Page 205 - DMGT550_RETAIL_MANAGEMENT

Retail Management

Notes need. With that edge, and a super-fast garment design and production process, it takes to
the market what its customers are looking for.
Quick-Bake Recipe: Well-Mixed Ingredients

Garment styling for Zara actually starts from the email or phone call received from the
stores. Thus, from the beginning Zara is responding to an actual need, rather than forecasting
for a distant future.
Based on the store demand, Zara’s commercial managers and designers sit down and
conceptualize what the garment will look like, what fabric it will be made out of, what it
will cost and at what price it will sell.
The designer then actually sketches the garment out, details the specifications and prepares
the technical brief. Since fabrics and trims are already in Zara’s warehouse, sampling takes
very little time. Approvals are equally quick, since the entire team is located in the same
place.
As soon as approvals are received, instructions are issued to cut the appropriate fabric. The
cutting is done in Zara’s own high-tech automated cutting facilities. The cut pieces are
distributed for assembly to a network of small workshops mostly in Galicia and in northern
Portugal these 350 workshops between them employ some 11,000 apparently grey-
economy workers. None of these workshops are owned by Zara. The workshops are
provided with a set of easy to follow instructions, which enable them to quickly sew up
the pieces and provide a constant stream to Zara’s garment finishing and packing facilities.
Thus, what takes months for other companies, takes no more than a few days for Zara.

Finally, Zara’s high-tech distribution system ensures that no style sits around very long at
head office. The garments are quickly cleared through the distribution centre, and shipped
to the stores, arriving within 48 hours. Each store receives deliveries twice a week, so after
being produced the merchandise does not spend more than a week at most in transit.
Keeping Costs Down

Even while manufacturing in Europe, Zara manages to keep its costs down. None of its
assembly workshops are owned by the company. Most of the informal economy workers
the workshops employ are mothers, grandmothers and teenage girls looking to add to
their household incomes in the small towns and villages where they live. Last year the
average monthly salary of a Spanish industrial worker was about 250,000 pesetas - $1,300
a month, excluding the state’s 30.8 per cent charge for social contributions. In contrast,
according to reports, the workshops working for Inditex may or may not pay the social
charges. According to one estimate, the seamstresses probably get something less than
half the average industrial wage, maybe $ 500 a month. These are around 5-6 times typical
Indian or Chinese wages, and yet offer the flexibility beyond what Asian factories can,
which has a tremendous impact on ratio of full-price merchandise sales.
Further, in terms of marketing costs, Zara relies more on having prime retail locations
than on advertising for attracting customers into its stores. It spends a meager 0.3 per cent
of sales on advertising compared to an average of 3.5 per cent of competitors according to
the company, choosing highly visible locations for its stores renders advertising
unnecessary.
Question:
Discus how Zara manages to keep its costs down.

Source: thirdeyesight.in/articles/ImagesFashion_Zara_Part_I.pdf

200 LOVELY PROFESSIONAL UNIVERSITY