Berfield & Baigorri (2013) relate a fascinating story about a Spanish company whose supply chain is highly centralized and where "speed and responsiveness are more important than cost." We learn the Zara produces about half of its clothing in Spain or nearby countries and the rest in other carefully selected locations. All products are shipped to Spain for distribution to the stores. With this level of control, Zara manages to make scheduled deliveries twice a week to each store, often with 48 hours after leaving Spain.
Fast Fashion refers to not only the speed at which inventory reaches the store but also to the interval at which the store's inventory is refreshed. Zara's store managers use Personal Digital Assistants (PDAs) to provide daily feedback to the company headquarters, where the data is used to drive decisions regarding stock replenishment and new products. Zara has also invested in the technology which enables them to go from concept to having inventory in the store in two weeks. The result is that Zara does not have to overinvest in inventory that may not sell. Rather, they only offer items for a short period and refresh their stores every two weeks. The ever-changing stock creates additional "buzz" which attracts Customers back into the store more frequently. As a result, Zara does not have to discount as much as its competitors to move "stale" product (Zara: Fast Fashion from Savvy Systems, n.d.; TradeGecko, 2018).
With that as a backdrop, I believe that today, these are some of Zara's biggest challenges.
As Zara moves into more distant markets, their ability to adhere to the twice-weekly deliveries and the 48-hour turn-around may suffer.
As Zara moves into more distant markets, particularly Eastern ones, the definition of "fashion" may differ.
With the increasing empowerment that the Internet brings to their customers and competitors, Zara will have to embrace the technologies even more.
If Zara wants to maintain these same services levels, they must invest more in Logistics. As long as the distant outlets are profitable and can sustain the investment, I don't see this as a huge challenge.
Berfield & Baigorri (2013) remark that the number of store in China had surpassed France. A 2017 article on translatemedia.com focuses on Zara's expansion into India and China. Regarding its expansion into India, Yusef (2013) writes that India does not experience the seasonal changes that many markets do. As a result, the change of seasons does not drive fashion purchasing decisions. Also, in a culture where most people wear traditional clothing, there isn't a drive to rapidly update one's wardrobe.
Yusef (2013) writes that for the foreseeable future, "Chinese consumers are expected to increase their spending." This could be a good thing for Zara. However, another author observed that Zara might not see the repeat visits that are experienced elsewhere (Towson, 2017).
The final item may be the most serious one for Zara. Much of Zara's success is built on their particular adoption and application of technology. It has been noted that managers use PDAs to send daily reports back to HQ and that Zara ships to most stores within 48 hours (Berfield & Baigorri, 2013; Zara: Fast Fashion from Savvy Systems, n.d.).
This technology is commonly available, today. A recent news story highlighted that more than half of the world's population is online. Furthermore, mobile-cellular telephone subscriptions now exceed the global population (Lloyd, 2018). More than half of the world's population is now empowered with Internet access. Coupled with the statistic that the number of mobile devices outnumbers the world's population, it is not a stretch to see that most of the connected people carry a personal version of the PDAs that Zara's managers use. At the same time, many of the major retailers, here in the U.S, at least, offer free 48-hour shipping. Therefore, many customers can now do their research, place orders, and receive goods all within a couple of days. The bottom line is that many people are now empowered and equipped as never before, to use many of the same techniques as Zara does.
In the face of the empowered customer and competition, Zara must constantly innovate to stay ahead of those that may want to copy them. Towson (2017) observed that Zara didn't have an online store until 2010. Nor, did they have a presence on China's Tmall until 2014. In India, where there is a lack of retail space, Zara has had some difficulty selecting sites for new locations (Yusuf, 2016). As consumers' focus shifts from in-person shopping to online, Zara needs to ensure that it brings all of its advantages online, too.
- Dan
References:
Berfield, S., & Baigorri, M. (2013). Zara’s Fast Fashion Edge. Retrieved from https://bambooinnovator.com/2013/11/20/zaras-fast-fashion-edge/#more-33581
Ferdows, K., Lewis, M. A., & Machuca, J. A. (2005). Zara’s Secret for Fast Fashion. Retrieved from https://web.archive.org/web/20171118105350/https://hbswk.hbs.edu/archive/zara-s-secret-for-fast-fashion
Lloyd, P. (2018). More than half of the global population is now online | Daily Mail Online. Retrieved from https://www.dailymail.co.uk/sciencetech/article-6472151/More-half-global-population-online-3-9-billion-people-connected.html
mugs. (2015). Zara Clothing Company Supply Chain | SCM Globe. Retrieved from https://www.scmglobe.com/zara-clothing-company-supply-chain/
Towson, J. (2017). » Two Threats to the Big China Dreams of Zara and H&M. Retrieved from http://jefftowson.com/2017/08/two-threats-to-the-big-china-dreams-of-zara-and-hm/
TradeGecko. (2018). Zara supply chain analysis - the secret behind Zara’s retail success. Retrieved from https://www.tradegecko.com/blog/zara-supply-chain-its-secret-to-retail-success
Yusuf. (2016). How Zara is Tackling India and China. Retrieved from https://www.translatemedia.com/translation-blog/zara-tackling-india-china/#
Zara: Fast Fashion from Savvy Systems. Retrieved from https://saylordotorg.github.io/text_information-systems-a-managers-guide-to-harnessing-technology-v2.0/s07-zara-fast-fashion-from-savvy-s.html
Comments
Post a Comment