand designs styles of the next season while renewing in-season collections. Can you make some comments on Zara’s design system? Q: Zara boasts a giant designer centre and a headquarter-based business team composed of designers, market analysts and purchasers. There are said to be 40,000 new styles designed every year, around 12,000 of which will be released to the market. At Zara, it takes only 20 minutes to redesign a sample style, such as changing its material or sewing method to make the design simpler. Unlike its competitors, the brand designs styles of the next season while renewing in-season collections. Can you make some comments on Zara’s design system?

Some say that Europe is the only right place for brands like Zara which will not succeed anywhere else. Do you agree with that? Does it indicate that there is a good sense of design in Europe?

You mentioned the different maturity degrees of Chinese consumers and European consumers. In the US, for instance, consumers may still have difficulties in deciding what styles they want and have to spend a lot of time queuing for fitting room. How does Zara ensure standardised store management practices worldwide?

You just said if products haven’t been sold out within two weeks, they’d be transferred to other branches or to the headquarters, so that’s why the Zara could maintain a healthy inventory?

What kind of online marketing strategies will Zara take? Do you expect Zara to cooperate with apps such as Douyin and Xiaohongshu?

You mentioned that Zara will design 40,000 styles of products each year, and 12,000 of them will be put into production, and 10,000 of them will be launched to the Chinese market. Can you introduce us the main categories of Zara’s products? What are the contributions of each category to Zara’s total revenue?

What’s the average revenue per user (ARPU) of Zara in 2018?

What’s the respective proportion of products made by Zara itself and third-parties?

Is there anything we haven’t covered in our discussion today, or is there anything more you’d like to share with us?

Zara really has great advantages over its peers, doesn’t it?