jasminewing

In Class 16, we used Zara as an example of a company that has a fast inventory turnover. Zara also is doing very well. In 2005, Inditex, best know for its Zara stores, reported a 21% sales growth. The company keeps inventory low to create demand and to make it possible for new fashion to come in. At Zara, a sketch can be in stores in only two weeks. When Zara sees new trends coming out they can easily re-create them in no time. This brings customers back to the store multiple times to see what is new. Zara has an in-house design team in Spain and a tightly controlled factory and distribution network. Zara’s wages are a lot higher because most companies produce in Africa or Asia; however, since Zara has such a fast turnover, if something is not selling they can easily move to another trend without losing lots of money. Keeping inventory low creates scarcity, and this can lead to a higher demand. Consumers believe that if they don’t by it now, it might not be there in a few days, and thus, should buy it right away. Low inventory also reduces the markdowns on items. Fast fashion is a growing trend, but no other company will easily be as successful as Zara.