ZARA FAST FASHION AGENDA l Industry Overview

ZARA: FAST FASHION

AGENDA l Industry Overview l Zara Supply Chain l Zara Challenges l Recommendations

INDUSTRY OVERVIEW • High Demand Uncertainty • Push vs. Pull Method • 30% of world production exported from developing countries • Geographic Differences • Per capita spending and preferences different in any given market

INDUSTRY OVERVIEW: COMPETITION Gap, Inc. H&M Benetton Zara Production Outsourced In-House 40% In-House 60% Outsourced Production Lead Times High Low Net Margins -. 06% 9. 6% 7. 05% 10. 47%

INDUSTRY OVERVIEW: POSITIONING Price + Benetton Gap Fashion - Fashion + ZARA H&M Price -

ZARA OVERVIEW l Owned by Inditex (Industria de Diseno Textil) l Largest of 6 Inditex Chains l 500 stores in 30 countries l For women, and youth l From infants to age 45 l Zara starts with “Z”

The “yoo-goo-lizer” – you know, the guy that speaks at funerals!

ZARA OVERVIEW: ADVANTAGES • Vertical Integration • Quick Response to Demand (Pull System) • Small Batch Production • High Product Turnover • Central Distribution Center / Strong IT System

ZARA OVERVIEW: SUPPLY CHAIN Manufacturing Design INDITEX MANAGEMENT / DESIGNERS Determine apparel designs and manufacturing locations ASIA (20%) Low QR Low Cost System is designed for short production cycles, quick response (QR) to demand, and reduced number of markdowns Distribution Sale DISTRIBUTION CENTER IN-HOUSE (40%) High QR High Cost EUROPE / N. AFRICA (40%) High QR High cost Increased shipment frequency increases QR Small batch production lowers cost of demand uncertainty STORES Decentralized store management supplements QR Managers determine products to sell and return Returns from stores either rerouted or disposed of in local stores near dist. center IT SYSTEMS Provides accurate demand information to determine manufacturing locations and production levels

ZARA CHALLENGES l Aggressive growth strategy needed l l 76% of equity value based on future growth expectations Need to maintain competitive advantages in new geographic markets l Data collection, Quick response, High product turnover, Strong IT System

RECOMMENDATIONS l Short-Term Solution: Expand in Europe l l l Long-Term Solution: Expand Outside of Europe l l l Focus on Italy (63 Billion Euro Market) Implement “Oil Stain” expansion method Establish operations in North American Distribution Center (Mexico) Initially focus on coastal cities Implement “Oil Stain” expansion method Culturally Diverse Management Team

Q&A