“The Zara Gap” article

In an article in the “Sourcing Journal” (April 24 2015) John Thorbeck describes research with Warren Hausman on the persistent gap in the performance between Zara and other apparel retailers. Their results suggest a profit increase of 28% through adoption of fast fashion practices. They claim that close coordination of production and retailing, quick response to trends and ownership  of retailing are key differentiators. Can other retailers and manufacturers similarly gain customer  trend information and adapt production if they outsource  production or is ownership of production a necessity ? Can technology i.e. smartphones and cameras and big data enable such insights?

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54 Responses to “The Zara Gap” article

  1. cpeplin21 says:

    While it is possible for other fashion retailers and manufacturers to gain similar customer trend information, Zara’s ability to maintain the competitive advantage shows that it is difficult to apply in the fashion industry. If another company was going to try and imitate the strategy I believe that ownership of the production is a necessity because of the information visibility that is needed to postpone production for such a long time. Everyone in the process needs to know exactly what is going on at every step of the supply chain from production to customer demand. If you were going to attempt this Zara model through outsourcing, you would have to build a close partnership with a manufacturer and share a lot of information regarding customer demand and costs to be successful. It is unlikely such a strong partnership could be built. Newer technology could be useful to gain customer trend information insights quickly. However, if the information does not have high visibility throughout the entire supply chain it is unlikely that the Zara model would be successful, even with such information.

  2. Zihan Lin says:

    The quick response and coordinated supply chain are important in fast fashion. While, only outsourcing production or own the production is not enough to forecast the customer trend and do the fast response. The efficient supply chain management helps the company response quickly. The digital trend information updates daily which helps designers to create and modify. Also, the inventory management and procurement need to be coordinated to meet the demand. Zara always provide the trendy products at the affordable prices which is an important characteristic of this brand. In different industry, it will be a different way to figure out the trend.

  3. Adam Hupp says:

    Modern communication and coordination practices could help competitors shrink the gap, but they are unlikely to completely close the gap without complete vertical integration. Zara’s entire value chain is focused on quickly responding to customer trends, which is very hard to replicate. It is not just a matter of adopting new software, but rather an end-to-end alignment supported by a consistent culture. Zara itself has not historically focused on having the latest and greatest technology. Some competitors may be able to use technology to offer new services that would differentiate them vs. Zara (AI generated recommendations, 2 day delivery, etc.).

    It is possible that future industry trends will hurt Zara. Historically, customers have focused on obtaining the latest fashions and trends, and Zara responds to these shifts very well. However, if customers increasingly care about the environmental and the social impact of fast fashion, or continue to migrate away from retail, Zara’s strategy may not respond well to these changes. Under such changes, competitor retailers with strong connections with high-quality suppliers with excellent working conditions could gain an edge over Zara.

  4. Rustam Kalimzhanov says:

    Zara’s business model is unique. Fast fashion (including an understanding of fashion trends here and now, coordinated supply chains, the ability of capacity to generate just-in-time as much goods as the market demands, full control) is a competitive advantage for the company. And it is very difficult for others to copy it.

    Other companies place orders 8 months in advance. Then they calmly follow the trend changes. And they make changes in four months. This only partially reduces forecasting errors.

    Customer preferences, their behavior information can be collected. However, one need to have the skills and capabilities to use it. To develop the same skills as Zara, one need to change the company’s strategy, and develop this direction.

    One doesn’t need to have a vertically integrated company to benefit from fast fashion. Success can also be achieved through highly coordinated supply chain. However, this requires an effort to adapt and build synergies between all the chains. For example, Toyota does not own all of its suppliers. And at the same time, on an ongoing basis, it fulfills customer orders on the principle of a supermarket.

    With the help of technology, it is possible to obtain information about customer preferences. However, in my opinion, in the fashion industry, many clients themselves do not know what they want. And just follow the trend of fashion. Therefore, in this case, the experience and flair of professionals are uniquely important to determine future trends.

