It’s been announced that global fashion brand Zara is preparing to enter the Australian market. The flagship brand of Spanish retail conglomerate Intidex, Zara was famously described by Louis Vutton designer Daniel Piette as “Possibly the most innovative and devastating retailer in the world”
A unique approach
From humble origins in 1975 in Galicia, Spain, Zara developed a successful strategy that allows it to rapidly design, produce and distribute fashionable clothing to customers worldwide. It has developed in-house capabilities in design, low-cost production, supply chain optimisation and effective feedback loops to ensure that it continually delivers great products to its customers.
Zara designers embed themselves within the fashion industry and hawkishly watch the new creations from leading haute-coutre designers. Concepts are interpreted and mimicked by Zara’s designers to create clothing that has the stylish look of high fashion – but without the high price.
Zara then mass produces these items and is able to distribute them through its global retail network incredibly quickly. Whereas other retailers can take months to go from design to store rack, Zara can do it in as little as two weeks.
Zara is ruthless in managing its inventories. It produces and carries far more unique items than its competitors but it produces them so in small batches. Using advanced data tracking it is able to identify and cull items that aren’t selling well, while simultaneously ensuring hot-selling items do not stockout. Zara fans the fires of demand by not carrying items for long. This encourages shoppers to come back and come back often to try to grab the hottest item before it’s gone.
A focus on satisfying customer needs and wants
Zara has differentiated its product to ensure that it satisfies customers better than its rivals can – and it can do so at significantly lower cost. It needs fewer inventories, has fewer requirements for costly warehousing and suffers less from unsuccessful designs.
Contrast this to most other apparel retailers and we find companies with complicated operations based on multiple outsourced producers and distributors, longer design and production processes and without the customer insight tools to respond quickly to the demands of fickle fashion buyers. Zara’s model is so successful that it has also found little need to advertise – its shoppers promote it sufficiently via word-of-mouth. On this front it’s begun to use social media to share news, photos and videos with fans via a facebook page with over 3.5 million members and a YouTube channel.
The hungry followers
Zara has proven capable of successfully growing into new markets and now has a portfolio of brands. It has scaled up design and distribution system and now operates in 77 countries worldwide. It rolled out a whopping 349 stores in 2009 alone and has had recent successes in China. Some adaptations are made for local markets and retail price is altered according to shipping costs but in general it applies the same model worldwide.
Zara’s impressive business model has attracted attention from fast followers and many specialist and major retailers have reinvented their own business models to try to replicate Zara’s success. Anglo-Irish retailer Primark has established a similar model with an albeit less fashionable focus and it has grown rapidly in the UK and is now expanding into Zara’s Spanish home turf.
Hola down under
Zara’s entry down under is being hailed as great news for consumers but as a warning to complacent Australian retailers. It has high brand recognition – probably due to so many Australians having encountered it overseas – and deep pockets. It has proven its ability to use the same model to devastating effect in other markets and threatens local retailers who may not be able to match it on design, speed or price.
As product managers will be pleased to point out, Zara has been successful because it identified and understands what its target customers want. It has designed its entire product, pricing and distribution around satisfying and exceeding these wants.
Will Zara’s entry into Australia be successful? Will it in any way adapt to meet local requirements or will it apply its proven model in the same way? What do you think?