Zara is a well-known brand in the fashion world. Zara is a fast adaptation of the latest trends in a very short period. Zara started in Spain and today is present in many countries worldwide. A lot of credit to Zara’s success has gone to its Technology-enabled Strategy. Strong data analytics has led to them being one of the most successful brands in the world. Let’s look at the top reasons for its growth over the years.
Zara has integrated the much-needed technology in its supply chain. Zara produces almost 50% of their new designs in the middle of a fashion season. Their competition has been guessing future trends at the same time. Constant feedbacks and suggestions are collected from the customers. These get populated into their Management Information System daily. Zara has been able to make changes based on received feedback and offer design changes in as little as 15 days. The data collected from customers get used to preparing the needed designs in such a short time.
Zara believes in keeping a low inventory of its in-stock products. This has saved Zara even during this Covid-19 situation. It helps them reduce their losses in an event that the clothes do not sell as expected. The inventory stocks keep changing every 15 days. Zara has been able to sell most of their inventory without offering high discount rates. The just-in-time manufacturing and well-organized logistics form the strength of their supply chain. It helps them make store deliveries in record time through airplanes and trucks. They leveraged data to optimize their inventory management and supply chain management. They have managed to increase store visits by their customers throughout the year.
Zara believes in vertical expansion and has ended up owning its supply chain. Most of Zara’s raw material is purchased from their subsidiaries. They invested in building automated factories to deal with repetitive work. This reduced manufacturing costs. They focus on vertical business growth makes the raw material cost negligible. Data analytics has helped Zara use vertical expansion. It has also helped Zara work through their vendor optimization process. Zara was able to handle the expenses of purchasing materials from third-party vendors.
Zara does not believe in spending on advertisements. The funds saved are diverted to hiring fresh talent. This helps generate new designs and improve their sales pipeline. Technology plays an important role in this process. Data gets collected from stores, surveys, and customer opinions. This is used to fuel the requirements for new designs. Zara has been able to bring out as many as 30000 designs annually. Their competitors could just manage about 3000. The designs are prepared and delivered within 15 days and made Zara the most sought after brand. Customers were able to receive new exclusive designs that make them unique. This sets a competitive advantage for Zara compared to its competitors.
Zara adapted to the changing technology world. Zara integrated technology with their business processes. Zara's Management Information System collected information from various sources. Store visits, customer feedback, logistics, factory inventories, and more were used initially. MIS helped Zara manage all their stores from their headquarters in Spain. They handled the store decor, racks as well as the music inside the stores. The manager could be instructed to have it set up as expected. The use of PDAs helped collect customer feedback on likes and dislikes. The PDA information and the store POS data were sent daily. Valuable insights into the sales forecast and probable design changes were predicted. The huge amount of raw data needed to be analyzed daily. The data is utilized to better optimize business processes. The logistics brought back raw materials from places where product deliveries were made.
Customer feedback became an important part of Zara's system. They executed suggestions within the shortest time possible. They made staff available to help customers by handling minor tasks. Pre-ironing clothes during delivery was an example of this. They optimized store staff availability during peak hours using technology. Zara was listening to its customers as well as providing the needed changes. This increased their customer visits to their stores. The collected data is sent directly to the headquarters. It is analyzed to understand the needed changes. The rectifications are made to the supply chain and inventory systems. Customers would not wait to decide on the outfits they liked as it may not be available on their next visit. The limited stock of designs helped Zara promote its designs as exclusive. This made customers happy to purchase without waiting for a price drop.
Many companies have tried to copy Zara’s method of business. This remains one of the key challenges for Zara today as the cost of technology has reduced in recent years. Another challenge would be to tackle the trend of online shopping. It has taken prevalence in recent times. According to Nasdaq, 95% of all purchases will be done through online portals from 2040. Zara needs to be ready for this challenge. The last challenge is the adaptation to new channels of sales. Zara will need to adapt to social media markets, voice-enabled sales, and more. It will be a challenge to work around while keeping the existing customers happy.
The adaptation of technology has been the strength of Zara. Success has been through their fast response to change. Data analytics and Business Intelligence have been the key to the success of Zara. New technology is readily available to new competitors at a lower price. Zara’s business model is a proven business model. It will be attempted to be copied by many, and Zara needs to be vigilant about this. Reinventing its business model in the face of changing technology is a must. They need to keep investing in the needed technology to move forward. Expansion through strategic acquisitions will keep them strong and on the top. The goal would be to stay relevant in 2040. The world would be focusing on online transactions post the Covid-19 time.