  5. Shrey Bansal says:

    Gaining customer trend information should not be a big issue for other retailers but this is not the only reason Zara is so successful and have a competitive edge. Most clothing brands operate using a top-down approach, where their designs are based on what they predict will become popular next season. Zara, on the other hand, takes the opposite approach. They constantly collect information about consumers right from the source. Scouts go onto the streets and in the malls of cities to see what people are wearing. Store managers take note on what customer tastes are like, which are reported back to headquarters. With this approach, designs are created based on instant feedback, and is tailored according to regional preferences. Another reasons for Zara success are vertical integration, and super responsive supply chain. Instead of outsourcing its production in Asia or Eastern Europe, Zara source most of its materials from local suppliers. While lower cost production could be achieved in other regions, the faster time to market, reduced transportation costs and low exposure to changing tariffs outweigh that one factor. This reduces overall supply risk. Ownership of production seems necessary as it allows more information visibility and flexibility to adapt as per customer demand. Outsourcing would require a lot of information sharing with suppliers and not so fast responsive supply chain, which is opposite to what is required for implementing Zara business model.
    Zara is well known for its unique supply chain. And since supply chains are composed of people, process, and technology, even the latest and greatest technology is not a competitive advantage all by itself. For the technology to be used effectively, first the competitors must learn about the mental models and the operating procedures used by Zara.

  6. Yuchen Zhang says:

    Strategic souring is always depending on every company’s situation and competence. In general, outsource production can let the company focus on the core competence. However, every company is different thus it is critical to make the decision based on the own situation. The companies should focus their own strategic decisions rather than copying competitors’ strategy as it might not work in different situation. In the article, Zara’s performance is more than higher turn and margin; its model reduces inventory risk in a highly uncertain business. Other companies should have other areas to work on to differences themselves. Technologies like cameras and smartphones can generate huge data to predict customers’ preference and demand. But the fashion industry’s demand is extremely violent and there are a lot of variables. More data can lead to more accurate prediction, but it might not be enough to enable such insights in some situations.

  7. Shannon Hadley says:

    It’s definitely possible for other retailers who outsource their production to increase the speed of their production and knowledge of customer base for other fast fashion retailers, however Zara will always have an advantage over them by being completely vertically integrated. Zara has created their supply chain in a way that favors them considerably against their other fast fashion competitors in terms of turnaround time between products and styles and having them in their stores as soon as two weeks after developing a new style. This timeline regardless of technology (smartphones/cameras/big data), though it may be helpful to compete better with Zara does not have the capacity to live up the same speedy turnaround time with Zara is known for because of their vertically integrated supply chain. There will always be an advantage for them over their competitors who choose to outsource their production or do not own all of the links within their own supply chain.

  8. Pooja Gupta says:

    Apparel and fashion is an industry that changes very quickly with time. Zara has been able to exemplify a successful model definitely due its rapid adaptability and having ownership of its production process unlike most of the large fashion labels in the US. However, I do believe it won’t be difficult for other retailers to emulate this strategy but the implementation can be tricky as they will have to work closely with the production units, communicate the needs, changes on time like Zara which is able to adapt as per changing customer likes and trends effectively sometimes within weeks. Having close visibility of the process can be definitely pose challenges in integration but is not impossible in today’s times with IoT taking over every industry. Utilizing customer data, application of forecasting models is one of the fastest and effective ways to incorporate business insights today and this can certainly prove helpful to retailers as well

  9. Diego Palacios says:

    One of Zara’s core strength is their ability to detect trends and top selling items and have a very short response to address the market needs. I believe the vertical integration Zara has is a key enabler of this fast response. Coordination among different parts of the supply chain is key and having visibility of the whole process can be a great advantage. Communication is key for a fast response and having less players with a complete alignment in goals can be a great advantage.

    Given that Zara is willing to be “ahead of fashion”, they have to be very receptive to the latest products trends and have to align the supply chain to have the lowest amount of bumps possible on the way. In this case, being vertically integrated can be extremely helpful. If it were not the case, strategic, long term partnerships and co-creation of goals should be created to address this gap. Probably a good way to coordinate and align goals would be developing special agreements similar to what revenue sharing agreements introduced by Rolls Royce did with the US Air-force (but tailored to products).

