Zara’s Strategy
Zara’s focus on technology is one of the main reasons why the company continues to not only be profitable but scalable and growing in profits as well. IT allows Zara to combine quick local manufacturing with limited exclusivity of the clothes the stores offer. The company can predict and dictate future fashion trends as a result of intelligence gathering and data automation. The stores’ hard data from cash registers and a unique point-of-sale (POS) system (that shows how clothes rank by sales) are utilized to project customer needs and wants. Zara created a model that enables it to produce most of the garments in-house (northern Spain) and do it exceptionally quickly through technology integration, “leveraging technology in those areas that speed up complex tasks, lower cycle time, and reduce error.” (Gallagher, 2008, p.7). Software is also used to control the balance between costs and sales in terms of staffing. IT is an essential instrument for Zara to schedule staff according to a particular store’s sales volume and peak activity periods throughout the day, month, or year.
Limited runs, on the other hand, allow Zara to minimize the mistakes in the ‘trend prediction’ process, cultivate exclusivity, and encourage customers to visit more often. Customers are more likely to buy right away and at full price because of a limited production run system, which rotates clothes every couple of weeks. The company constantly scans the market for new technological opportunities “to eliminate costs related to advertising, inventory missteps, and markdowns.” (Gallagher, 2008, p.8).
Zara’s Competitors
Recreating Zara’s capabilities is difficult for several reasons. Firstly, imitation is the opposite of an innovative approach that Zara is known for. Any clothing brand that tries to copy the operational or functional capabilities of Zara would always be behind it in terms of innovation and profit growth. Secondly, fashion is a complex industry because it is not easy to predict the trends that customers want to see in the stores and purchase. While Zara’s POS system, data gathering, and automation can be recreated, the information would be useless for a brand that does not have a defined customer base such as Gap. Moreover, Zara mastered targeting the exact points in its value chain, where technology would have the most significant benefits, which helped the company cut costs and optimize the operations. Technology implementation also has to be functional rather than fashionable and include all the crucial elements: hardware, software, procedures, data, and people. Brands that are new to IT often fail to consider the return-on-investment (ROI) ratio of net profit and total investment, so they end up spending too much on IT integration in their business model.
References
Gallagher, J. (2008). Zara Case: Fast Fashion from Savvy Systems. pp. 1-11.