Will ZARA become the Game Changer in the Indian Fashion Industry?
ZARA an international fashion retailer has made it's way into world's second most populated country, India after 35 years of its successful business ventures worldwide and has opened its first store in Gurgaon NCR which also marks the entry of TATA group into the yet another fashion retailing venture after Westside, and it's arrival is an alarm to all the current fashion retailers and designers because of the business model used by ZARA in the international market successfully.
The business model of ZARA is a direct threat to the current retailers like Pantaloons, Westside, Peter England, Allen Solly, Reid and Taylor and the likes. The basic design and development lead time of the current retailer in India is around 8-10 weeks and in case of prominent designers the lead time goes up to 52 weeks and the most efficient among the current, Pantaloons has a lead time of 6-8 weeks whereas ZARA has a record of having lead time of 3-4 weeks and on an average the retailer releases 12,000 designs in a year in its international outlets which is 1000 designs in a month.
This record lead time gives an edge over its competitors to get new products on the shelves at a faster rate and as the basic idea of ZARA is to manufacture in less quantities which gives its fashion range an exclusive image rather than a mass product like the business model of Indian fashion biggies. The Retailers are replenished twice in a week worldwide and every replenishment comes up with new fashionable collection.
The Business model is in a way simple and has been effectively used in India by business houses and has achieved tremendous success in other business areas. ZARA usually sets up its back end manufacturing facility and doesn't outsource which makes it faster to process unlike its competitors and the company has its unit located in a closed areas which helps in finishing the process faster, The same way TATA has set up its Sanand Plant in Gujrat where all EM's are located near the TATA plant who fulfill all its automotive components need at low costs and at a faster rate as it is closely located. The investment is also low when compared to its competitors who invest huge amount in research and development and market research, whereas ZARA uses its own store for market research and the best part is the culture of "Nothing is Predicted,but Acted On" as they have 1000 styles to be launched in a month and success rarely matters as even in case of failure the production is always less and not a mass produced fashion.
The profit margin on the products manufactures is also low but ZARA invest a meager 0.3% of its sales to market its product because of the fast changing fashion trends unlike its competitors and as the manufacturing is done in less quantities, in the event of a failure of a fashion trend the loss is meager and it has been proved that only 18% of the total production goes for an annual sale compared to 35% of its competitors in the international market.
Looking at the large market of Indian population with a large chunk being the middle class ZARA's entry into the Indian market looks promising with the Indian youth constantly behind looking fashionable ,trendy clothing, the business model fits the bill of the Indian consumer. The most interesting aspect to be noted in the coming months would be the reaction of the competitors to ZARA.
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