    I also believe that technology is facilitating how to get the information and a huge advantage will be provided to the one that learns how to use data to predict trends and demand. For example, If a fashion retailer were to sponsor a fashion event, they could offer to have an online platform to share the event and let people comment what they think, monitor their interests (like buttons), facilitate searches, among others. That could help getting information faster. This together with a close relationship with strategic partners could contribute to have a more responsive operation and reduce that gap.

  10. Szu Han Huang says:

    Take a look of 4C of Zara supply chain-chain structure: All the steps, design, manufacture, shipping, sale to the customer, and feedback from the customer is all managed by Zara/ Capacity: staff, cutting and store inventory/ Coordination: Between store staff and what they learn from customers and the link back to the designer/ Competitiveness: Trendy product, Service level and retail location. I think what makes Zara so different is its capability to collect the customers’ feedback and rapid response to the market as well as its capacity. Outsourcing may be a means to improve the productivity however the cost should be taken into consideration. Furthermore, is there enough database and the technology to analyze and forecast the customers’ preference and demand will be challenging for a beginner to imitate Zara. The coordination and time to prepare is necessary.

  11. laford13 says:

    There are many factors that go into Zara’s success outside of just their practice of fast fashion. Zara has an excellent coordination plan between their stores and the designers. Yes, it sounds like a great idea for other organizations to follow in Zara’s footsteps and join the fast fashion industry because they believe their profits will increase, but Zara’s process will not be able to be mimicked easily. If other organizations move to fast fashion, they will need to change the way they manufacture and distribute their products. Currently they have too large of a lead time for this system to be effective. Zara also reaches out so a very specific buyer to sell their product to enabling them to be successful with the implementation of fast fashion. If they have a product that isn’t selling well in the store, their store associates call the designers to have the production of that item halted to avoid any further losses. If other stores were able to adapt to customer trends as fast as Zara it would be thanks to the advancement in technology that they have placed in their stores. I believe it would be a great idea for stores to put a big kiosk in the store, and this kiosk would allow the customers to say what they wanted to see in the store and even design their own products. This would allow the designers to have a better understanding of what their customers are looking for. Zara is an industry leader, and this success will be very hard to replicate for other organizations.

  12. Guillermo Cerutti says:

    Zara’s competitive advantage is difficult to replicate because it needs time. It takes time to gain the relationship they have with suppliers, it takes time to gain the trust of the customers, it takes time to educate the clients in the way Zara works. If a customer does not find what he or she is looking for a few times, then that customer moves on to other shops but it is not the case with Zara.
    Customers know that if they don’t buy it now then it is gone and are ok with that. This commitment or brand loyalty takes time.
    They deal with low inventories because they need to move it fast, and the information flow needs to be smooth and quick. That amount of coordination also takes time. I agree with some of my colleagues that a competitor for Zara does not need to be vertically integrated at the same level as Zara does, but coordination then must be carefully planned and executed.
    Technology can be a big help in this coordination issue, as real time information can have a huge impact in this. It remains to be seen if the costs of adopting all these technologies as well as the coordination between the different stages in the supply chain do not affect the prices because that could hurt a potential Zara competitor from entering the market.

  13. yutzu_huang says:

    Zara is famous for quick response of fashion trend. It designs and manufactures fast and uses cheaper salvage price for the products that are not sold out. Other retailers and manufacturers can be hard to do that if they outsource production. Because outsourcing requires more shipping lead time and management of coordination which can’t compare to Zara’s fast path each week. Technology and big data can definitely help to forecast demand. But the sense of fashion and how the customers like their products are the key.

