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How Zara is slowly recovering from CV19's impact

Large Wreath

Brought to you by:

WE Development

Large Wreath

Content written by:

JP Tan

Last Updated:

9 June 2021 at 2:58:26 am

Image by Daniel Mirlea
Case Studies

Zara is recognised as the world’s largest clothing retailer.

One of eight famous brand under Inditex.

If you are unaware, “Zara changes its clothing designs every two weeks on average, while competitors change their designs every two or three months” as quoted from SCM globe.

This fast adaptation allows Zara to effectively handle supply issues that clothing retailers always face, which is the oversupply of clothing that customers are not interested in and undersupply of clothing customers are interested with.

With Covid19 haunting business globally, Zara also restrategise themselves. 

Using WE Development's Demand-Supply Improvised (DSI) model, let us look at how Zara implemented positive change!

1) How Zara manage their supply issues

2) How Zara restrategise their transaction model amid Covid19

1) Reflected in DSI model - Supply

First, Zara’s vast experience in the clothing industry allows them to identify that fashion is fast-changing. Therefore, whoever reaches their market fast, with quality, and affordable wins the race

This makes it difficult to predict the most viable clothing for sales. The only way is to manufacture more in variety and control the production rate quickly whenever demand decreases or increases.

Second, Zara has contingency plans for their supplies. When undersupply, Zara’s famous in-house supply chain, “The Cube” can quickly accelerate production rate to meet demands. 

When oversupply, Zara will run clearance sales or donate them. However, it is known that the clothing industry usually destroys unsold goods, which have caused an uproar by environmental activists. 

To address this issue, Zara also plans to refine its approach by implementing plans that we will discuss in the next point.

Third, for continuous improvement with their oversupply issues, Zara has rolled out plans to achieve 100% sustainable fabric by 2025, as reflected in their official announcement.

2) Reflected in DSI model – Transaction

First, Zara has identified that Covid19 has caused retail sales to drop significantly. Furthermore, with rental and salary to pay, a total net loss of US465 million was seen in its first quarter of 2020. 

The transaction model in the retail store is not viable as Covid19 has not yet subsided globally.

Second, to curb further losses, Zara has publicly announced their losses and intention to close half of its stores reported by Bloomberg in March 2020. 

This change is a massive leap as Zara is known to make most of its retail sales before this pandemic.

Third, right after their announcement, Zara acted swiftly. In June 2020, it has officially announced the closing of 1,200 stores worldwide, including Singapore. 

Knowing that jobs will be lost, Zara has communicated that they will protect their staff by offering job roles to handle and dispatch online purchases as reported in Straits time. Numbers are, however, not specified.

As a viable stepping stone, Zara will now focus on their online sales as a transaction with their consumers. Ever since then, stocks of Inditex (Zara's parent company) has seen slowly recovering.

Gentle Note

If you wish to know more about how DSI model can help you, book a consultation with us here today!

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