Global Fashion Apparel Essay Example

Hong Kong, Italy, Malaysia, Pakistan, Thailand and India. Some of the apparel trade statistics are presented below: The clothing and apparel industry produces finished clothing products made from both natural and manmade fibers like cotton, silk, wool, linen, polyester, rayon, lycra and denim. The important segments covered in apparel industry include:

1. Kids clothing
2. Men’s clothing
3. Clothing for women
4. Bridal wear
5. Men’s wedding wear
6. Intimate apparel

The apparel is sold through three major channels: Brick & mortar: A “brick and mortar business” is a term used mainly on the Internet to differentiate between companies that are based solely online, and those that have a real-world counterpart. A brick and mortar business has a commercial address “made of brick and mortar” where customers can transact face-to-face. The company might also have an online presence.

Catalog: A book or pamphlet containing an enumeration of clothes, so that consumers can see how the apparel will look once it is stitched & ready to wear.

Internet

The market share of the different channels is shown below: The largest apparel manufacturers and exporters are countries from the Asia-Pacific region which included countries like China, Hong Kong, Philippines, Malaysia, Indonesia, Bangladesh, Srilanka, Pakistan, Thailand and India. The other major apparel manufacturing nations were USA, Italy, Germany and Mexico. The key dominant features of this industry are:

1. Short product life cycles
2. Volatile and unpredictable demand
3. Long and inflexible supply processes
4. Tremendous product variety
5. No style lasts more than four weeks.

Fashion is a style that is popular in the present or a set of trends that have been accepted by a wide audience. But fashion itself is far from simple. Fashion is a complex phenomenon from psychological, sociological,

cultural or commercial point of view. Fashion trends are the styling ideas that major collections have in common. They indicate the direction in which the fashion is moving. To cope with the ever-changing world, the marketing segmentation and targeting techniques are rapidly evolving from traditional, static, demographic-based criteria towards dynamic, mood, lifestyle and psycho graphic influences.

Fashion forecasting is the prediction of mood, behavior and buying habits of the consumer. It is no longer a question of identifying your customers by age, geography or income, but looking into how and why they buy, based on their mood, beliefs and the occasion. To convert these findings into the products, an apparel company’s marketing, manufacturing & logistics has to work hand in hand. Zara’s strategy: Zara’s strategy rests on strong link between market research & logistics, assisted by robust IT support.

It makes extensive use of robotics, inventory management models, PDAs & automation. This helps Zara reduce lead time drastically compared to the industry & gives it a competitive advantage over close rivals like Prada, GAP, Mango, Benetton etc. It also invests in stores at premium localities & uses them as not a “place to sell” but to represent the face of Zara to the world & do its in-depth market research. Market research: Zara has rejected the idea of traditional segmenting & targeting and spring & autumn collections.

Instead Zara goes for “live collections” which can be designed, manufactured, distributed & sold almost quickly as the customers’ fleeting tastes.

Zara has more than 300 designers ho continuously track market events, fashion trends & customers preferences. They design 11, 000 distinct items per year as compared to 2000 to 4000 by

rivals. Designers get ideas from store managers, industry publications, TV, internet, film content & trend spotters who focus on university campuses & night clubs. Trend spotters click the snaps at coutures shows & immediately reproduce the looks for the mass market. Store staff also analyze the unsold clothes and try to find out patterns, looking for evidence for customer’s not buying the unsold items (whether they did not like the color, length, style, fabric etc)

A Zara manager might casually ask: What if this skirt were in a longer length. Would you like it in a different color. What if this v-neck blouse were available in a round-neck.

Zara invests in stores located at premium localities. But not as “a place to sell” but with the thinking that:

• Store represents the face of Zara to the world To conduct its in-depth market research

Manufacturing & logistics: The average time for a Zara concept to go from idea to appearance in store is 15 days vs. rivals who receive new styles once or twice a season. Smaller tweaks arrive even faster. If enough customers come in and ask for, say a round neck instead of a “v” neck, a new version can be in stores with in just 10 days. To put that in perspective, Zara is twelve times faster than Gap, despite offering roughly ten times more unique products! For the rival, H&M it takes three to five months to go from creation to delivery.