  14. tiandai says:

    I think Zara’s success does not rely solely on technology. For other competitors, it may be feasible to imitate and learn Zara’s predictive models and management strategies. But Zara’s success is largely due to a bottom-up information gathering. Zara will collect the sales of all stores worldwide, and the store manager will summarize and report to the design department in a timely manner. At the same time, Zara will also let designers go to the streets to observe people’s clothes and draw inspiration from it. So I think that for Zara, it is ‘creating’ fashion trends, not simply predicting demand. On the other hand, Zara’s tightly integrated supply chain also provides it with a great competitive advantage. The two-way communication between information and products is very efficient, which can ensure that Zara’s lead time is greatly shortened, thereby ensuring the lead in the fashion clothing industry.

  15. I believe the secret behind Zara’s success lies solely in the fact that it has leveraged its supply chain to align with its business model, where the supply chain creates value towards Zara’s strategic advantage. The question, if this model could be replicated by others needs a lot of other considerations like the business model & the strategic goals of the company. Zara’s success doesn’t guarantee success for other companies who are replicating the same without a thorough analysis of their internal & external business factors. Secondly, the replication process in itself would be difficult to achieve since its nearly impossible to have a cent percent coordinated supply chain in case of outsourcing from other suppliers. Coordination needs time, money, and exchange of information. What makes it even more difficult is the extent of information sharing with the supplier and how safe it is. Based on the above ideas, first, it wouldn’t be a good idea to replicate the model, and second, it would be nearly impossible to replicate the whole thing without vertical integration.

  16. chizhang says:

    The success of Zara is mainly because of its efficient supply chain and ability to keep up with rapidly changing fashion trends. I think outsource production could help other retailers to gain similar customer trend information and adapt production as Zara. Zara does not only have fast production plan but also has many plants spread in Spain, Portugal, and Morocco while its most competitors’ supply chain is located in Asia, Thus as competitors’ new products are still on the Pacific ocean, Zara’s new product are selling in the store. The new technology will enable retailers and customers to get responses from the customers easier and faster, and the customer trend will be more precise because the information is sending directly to the design department without paraphrase of store employees. Instead company could post some pictures of new products on social media before sales to see the reactions of customers, then they can get more accurate customer trends and adjust their design before on sale.

  17. Robert Waggoner says:

    Zara is one of the most, if not the most successful clothing brands in the world. One thing the company is noted for is their ability to adapt to customer trends and quickly release new clothing wear according to their customer’s preferences. They are also known for not relying too much on technological advancements such as A.I. or other information technology, which is surprising for the current environment. The company is a great example of how technology can only help you to a certain point, and the rest is based off of good business management, efficient operation practices and effective decision making. Because of this, technology or big data implementation will probably not be enough to close the gap.
    With regards to other companies trying to close the gap with Zara, I think it comes down to how effectively they collect information and how they are able to use that information to adapt quickly to customer fashion demand. These companies must own production in order to reduce lead times and production times as much as possible, also to have more control over the product. There is a possibility that production could be outsourced, but the supplier relationship must be strong and they would have to be very responsive to your orders.

  18. Zhewei Tao says:

    It is hard to close the entire gap while the retailers are only doing so much and there is no doubt that Zara has its own place in the fast fashion industry, and it makes even more difficult for others to copy its business mindsets. It is true that by adapting modern communication and coordination practice in some degree can help other retailers to close the gap, but if they want to further shrink the gap, there are more to do. For example, strategic sourcing can be a competitive point since outsourcing the production line to other countries can cut the lead time and increase the efficiency. Also, the latest technology can play a key role in the future prediction. However, putting up all the technology together might not solve the problem and be competitive enough to Zara since Zara has performed so well in the vertically integrated supply chain, it offers higher margin and less turnaround time. So It is a smart idea for other retailers to adopt their own critical business strategy by pursing further on the customer data colleting process.

  19. Mrunal Vaidya says:

    It was possible for Zara because of the vertical business organization. It is easier for them to take and implement decisions for such a dynamic set up. Secondly, fashion industry is always changing and their product can be amended relatively easily. Instruments and technology on the other hand needs a lot of engineering and manufacturing R&D to make and produce in bulk. To get a suggested change into the market it would take at least 2-3 months at the earliest. Such products need to be standardized before getting into the market for mass production. A little customization offered by the company to the customers buying online is what makes the product as closer to the customer expectation as possible. So no I don’t think such a strategy can be implemented by companies selling technology.

