What are the Key success factors of Zara? “The ability to respond to customer requirements on a timely basis has always been a fundamental element of the marketing concept. ” Martin Christopher et. al. Hence, it is important being proactive in a market such as the fast-fashion industry which Zara is operating in, time is always a crucial factor. The fast-fashion market, amongst other things, is characterized by short lifecycles, high volatility, low predictability, and high-impulse purchases. Therefore, it is very important for Zara to constantly have their products available for a potential customer in order to sell and earn more profit.
Since the fast-fashion market is also constantly shifting and trends can be replaced over a night, there is a low predictability. This makes it a lot more difficult to compose accurate forecasts. In order to stay competitive in the market, it is important to take be aware of these types of factors mentioned above, and make sure you are not left behind. One of Zara? s distinctive key success factors is their valuable and planned integrated logistics and supply chain management. This allows them to further develop and deliver a competitive marketing mix.
In a marketplace where customers expect to find the latest designs that are still in fashion, Zara is an outstanding example of how to make that possible. It usually takes at least six months in the textile industry for an idea to be transformed into a product and reach the store shelves. By reducing the lead-time through efficient channel management, Zara has developed a vertical integrated business model, which allows them to change some parts of their inventory in only a couple of weeks. This strategy is nowadays known as the “Quick Response” (QR).
By having products for a reasonable price with relatively high quality, Zara is one of the leading fast-fashion companies in the world. But, how does their company function to have this much success? One of the main reasons why Zara is so competitive is because they have suppliers that are strategically designed to fulfill their conceptual idea. Their conceptual idea is to supply trendy clothes, to a broad market, for a reasonable price. Almost 30 percent of the company`s suppliers are situated in either Spain or parts of Europe.
The local presence of the manufacturing facilities within a short distance to many of their stores and headquarters, has allowed the company to be very flexible in a changing market. With high integration to the company? s suppliers, the products that are highly sensitive to availability and proactive response are mainly produced in Europe. They minimize costs and lead-time because of the local presence, which makes it possible to introduce new and fresh merchandise multiple times a year.
Since, major parts of the production are situated locally, the products can reach the stores at the right time, meet the actual demand, and reach a higher sell-through. The other part of their product line that is not susceptible for seasonal change is outsourced to low-cost-labor countries in Asia. The combination of suppliers works as a competitive advantage. It promotes high-impulse purchasing from their new lines while still profiting for their basic product lines. Another key success factor is their pricing strategy.
The company uses a market-based pricing strategy, which means that they design products at a fixed price according to what the costumers are willing to pay. All the costs to produce and deliver the product combined with the planned gross margin for profit are then calculated in accordance to the final retail price. Besides the pricing strategy, Zara also uses a market-oriented approach, which refers to being aware and predicting costumers hidden needs. As studies has revealed, the company only spends one percent of their annual turnover on advertising.
They put most of their resources into using modern technologies, such as point-of-sales data collected from their stores as an effective communication tool. By regularly collecting POS-data, and translating the information into real demand and different consumption patterns, the company can deliver the exact quantity of merchandise, at the right time, to their stores. This activity minimizes the costs and results in higher profit, which can be used for other business activities such as expansion, product development and so on.
Not to mention, it also makes it possible for the company to evaluate and predict which products that will have a shorter or longer product life cycle. Hence, will result in higher sell-through, quick elimination of products that are out of fashion, and replenishment of new merchandise. Another reason to why their internationalization has been so successful is the fact that their merchandize can be sold in many different parts of the world. Even regardless of cultural differences. One of the reasons is that their consumer’s love garments from the high-end market and Zara copies those garments at lower prices for their consumers.
In some cultures the company is using adaptation tools. For example, each store manager is allowed to make slight modifications to the assortment to achieve a better match between supply and demand in certain countries. In addition, the location of the stores is another successful factor. Zara has chosen to position their stores in attractive and high-trafficked locations. Also, Zara’s stores are designed by professional store decorators in accordance to Zara’s business image. The interior of the Zara in Central for instance is very similar to other high-end fashion stores, which gives customers the same feeling as shopping in a luxury store.
References Used the two articles posted by Dawn on FB Lectures Tutorials And: Retrieved on 2012-03-11http://www. google. com. hk/books? hl=sv&lr=&id=-9Ja0ZQ6gSMC&oi=fnd&pg=PA62&dq=market+orientation+and+supply+chain+management+in+the+fashion+industry&ots=0FiX4Yvyf5&sig=BoBe-KOlSiOaY6igTvN7NvyPVYM&redir_esc=y#v=onepage&q=market%20orientation%20and%20supply%20chain%20management%20in%20the%20fashion%20industry&f=false Retrieved on 2012-03-11 http://martin-christopher. info/wp-content/uploads/2009/12/CREATING-AGILE-SUPPLY-CHAINS-IN-THE-FASHION-INDUSTRY. pdf