Other retailers need an average of six months to design a new collection and then another three months to manufacture it. VF Corp (Lee, Wrangler) can take 9 months just to design a pair

of jeans, while J. Jill needs a year to go from concept to shelves. At Zara, most of the products you see in stores didn't exist three weeks earlier, not even as sketches. Vertical integration ; Just-in-time manufacturing The firm makes 40 percent of its own fabric and purchases most of its dyes from its own subsidiary. Roughly half of the cloth arrives undyed so the firm can respond as any mid-season fashion shifts occur.

After cutting and dying, many items are stitched together through a network of local cooperatives that have worked with Inditex so long they don’t even operate with written contracts. The firm does leverage contract manufacturers (mostly in Turkey and Asia) to produce staple items with longer shelf lives, such as t-shirts and jeans, but this volume accounts for only about 1/8th of dollar volume. All of the items the firm sells end up in a 5 million square foot distribution center in La Coruna, or a similar facility in Zaragoza in Spain’s northeast. The facilities move about 2. million items a week, with no item staying in-house for more than 72hours. Ceiling-mounted racks and customized sorting machines patterned on equipment used by overnight parcel services whisk items from factories to staging areas for each store. Clothes are ironed in advanced, packed on hangers, with security and price tags affixed. This means that instead of wrestling with inventory during busy periods, employees in Zara stores simply move items from shipping box to store racks, spending most of their time on value-added functions like helping customers find what they want.

Efforts like this help store staff regain as much as three hours in prime

selling time. Trucks serve destinations that can be reached overnight, while chartered cargo flights serve farther destinations. The firm recently tweaked its shipping models through Air France-KLM Cargo and Emirates Air, so flights can coordinate outbound shipment of all Inditex brands with return legs loaded with raw materials and half-finished clothes items from locations outside of Spain. Production commitment ; markdown:

Technology-orchestrated coordination

It is technology that helps Zara identify and manufacture the clothes customers want, get those products to market quickly and eliminate costs related to advertising, inventory missteps, and markdowns. Store managers t Zara are equipped with personal digital assistants (PDAs) to gather customer input, staff regularly chat up customers to gain feedback on what they’d like to see more of. PDAs are also linked to the store’s point-of-sale (POS) system, showing how garments rank by sales.

In less than an hour, managers can send updates that combine the hard data captured at the cash register combined with insights on what customers would like to see. All of this valuable data allows the firm to plan styles and issue re-buy orders based on feedback rather than hunches and guesswork. The goal - to improve the frequency and quality of ‘sense making’ for the design ; planning teams. ?Inventory optimization models help the firm determine how many of which items in which sizes should be delivered to stores during twice-a-week shipments, ensuring stores are stocked with just hat they need. ?Outside the distribution center in La Coruna, fabric is cut and dyed by robots in highly automated factories. 3)Analyze global fashion apparel industry using Porter's Five Forces framework and Value Net. How does Zara minimize the impact

of the five competitive forces? The complexities of an economic structure are the result of long-term social trends and economic forces. But its effects on business managers are immediate because it determines the competitive rules and strategies they are likely to use.

Learning about that structure provides essential insight for our business strategy. Michael Porter has identified five forces that are widely used to assess the structure of any industry. Porter’s five forces are: Together, the strength of the five forces determines the profit potential in an industry by influencing the prices, costs, and required investments of businesses—the elements of return on investment. Stronger forces are associated with a more challenging business environment.

