The demands of consumers is changing rapidly and the access to information and communication technologies are transforming the supply chain into a network of partnerships. Nowadays most of the companies innovate due to information of consumers through fashion magazines, fashion shows, blogs, social media and forums. Consumers are constantly talking about the newest fashions and are longing to have the new collection of the fashion designers. However, these products of fashion designers are too expansive for most consumers. Zara is doing it differently. Zara segments its market into a set of customers who share the same or similar set of needs and wants, which are customers who are aware of fashion. Instead of asking consumers what they want, Zara goes to fashion shows or meets with the designers to decide where there is a trend. After identifying a promising fashion, Zara simply goes into action.
The most important advantage of Zara is the fact that they optimize a fast-response distribution network, whereas they can react fast to the rapidly changing consumer demand. Basically, Zara has control over a big part of the supply chain. Not only does Zara makes its own fabrics, but it also designs, manufactures and distributes its own clothes. Only a small part of the distribution is being outsourced. Consequently, the new collection is distributed in 2 weeks, while competitors usually need 6 months for the same results. The new collection of Zara will not remain more than a month, which makes the collection even more exclusive. When having overproduction, companies often sell their clothes at a lower price. The chance to have outdated products is lowered with the fast change of Zara’s collection and the consumers have a broader range of choice in clothes due to the different styles in the stores. In this figure you can find Zara’s design, Product and Market Cycle ( Source: Christopher, 1998: 155-57; Burt, Dawson and Larke, 2003; Retail week 21 nov 2003:16-17.)
Basically, Zara’s competitive advantage is because they make use of mass customization. The combination of the low volumes and high efficiency lowers the costs and fastens the production procedure. On the other hand, this aggressive approach of Zara is very risky though. Despite they are customer oriented, they actually do not have a lot of interaction with their customers. Besides that, competitors are getting more and more experienced. Therefore I would recommend Zara to design some marketing mechanisms to try to activate the knowledge and labor of consumers. This will not only lead to higher commitment of the consumer, but it also enhances the value for the consumer. Both consumers as firms will benefit of this new strategy. To sum up, Zara’s key to success is because of their fast distribution network. Zara focuses on the customer segment that is aware of fashion. Whereas this group always want to be exclusive and the first with fashion. The new and exclusive collection of Zara simply let consumers visit Zara stores constantly to see what is new in stores, before its gone. Because of this fast distribution network of Zara, it is able to satisfy the rapidly changing demand of consumers. That is the reason why Zara became a customer magnet. Zara is very careful with information about their strategy, however competitors are getting more and more experienced though. Therefore it might have to improve their strategy to remain one of the most successful retailer. Maybe you have some really good ideas? If you do, please feel free to reply/commend on this post. For the ones who are interested:
- Some Youtube movies: About Zara’s distribution network: http://www.youtube.com/watch?v=hpUm_UQgid0
- Article in NYtimes about Zara’s success: http://www.nytimes.com/2012/11/11/magazine/how-zara-grew-into-the-worlds-largest-fashion-retailer.html?pagewanted=all&_r=1&
- Educational journal about Zara in HBS: http://hbswk.hbs.edu/archive/4652.html
Regards, Samantha Lam (320017wl)
One thought on “The Secret behind Zara’s success”
Very interesting post Samantha, thank you! Ibelieve it is great to see the success of a firm that pays attention to consumers’ interests and trends, is cautious about stocking, produces and distributes its own products.