Question

Case study Zara – questions 1 and 2 – page 354

1 What can competitors learn from Zara?

2 How is Zara succeeding if they don’t have a unique product to offer?

this is the case study of zara

As the rest of the Australian retailing economy was flailing in April 2011 after the global financial crisis, reporting lost consumer con dence and increasing online shopping, the Zara Sydney store was just gearing up to open its doors, on all three levels of the new 1830-square-metre Westfield store (Tadros, 2010). And open they did, amid shopper mayhem. Customers queued for hours and were quick to swipe items before they could make it to the shelf. Some estimates quote 80 per cent (AU$1.2 million) worth of stock being sold on the rst day’s opening in Sydney (Burns, 2011). A few months later, the Melbourne Bourke Street store opened, with hundreds of people lining up to get in. So how do they do it? Zara has a unique business model that essentially boasts good quality, on-trend merchandise and a ordable prices, resulting in staggering pro ts. Each year, the reported 200 designers on sta put out around 20,000 items (Inditex, 2016). The global distribution centre in Spain moves around 2.5 million items per week, and nothing stays in the warehouse for longer than 72 hours at a time (Kottke, 2015). Chief Communications O cer Jesus Echevarria is quoted as saying the strategy of the fast-fashion retailers is ‘the complete opposite’ to the traditional model. He says, ‘it’s a matter of customer feedback. We are pretty quick to react’ (Burns, 2011). Zara puts the success down to using customer feedback to design their range. However, it is the business model that incorporates speed rather than unique innovation that sets Zara apart from the rest. It is reported that Zara uses customer feedback and a daily sales analysis from all 1830 stores to compile manufacturing plans within 48 hours (Burns, 2011). These plans are then communicated to 1500 factories in Asia, Spain and Brazil— the garments are then delivered to stores within three weeks (Burns, 2011). This means that Zara stores can be replenished with small-batch fashion choices twice a week. Zara stocks many different products: apparel for men, women and kids, plus bags, accessories and shoes. While Zara has at times been criticised for copying major designers, they insist that it is the customer-driven focus that gives shape to the products that they design worldwide. From humble beginnings in 1975, when the rst Zara store opened in A Coruña, Spain, Zara now operates in 88 countries, with online shopping also available (Inditex, 2016). Retailers like Zara represent a new wave of retailing, bringing production even closer to customer demands.

Answer 1

Case study Zara – questions 1 and 2 – page 354

Q# 1 What can competitors learn from Zara?

It can be seen from the case study that Zara is one of the most popular fashion stores in Australia. Zara Sydney fashion stores is brimming with confidence, in the face of economic meltdown following the 2008 economic crisis. When customer confidence was low, purchasing power was negligible, economies were crumbling, Zara stood steadfast in upholding rich business ethics of customer satisfaction and business model. Though rest of Australian economy was falling apart, Zara’s success story is a lesson for the competitors to emulate.

The lessons to be learnt by the competitors are:

· Repeated Customer footfalls /online shopping due to Zara’s belief in customer needs of meeting on-trend/Latest merchandise design

· Affordable Pricing

· Meet Customer needs with high speed delivery. As items disappeared even before making it to shelf, as 2.5Million items are moved per week from Spain. The same strategy is adopted by Amazon now, as the products are shipped within 10 minutes of receiving the order, which means it leaves no room for mood-changes and scrapping orders by customers. Impulsive buying compels high speed delivery, high-quality products at affordable prices

· Customer Confidence

· Low cost Inventory Management

· Negligible inventories/obsolescence

· High Inventory turnover resulting in staggering profits

· Captures the customer moods & prompts impulsive buying due to on-road/online displays with 200 designers displaying around 20,000 items.

· Constant Customer feedback is encouraged to stay-put with UpToDate technology and pricing.

· High employee morale, Suppliers/manufacturers, shipping agents and all involved in the success of Zara, make it one of the best retailing strategies.

2 How is Zara succeeding if they don’t have a unique product to offer?

· Zara’s products are multi-fold comprising of apparel for men, women and kids, plus bags, accessories and shoes. These products are always on high-demand due to their fashion statement and utility.

· If a firm deals with only one product, the product may lose market demand due to obsolescence. As, Zara offers multiple products, with good quality at affordable price and high-speed delivery, it is able to succeed.

· It is also seen that no item stays in the store for more than 72 hours. This speaks volumes of its unique marketing technique to deliver the product at the customer doorstep at the speed of the wink of an eye.

· Zara’s success is mainly attributable to

o Using customer feedback and a daily sales analysis from all 1830 stores to compile manufacturing plans within 48 hours.

o These plans are then communicated to 1500 factories in Asia, Spain and Brazil— the garments are then delivered to stores within three weeks.

o This means that Zara stores can be replenished with small-batch fashion choices twice a week.

o Before other customers know about the new fashion, the product is off the shelf and these customers are the new trend setters who have new products for exhibiting to other. This forms a chain reaction and the customer mayhem to lift the latest items of the shelf or online.

o Zara brings production closer to customer demands, which leads to customer ecstasy and customer delight ushering more business and profits and setting a new wave of retailing.