Industry rivalry: Concentration & balance:

The major companies in the global fashion apparel industry are: Benetton, GAP, Prada, H&M, Ferragamo, Max Mara, Furla, Giorgio Armani, Bruno Magli, Versache, Gucci, Dolce & Gabanna, Chapurin, Alena Akhmadullina, Denis Simachev, Yves Saint Lauren, Jimmy Choo, Christian Dior,Channel, Dior, Zara and many others. Also, the industry is flooded with many local, faceless players as fashion can be very location specific depending on the culture, customs and climate of a country. This creates an imbalance in the industry as everybody tries to achieve a higher market share.

This is a highly fragmented industry. Industry Growth: Though an exact figure for global fashion apparel industry cannot be given, it is clear from the trends in emerging markets that the industry is growing at a rapid pace & will continue to do so. Some findings are shown below: South Africa South Africa South Africa South Africa

Many high profile brands such as Armani, Prada, and Versace have short-listed South Africa for expansion beyond the

traditional fashion capitals. Young South African fashion designers have been invited to the Paris Fashion Week to showcase their creations UAE Despite the global economic recession, the Middle East luxury market is expected to grow 2% in 2009. The regional markets of Saudi Arabia and Turkey have been ranked among the top-10 most attractive emerging markets for apparel retailers, in 2009  UAE consumers are increasingly purchasing brands such as Christian Dior, Giorgio Armani, Yves Saint Lauren, Armani, Channel, and Dior SIngapore. Singapore has long been the home of many international fashion brands such as, Giorgio Armani, Gucci, D&G, Versace, Prada eyes Singapore as the next regional hub for the retail and luxury market.

The company plans to have at least 10 stores in Singapore by the end of 2010 Russia. Russia has witnessed a 14. 8% CAGR in consumer expenditure on fashion products from 2002 through 2007. Italian luxury fashion brands are eyeing emerging economies such as Russia; several international brands are also expanding their presence beyond Moscow and St Petersburg, to smaller Russian cities, for growth opportunities. Russian brands such as Chapurin, Alena Akhmadullina, and Denis Simachev have displayed their work at the Paris Fashion Week India.

India is considered an attractive market for luxury brands; about 50 premium and luxury brands, including Jimmy Choo, Gucci, Christian Dior, and Chanel, have opened stores in India in recent years. Apparel manufacturers are now shifting production to low cost Asian countries such as India. Consumer spending on fashion products has grown at 7. 1% annually from 2002 through 2007 Indian domestic designers, such as Rina Dhaka, Anamika Khanna and Manish Arora are gaining international recognition Brazil. The Brazilian

luxury market is expected to grow 35% over the next 5 years, the highest rate for any country in the world.

For the second year in a row, AT Kearney has ranked Brazil the most attractive emerging market for apparel retailers. The country’s fashion exports have been growing at an annual average of 5% since 2002 Fixed Costs: Fashion apparel industry is labor intensive rather than capital intensive. The initial investment or fixed costs in this industry are, thus, low. Fashion retailers and apparel manufacturers are always seeking to lower costs by outsourcing production to developing countries where the lowest labor rates are found. Product Differences: Product differentiation is of utmost importance in the global fashion apparel industry.

Product differentiation here is very high & thus, increases rivalry in the industry. Brand Identity: The whole fashion industry is driven by brand identity. The market is flooded with not only well known international brand mentioned above but also many local designers & brand for example, Rohit Bal in India. Brand identity increases rivalry. Switching costs: Switching costs for the customer to switch from one brand to another are very low. This increases the rivalry in the industry. Informational Complexity: Due to evolution of IT & internet, competitors can assess the costs, working structure of the rivals.

This increases the rivalry in the industry. Diversity of competitors: The industry players are active in their defined geographies and hence there is always an attempt to enter into the competitors market. Also, the players which have been successful in the foreign markets would try to enter newer and similar markets, thus increasing the degree of rivalry. Corporate stakes: A company like Prada

has been playing a major role in the fashion apparel industry and hence any major trend or innovation by the same is likely to increase the degree of rivalry.

