How specifically do the distinctive features of Zara’s business model affect its operating economics?
Zara’s business model allows for substantial economic savings throughout their value chain. Starting with raw materials, Zara has a policy of acquiring only un-dyed fabric initially, allowing the flexibility to change colors and designs and netting a substantial material savings. In terms of manufacturing and production, Zara relies heavily on their central location in Spain to reduce shipping and distribution costs, tap into skilled labor in a high wage economy and keep the flow of items moving from production to distribution with minimal storage times. To that point, the Zara case highlights the Zara view that warehouses are viewed more as a pass-through area rather than a storage area.