Tuesday, February 18, 2014

Zara’s Innovative Fast Fashion Strategy

Zara ,a fashion retail company based in Spain, has risen to become one of the top fashion retailer’s in the world. Its rise to the top has been rapid and has turned quite a lot of heads. In an industry which is extremely fast paced and demanding, Zara has got a great competitive advantage over the rest of the industry. Their innovative supply chain is responsible for this rise to glory. There are two important steps to become successful in the fashion retail business - 1. Keep up with fashion and make clothes that the customers want and 2. Have an effective marketing strategy. This has enabled them to be fast and market responsive with the clothes taking less than 4 weeks to reach from the designers to the customers which is usually around 2-5 months for other companies.  
The fashion industry is really volatile. Style and fashion are fleeting and what might be in vogue today can be hated tomorrow. Making or having clothes that the customers will always want to buy is quite a challenge. This is an added complexity when trying to forecast the demand of the products. Distinguishing yourself is not cheap as designers, top brands and marketing cost a lot. The cost of setting up the stores and displaying the clothes is also extremely high. Marketing effectively can make all the difference for a fashion retailer.

To keep up with the style, Zara copies the designs of world class designers instead of hiring and paying for them. They monitor the customers’ feedback and reactions and their buying patterns. They use this feedback from the shoppers to modify the designs. Once they have the feedback, the designs are sent to the manufacturers who tweak the original design and the clothes are then shipped to the stores. They ship only a limited number of each style to each store. The clothes are only in the stores for few weeks and this along with affordable prices acts as a driving factor making people buy clothes before the stock changes. New clothes are delivered twice a week. This has been rightly coined as fast fashion.

To tackle the marketing and advertising problem, Zara takes a really innovative and different approach. Zara spends almost nothing on advertising. They spend lots of money in setting up their stores next to the top luxury brands like Prada, Gucci and others. This has allowed them to piggyback on the other brands fame.         
Their supply chain is the main reason for their success in selling clothes in depressed European economy. Instead of shipping clothes from China or India, Zara make most of their clothes in Spain and Morocco and this gives them speed in bringing the latest clothes to stores in Europe when they are still in vogue. Although this was more costly the extremely fast turnaround times made up for the cost and proved to be more beneficial. They are able to get their new clothes to most of the stores within 48 hours of the order. This strategy has helped them to grow their sales by 50% in the past five years which is an amazing feat. They are opening more than one store every day and are continuing to grow at an alarming rate. A change in their supply chain strategy has made them the leaders in the industry.

Although there are a lot of competitors who are following similar strategies in terms of frequently renewing their inventories, Zara’s efficiency is still unmatched. They have efficiently managed to ensure that all the clothes that are made are sold out or even if they aren’t they make sure that the loss is very low. Their process can be considered Lean as it involves specific strategies to reduce wastage, have minimum inventory and tailor the products according to what the customers want. This ensures that their clothes are always in demand.
In summary
  • ·         Shorter Lead Time
  • ·         Lower supply
  • ·         More style options

These have helped Zara become a leader in the Fashion retail industry.
Zara is expanding at an alarming rate. They haven’t had problems scaling up their supply chain so far but if they continue to expand at the same rate do you think they would face problems in scaling their supply chains further? Also what are the challenges that Zara would face when they try to expand in the United States?




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