Exit barriers: The newer or smaller companies not being able to find the buyers for their outputs might have to close down due to the well established players. The exit barriers in this industry are quite low. This decreases the rivalry in the industry. Thus, overall rivalry in the industry is high. Threat of new entrants: Economies of scale: The larger the economies of scale, the difficult it becomes for a new player to enter the industry. Since in the given industry, there are well established players operating at various economies of scale and due to the products nature itself, the entry barriers are high.

Growing exports have fuelled quality improvement. Also, this being a labor intensive industry, most of the companies outsource their manufacturing to countries like India, Thailand & China etc. Thus, economies of scale is not a concern for new entrant. Brand Identity: The whole fashion industry is driven by brand identity. The market is flooded with not only well known international brand mentioned above but also many local designers & brand for example, Rohit Bal in India. Brand identity poses a threat to the new entrant.

Capital requirements: The industry in concern is a labor intensive industry and the stringent capital requirements do not pose a strong entry barrier to the new players. Proprietary product differences: Product differentiation is of utmost importance in the global fashion apparel industry. Product differentiation here is very high & thus, poses a threat to the new entrant. Switching costs:

Being a trend driven industry, the switching costs are low for both the manufacturers and consumers, leading to lowering the entry barriers.

Access to distribution: Fashion apparel is sold through three major channels: Brick & mortar: A “brick and mortar business” is a term used mainly on the Internet to differentiate between companies that are based solely online, and those that have a real-world counterpart. A brick and mortar business has a commercial address “made of brick and mortar” where customers can transact face-to-face. The company might also have an online presence. Catalog: A book or pamphlet containing an enumeration of clothes, so that consumers can see how the apparel will look once it is stitched & ready to wear. Internet Thus, it becomes easy for new entrants to reach customers & hence, distribution channels do not deter a new entrant to enter the market. Proprietary learning curve: The economies of scale achieved by some players due to the experiences of the employees and the organization wide learning, keep the workers tied to the production process and the company in general. This therefore increases the entry barrier as the skilled workers are unavailable for being employed by the new entrants. I fashion industry, learning mainly concerns with predicting the future trends & designing clothes accordingly.

Access to necessary inputs: Inputs to the apparel industry are fibers (natural or synthetic), stitching machines, dyes etc. which are readily available & thus do not deter a new entrant. Low-cost product design: This is possible through a very robust logistics & supply chain management, which is not a feasible option for the new entrant and thus the leading players continue to

give them a tough time by raising the barriers by lowering costs and improving designs. Some companies try to reduce costs by outsourcing manufacturing processes.

Government Policy: Many governments support fashion industry for various reasons: as a part of their economic development drive (South Africa) to promote tourism (UAE) by organizing events to promote domestic textile industry (Brazil) Governments support makes it easy for a new entrant to enter the industry. Expected retaliation: Apparel designs are creations of intellectual property. This makes expected retaliation by the competitors very high & thus, decreases the threat of new entrants. Thus, threat of new entrant to the industry is very high.

All these factors make the fashion apparel industry vulnerable to new players entering the industry. Threat of substitutes: Fashion industry is very much susceptible to substitution by cheaper “me too” products made available by local players. This can be explained as follows: Relative price performance of substitutes: Threat of substitutes can arise due to following factors: Switching costs: Like mentioned above, the costs of switching are low for both the manufacturers and consumers, and hence the threat of substitution is high. Buyer propensity to substitute: The buyers for the fashion apparel ndustry are common people of all socio economic classes of the society, entertainment industry, retailers etc. Since the industry is highly fragmented & flooded with “me too” products, buyer has an incentive to go for the substitutes. This makes industry vulnerable to the threat posed by the substitutes. Thus, fashion apparel industry faces substantial threat from the substitutes. Bargaining power of Buyers: The buyers for the fashion apparel industry are common people of all socio economic classes of

the society, entertainment industry, retailers etc. uyers’ power arises due to following reasons: Buyer concentration: Countries like India, Brazil, China and Russia are being developed as major sourcing and manufacturing hubs by leading fashion apparel companies all over the world. These buyers are not concentrated (there are many buyers) & hence their bargaining power is low. Buyer volume: Fashion industry is defined by time and fashions have very short lives. Thus, buyers need to assess demand quickly and correctly. To cater to the demand for the time the fashion is in vogue, volumes are important to a buyer (a retailer).

