It For Fast Fashion Case Study

1823 words - 7 pages

IT for Fast Fashion Case StudyZara is a flagship store for the Spanish Inditex Group, one of the largest fashion retail groups worldwide and currently contributes to 65.6% of its sales. The company has 1520 stores (as at end of 2008, including Zara Kids) and opened 159 stores in 2008 (Inditex 2009). Its stores are located in cities across Europe, America and Asia, present in 72 countries, offering up to date trends in international fashion. It has overtaken Hennes and Mauritz to become Europe's largest fashion retailer, providing affordable quality clothing and footwear for women, men and children (Tiplady 2006). The environment in which Zara is operating is highly competitive due to the fast moving nature of fashion where the consumer is fashion confident and expects product innovation. What is the best way on which Zara has to focus to be competitive and profitable on a permanent basis? Going through an analysis of the Porter's five forces of Zara will give us an overview of its direct environment which then will allow us to discuss the improvements that can benefit Zara's IT systems against its competitors and identify what is the main resource that Zara exploited to build its advantage.The competitive rivalry of Zara is really high. Its first competitors in the market are Gap and Hennes & Mauritz. H&M remained the market leaders until they were supplanted by Zara in March 2006. Zara's sales rose by 21% to $8.5 billion while profits increased 26% to $1 bn. Even if Gap has more stores than Zara, its margin is 10.9% compared to Zara's one which is 16.2% (Tiplady, 2006). Only present in 22 countries, H&M have had higher sales, profits and margins in the past. They also operate on a different production system which involves forecasting trends nine to twelve months in advance and sourcing items from cheap Asian factories. Whereas Zara reacts to customers desires really quickly producing low quantities of each product for each order. In the event it is not successful, losses can be cut down (Tiplady, 2006).At first, the barriers to entry for Zara may be perceived as high. Indeed, Zara has short lead times, lower quantities and more styles which require an established, efficient production and distribution system, well explained in the reading. They managed to seize on the season's hottest trends in only four weeks (Capell and Kameney, 2006). Zara's supply structure is designed for flexibility and speed (Inditex Annual Report, 2008). Nevertheless, barriers to entry are low. Zara is not the only one fast fashion specialist and fashion retailing. For instance, Mintel is the most 'fluid of all sectors of retailing and the one where consumers are least forgiving' (Mintel Group International 2009). Plus, fast fashion retailing could be considered as a niche business where a well focused company should be successful. The extent of success depends on trends, flexibility in reacting to customers' demands and speed.The threat of substitutes is...

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