  20. Zi Wang says:

    Rome is not built in a day. Clearly for the fast-fashion industry, FAST is the key and this is why Zara succeeded. Zara built its fast-fashion empire with the use of vertical integration, gaining ownership of the whole supply chain. With highly integration for design, production, transportation, wholesale, and retail, Zara could always provide proper fashionable clothes in limited quantity at the right time with a quick response. What’s more, Zara has a deeper understanding of the entire value proposition it exchanges with customers, exposing shoppers to an environment that allows for high engagement. It would be pretty hard for competitors to replicate the Zara model without a more thorough overhaul of the way they design, manufacture, and distribute their products. Technology will bring some insights under the huge sample size, but it’s far difficult to learn how to change even if companies know what to change.

  21. Antoine Minier says:

    Zara can react very quickly thanks to their short lead time between production and sales. Indeed, their unique model of manufacturing locally close to their design team and customers enable them to react quickly to new trends. It is therefore very important for them to own their mean of production. However, it is not the only solutions for retailers to quickly react to news trends. Indeed, it is still possible to outsource your production with suppliers, but you need to invest and work with a company that can match the level of reactiveness that Zara achieve in their plants. Moreover, by shipping your goods by plan, you can also reduce drastically the lead time even though you increase your transportation costs.
    The increasing accessibility of data offered by social media and smartphones are incredible source of information regarding trends for companies. Mastering the analysis of those data is critical for brands to have better insights about what the public want.

  22. zhixinli says:

    Zara has been successfully observed customers need and make quick responses, which enables a 28% profit increase. In the fashion industry, inventories are “perishable”. This does not mean the inventory will disappear but indicates that fashion products would lose much of their values in the next period when they are no longer popular. So, the ownership of products is necessary to make quick responses to trends possible. Outsourcing has great potentials to cut down the cost, however, it would also increase the time of this production process.
    Technologies such as Big data enables retailers to predict customers’ preferences based on their historical purchase information. Retailers can take advantage of this information and customize their advertising strategy accordingly. This is very common nowadays. After you browse a fashion website, Google will pop up some ads when browsing other websites later, which will direct you to some relevant products.

  23. Mengwei Li says:

    Fast fashion targets at low level and mid level customer. Zara react quickly to customers because of its short lead time, effective supply chain and great coordination. I think other retailers and manufacturers can also similarly gain customer trend information and adapt production once they outsource production. Ownership of production is not a necessity but make crucial important part.
    Technology enable good insights in boosting information and reaching out to customers so that can bring more exposure and connections.

  24. Karun Nambiar Manikoth says:

    The reason Zara is able to facilitate the fast fashion is because of its strong, built relationship with its suppliers. Through vertical integration, Zara takes total ownership of production, which has also facilitated their fast response and growth. Outsourcing the production can help other retailers and manufacturers gain customer trend information and adapt production, and also reduce lead times and increase efficiencies, but they may not be nearly as responsive as Zara’s supply chain, which takes a long time to build. Hence they won’t be able to match Zara’s fast fashion trend through outsourcing.

    Yes, technology like smartphones and cameras and big data can generate and correlate data about current trends, tastes and demands. What sells in the fashion industry constantly changes as it is very trend based, so there are many factors and customer preferences to be considered during the data analysis. More data is bound to provide further insights.

  25. Himanshu says:

    There’s no denying that Zara is one of the most in-demand retailers of the past few years. This has been very well reflected on their sales outcome. They very well implemented all the latest technology and trends to have a better customer experience. One of the example could be introduction of self-service checkouts, enabling consumers to bypass the queue and purchase their products with do-it-yourself kiosks. Zara’s latest initiative – augmented reality could be another game changer and all the other retailers must be taking cue out of it. Zara has recently been one of the first major brands to introduce an AR interface intended to bring apparel to life in shops. Through aiming cameras at the sensors mounted in the screens, users of the app can see simulated fashion models strutting around their things. Other AR photos show mannequins moving about and showing the brand ‘s latest Studio Range. Influx of smartphones with well advanced camera very well contribute to such technologies and I am sure all the fashion retailers will be sooner or later implementing such technologies.