This reduces his bargaining power. Switching costs: Like mentioned above, the costs of switching are low for both the manufacturers and consumers. This increases the bargaining power of the buyers. Buyer information: Buyers have access to information via internet, movies, fashion magazines and fashion shows etc. This increases their bargaining power. Buyer profits: If buyers (retailers) make profit by selling fashion apparel industry’s products, they can dominate suppliers & thus enjoy better bargaining power over them.

Substitute products: Bargaining power is very high for buyers due to availability of numerous substitutes & low switching costs. Pull-through: Fashion industry is driven by glamour & pull through. Buyers have little bargaining power if the product has a high pull through value. Price-sensitivity: Price sensitive buyers will go for substitutes & this gives them higher bargaining power. Price/total purchases: Since the buyers here do not purchase in bulk and thus do not determine the prices based upon the volume of purchase, they exercise lower bargaining power.

Product differences: Highly differentiated products give low power to buyers. Brand identity: Plays a very

crucial role in fashion industry. Respected brand like Prada, Versache etc command a premium price & weaken the buyer’s bargaining power. Ability to backward-integrate: A retailer can integrate backward (manufacturing of clothes, procuring material etc) easily. This gives him high bargaining power. Impact on quality/performance: Since fashions are transitory, customers are bothered about the quality/performance ratio. This lowers their bargaining power.

In the fashion apparels industry, the buyers have a higher bargaining power. Bargaining power of Suppliers: The suppliers to the fashion apparels industry include the manufacturers of natural & synthetic fibers, dyes, sewing machines etc. Apart from these, there also exist the typical manufacturers of various supplies which an industry in general needs for its functioning. Switching costs: Low switching costs give suppliers a high bargaining power. Differentiation of inputs: Little variation in the inputs gives suppliers a low bargaining power.

Supplier concentration: As the industry develops, the suppliers also develop around the same. In the fashion apparel industry the suppliers are many and hence the bargaining power is low. Presence of substitute inputs: Inputs can be easily substituted (natural vs synthetic fiber). This reduces supplier’s bargaining power. Importance of volume to suppliers: The fixed costs associated with these suppliers are normally high and so they need to produce and sell volumes. This restricts the bargaining power that they enjoy. E. a supplier of natural cotton fiber has to sell his produce in order to recover his fixed costs & achieve BEP. Impact of inputs on cost or differentiation: There isn’t much impact of inputs on cost differentiation. This reduces supplier’s bargaining power. Threat of forward integration: If a supplier has the ability to integrate forward,

he enjoys greater bargaining power over the competitors in the industry. In fashion industry, a manufacturer of fiber cannot enter designing, marketing & distribution of apparels, as the two require very different core competencies.

Thus, they have low bargaining power. Thus, in a nutshell, suppliers have a low bargaining power over the industry. Zara’s strategy to manage the five forces acting on the fashion apparel industry: This can be shown with a comparative analysis between Zara vis-a-vis industry average/closest rival: Parameter Industry average/ closest rivalZara Zara’s strategy IT expenditurePrada spends the highest on IT. It includes cameras & foot pedals in dressing rooms & such high tech itemsLess than 1/4th of industry averageUse of IT for automation of processes like dying (robots) Inventory management

PDAs to market research & to assist JIT manufacturing Average visits of customers to stores3 per year17 per yearShows low stock in the stores, customers feel if they don’t buy now, they won’t find the item later. % of revenue spent on advertising 3. 5%0. 3%There’s plenty of free press. The money saved can be spent for automation, designing of new styles. Failure rate (of designs)10%1%In depth & continuous market research, staff trained to question customers if they would like the outfit in different color, style, fabric etc.

