Zaras Business Model Essay Example for Free

Zaras Business Model EssayWhen I saw the first announcement of their ecommerce launch I ran home and dug through my undergrad signifier work and quickly produced a baptistery study Id read in 2003. Zara IT for Fast Fashion a Harvard Business School case study that examined Zaras IT infrastructure and how it supported their unique business mould.Two important caveats from this case study stuck out in my mind.Zaras business model closely linked customer demand to manufacturing and distribution. Inventory depended largely on the location of the monetary fund and what particular customers were buying. They understood that their consumer had a penchant for trend set pieces, and that marketing and advertising efforts lengthened the lead-time. Thus their marketing budget was usually .3% of revenue, and Zara was able to get high fashion looks in stores while they were still hot. Zara didnt need to convince their consumers to buy with advertising and marketing efforts, rather they c hanged 75% of their inventory every three to four weeks, so consumers knew to constantly frequent the store for up to date items.Secondly, Zara had decided not to retail clothes online because of the high rate of returns (retail mail order rates were 50-60% whereas in store was roughly 5%), and because their distribution centers were not configured for small pick and pack orders. If you think about it, Zaras business model is actually perfect for online retail. Their vertically interconnected manufacturing operations allowed for the perpetual introduction of new pieces with short lead times. For the fickle online consumer that wants newness all the time, its heaven In fact, the top right hand corner of their set pays homage to this brand ethos with a new this week link standing out from the pack.So what took them so long to make the move?