This quick in-season turnaround, from production facilities located close to Zara’s distribution headquarters in Spain, allows Zara to ship more often and in smaller batches. This goes towards the brand image of being exclusive while avoiding the build up of unpopular stock. The stock delivered is strictly limited, ensuring that each store only receives just want they need. Inventory optimization models are put in place to help the company to determine the quantity that should be delivered to every single one of its retail stores via shipments that go out twice every week. Throughout the supply chain, lean is the word, all the way from raw materials to the finished garments on the shelves. You'll be hard pressed to find any excess inventory or deadstock in a Zara warehouse. Unsold items account for less than 10 percent of its stock, compared with an industry average of 17 to 20 percent. Zara makes 85 percent of the full price on its clothes, while the industry average is 60 to 70 percent. Zara’s total cost is minimized because merchandise that is marked down is reduced dramatically as compared to competitors. Zara’s business strategy allows the company to sell more items at full price because of the sense of scarcity and exclusiveness the company exudes. This then translates to frequent shipments and higher numbers of customer visits to the stores, creating an environment of shortage and opportunity. For example, it operates typically 4.5 days per week around the clock on full capacity, leaving some flexibility for extra shifts and temporary labor to be added when needed. Zara also has extra capacity on hand to respond to demand as it develops and changes. That demand forecasting data is instantly funneled back to Zara’s designers, who begin sketching on the spot. Store managers communicate customer feedback on what shoppers like, what they dislike, and what they’re looking for. Designers churn out the new styles and they're fast-tracked to stores while the trend is still going strong. If a certain style or design becomes the new must-have on the street, Zara gets to work. And it only locks in 50 to 60 percent of its line by the start of the season, meaning that up to 50 percent of its clothes are designed and manufactured smack in the middle of the season. Zara also commits six months in advance to only 15 to 25 percent of a season’s line.
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