ManufacturingMostly outsourced to low wage rate countries40% finished garments made in its 20 factories JIT with the help of ToyotaFocus on capital intensive part of production i. e. pattern design, cutting, finishing & inspection High costs compensated by inventory control, adjusting to fashion trend quickly Supply of inputsPurchased from outside sourcesPurchased from its own subsidiaries Tight vertical integration, no dependence on suppliers Brand identityManage it by

heavy advertising, hiring celebritiesNo advertising, no celebrity endorsementsInvests in prime locations Stores serve 2 purposes: Represent Zara to the world Market research

Response to globalization Produce garments according to the tastes of a particular country, hence costsStandardization, mass customizationConvergence of tastes & fashion across national boundaries. Keeps its clothes line simple. Thus, with help of all these strategies Zara has achieved a dual competitive advantage over its rivals: cost advantage & differentiation. 4)Draw Zara's value chain and indicate its strengths and weaknesses relative to rivals. In 1985, in his book Competitive Advantage, Michael Porter suggested analyzing costs ; differentiation with the help of value chain.

A firm performs numerous activities to design, manufacture, market, distribute and support its product. Each of these activities can contribute the firm’s relative cost position ; create a basis for differentiation. Value chain disaggregates a firm into its strategic activities ; helps understand: oBehavior of costs oPotential sources of differentiation This can be explained with the help of following diagram: Raw materials Zara is highly vertically integrated ; procures 40% of raw materials from its own subsidiaries.

External suppliers are in Morocco, India, Spain, Far East. Half the fabric purchased is grey (undyed)Textile plants 20 fully owned factories, all in Spain. Factories are fully automated. Use of robotics, inventory control models, JIT manufacturing. Apparel plants Export chains Retail stores Invests in prime locations. Stores have two purposes Represent Zara to the world ; Market research Customer Zara’s competitive position vis-a-vis competitors: Zara’s strengths ; weaknesses: Strengths Weaknesses

Cost leadership (standardization)Centralized distribution system DifferentiationVulnerable to any kind of political, climatic, legal, financial disturbances in Spain Efficient distributionInability to acquire economies of scale due to vertical

integration Effective use of technologyHigh R costs Quick adoption of fashion trends 5)Current challenges Zara is facing and emerging challenges (five years) and your recommendations.

• Zara has an inability to penetrate the American apparel market.

This may be due to American tastes that differ from European preferences. More importantly, however, Zara has not been able to develop a strong supply chain strategy in the U. S. like they have in Europe. Their European strategy includes, having a strong production and distribution facility in their home country in order to have short production and lead times. Zara has not invested in distribution facilities in the Americas, which is a threat to their U. S. selling abilities since the U. S. makes up 29% of the total apparel market (19; 4).

This may make them “subject to diseconomies of scale”, which means that though are aware of how to quickly supply 1,000 stores, they may not be able to supply more retail locations due to their “centralized logistics model”.

• Their vertical integration has more advantages than drawbacks but it is important to recognize its limitations. Vertical integration often leads to the inability to acquire economies of scale, which means they cannot gain the advantages of producing large quantities of goods for a discounted rate. Higher costs are then incurred for the Inditex Corporation.

Inditex also has to support their own high capital investments for their chains and be able to financially back their “technology and skills beyond those currently available within the organization”. Zara’s speedy and recurrent introduction of new products incurs increased costs as well. They have higher research and development costs. They also have elevated costs due to

the constant changeover of production techniques to create their different apparel lines. That also means that employees must be trained in order to use the new manufacturing techniques, which again leads to increased costs.

Traditional retailers do not experience higher costs in all of these areas.

• The European switchover to the common currency called the euro has created the potential threat for the Spanish Zara chain. In July 2002 the euro was the only currency accepted for all transactions in member countries of the European Union (“Euro”). If the euro becomes stronger against the American dollar, than production costs will increase for European producers. The euro switchover will increase Zara’s cost of production.

