Companies are forced to be faster and faster in reacting to the needs of their consumers as change occurs with dramatic speed. Some fall by the wayside but a few use the opportunity of creating speed and agility to build a brand advantage and differentiator. Zara is a great example of this.
Owned by Spanish retailing giant Inditex, Zara has more than 15,000 stores and produces around 11,000 products each year, far more than most fashion retailers, and to accomplish this it has developed the ability to drastically shorten the product life cycle. Indeed, from the design stage to in store can take as little as four to five weeks. If the design is just a modification it may only take three weeks. No one design stays in the stores for more than four weeks and if the first week’s sales are not up to scratch, the item is withdrawn and production stopped.
This has an interesting and positive impact on the consumer. Firstly, it means that Zara shoppers have a constant source of new, fresh products to choose from. Secondly, customers know that any item they buy will be more ‘exclusive’ than those from other stores, as their items will only be on sale for a month. The benefit for the company is that Zara customers tend to visit stores around seventeen times a year, as opposed to the fashion retailing average of three of four times (these are figures for Zara in Spain). It encourages them to buy as they know the products will only be available for a short time.
The time limitation for fashion clothes is the speed of design, with traditional fashion houses tending to have few designers who take up to six months to produce new designs and thus only have two or three collections per year. Zara manages to speed up the design process by having a large team of designers that enables the company to react quickly to new trends and consumer demand.
Zara’s founder, Amancio Ortega, calls this business model “instant fashion”.
The speed required is augmented by a computerized inventory system that links the factories producing Zara’s large number of products to the retail outlets, which massively reduces the need to hold large inventories.
All in all, it’s a win-win situation for Zara, its customers, and its parent Inditex, whose net income at mid-2010 had increased 68% year on year.
Another brand insight from Paul Temporal