That cost increase will be carried over to the consumer with higher prices. This threat of the euro may also create a threat of decreased sales because apparel prices will be too high for the traditional Zara shopper.

• Another threat lies with the quota elimination under the World Trade Organization agreement on textiles and clothing expiring in 2005. Traditional retailers who outsource goods can benefit from greater access to less expensive manufacturing. Zara will suffer from a high euro and the threat of its competition offering more inexpensive products.

Zara’s direct competition may be their largest threat, especially when expanding into new geographic territory. Almost any retailer can be a threat to Zara due to their wide range of merchandise categories. Zara offers clothing and accessories for men, women, maternity, children, and baby. Many other retailers also offer goods to one or all of those merchandise groupings. The Gap is one of these competitors because they are also international and sell the same range of

merchandise with a less trendy style. H (Hennes and Mauritz) is probably Zara’s most similar and threatening competitor.

They too have been quick to “internationalize”, which allows them to gain sales in countries outside their native Sweden . H also is more attentive when entering new markets and tends to enter one country at a time, as opposed to Zara who multitasks globally. H builds distribution centers in their international locations in order to cut down lead times and potential logistical costs. Another threat to Zara is that H carries trendy clothing choices that they have designed based on the melding of international apparel tastes. However, H offers these styles at a cheaper rate than Zara .

H also uses more advertising than Zara, but not as much as the Gap, which may aid them in entering new markets successfully because the local customer is aware of H merchandise mix.

• A final threat to Zara is the issue of cannibalization. Zara’s extensive location strategy involves putting multiple Zara stores that carry the same merchandise in the same cities. That means Zara is trying to sell the same exact merchandise to the same people that reside in that city. For example, the two hundred and twenty-five Zara stores in Spain can cannibalize sales from each other especially if multiple locations are within the same city.

Also, the other 544 Inditex stores located in Spain can cannibalize Zara’s sales since the majority of the chains have a similar target market to Zara. This is similar to the challenges faced by the Gap versus Old Navy: Gap’s sales were cannibalized by Old Navy’s lower prices (Lee).

Recommendations: The best way for Zara

to maintain their sustainable growth is to seek new opportunities in the apparel market. With changing consumer behaviors as a result of globalization, and U. S. department stores suffering, there are growth options available for specialty retailers like Zara.

Zara has the opportunity to be one of the trendiest/low priced retailers that America has seen recently. Zara should most likely develop a second central distribution center in the Americas to decrease logistics in order to deliver fashionable goods in a faster manner. Their second central distribution facility should be an expansion of one of their smaller distribution centers located in Argentina, Brazil or Mexico. The close proximity of the distribution center to the American market will allow them to effectively interpret the particular American fashion.

The distribution center will also allow them to have additional funds to spend in other areas of business such as advertisements: a necessary feature to penetrate the American market. Another market opportunity for Zara is to invest in Internet retailing especially directed toward the U. S. market. Though Zara is wary of overexposure, Americans like to be able to purchase all goods including apparel from the comfort of their own homes at any time they chose. Therefore, since Zara is looking to expand in the U. S. market they could realize the potential for a direct Internet selling strategy.

That form of direct marketing will reach more consumers faster and easier. Though it may be difficult to display all of Zara’s ever-changing fashions online, it may prove profitable for shoppers to purchase a moderate selection of trendy Zara pieces along with some of their staple basics. A final recommendation for Zara is to

offer specialized products for different geographic locations within the same city. Zara already does this to an extent for different international preferences but more specialization will increase consumer demand and will motivate them to visit more Zara locations within their own region.

In some cities the company is possibly experiencing cannibalization because there are too many Zara stores that carry the same product within one city. Zara could differentiate its product from location to location to increase shopper traffic. This would work because shoppers would hear about new/different products (possibly from word of mouth or increased advertising) that another Zara store is carrying across the city and they would be intrigued to pay a visit.