  26. Smit Shah says:

    Conventionally, apparel industry works by forecasting the trend and its respective demand and then trying to fulfil that demand by pushing the brand and product out to the customer. But what if on top of that, one could “influence” the demand by pulling people/customers in and making them their brand evangelists? That would mean dictating the trend up to an extent, which would give one a first-mover advantage and increase sales. An article from Forbes says that this strategy is the game changer for Zara.
    Although not a necessity, vertical integration does aid in aligning the business model and respond quickly to external stimulus.
    Like Himanshu pointed out, Zara has introduced an AR experience which draws millennials into the store. With the advancements in technology, there are numerous ways in which one can create curiosity which makes for a powerful marketing strategy.

    Each retailer has a unique business model and it is necessary that any changes in the model should be compatible with their vision. I believe it is possible to attain a similar level of success even through outsourcing if their model is customer centric instead of company and brand centric.

  27. Akul Manoj Kumar says:

    Zara is experiencing one of the fastest global expansions the retail industry has ever seen, launching one shop a day and hitting new markets around the world — so far seventy-seven countries. Its implementation of all the latest fashion technology. The Spanish apparel retailer has continued to outpace its immediate rivals by embracing new tools, including big data, virtual reality and artificial intelligence. Inditex, the parent firm of Zara, is still able to assist consumers. Helping its e-customers to find the best size of clothes is one of the problems that Zara needs to overcome instantly. Its not just important but now compulsorily required by other fashion retailers to take a cue from their rival like Zara but If the fashion industry doesn’t keep up, the tech industry will occupy the empty space in the future of clothing. In addition, tech firms are mindful of the potential for connected technology and are leading the way for advancement in this area. Microsoft and Google have also licensed patents for smart textiles technology. Apple is going toward haptic feedback designs, which would be key to the development of versatile touchable surfaces – aka smart clothes.

  28. Yuanyuan Hu says:

    Everyone attributed Zara to fast fashion. Fast fashion is characterized by many styles, low prices, and small quantities, which can meet the needs of consumers to the greatest extent. The secret of Zara’s success has been interpreted by a large number of media. Bloomberg’s research analysis pointed out that the success of Zara’s parent company Inditex is mainly due to its centralized management structure and rapid response to big data.

    At this point, the rapid response model shows its advantages, that is, it can respond to consumers’ changing tastes in real-time, which is difficult for many other Chinese apparel brands to do. Compared with other fast fashion brands, Zara’s corporate culture is not as easy to be copied as the latest fashion trends, which is also an important key to Inditex’s continued success. Also, about 70% of Inditex’s products are produced within short-term delivery, which means that Zara can flexibly design and produce according to market demand and avoid unnecessary inventory. Therefore, Inditex once again recorded the lowest inventory in the industry last year.

    Richard Hyman, an independent analyst in London, pointed out that Zara’s production model has broken the traditional rules of the fashion industry and achieved true seasonal fashion. Although global fashion retail is sluggish, Pablo Isla is not surprised at the contrarian growth. He admitted to the outside world: “We can quickly respond to the latest data and market environment, adjust our strategy, and the design team has a high degree of product fashion trends. The power of control, the performance will naturally not be affected by the downturn of the general environment.”

    Pablo Isla also emphasized that Zara’s speed is not entirely dependent on production speed. 60% of the brand’s products come from the supply chains of Spain, Portugal and Morocco. Compared with other brands’ supply chains in Asia, the transportation time is greatly shortened. While the new products were still floating in the Pacific Ocean, Zara’s new products had already been sent to stores and were on sale. Some analysis also believes that Zara’s success is also due to the recognition in the hearts of consumers. Compared with H&M’s annual revenue of 4% for promotion, Zara basically has no other advertising budget except for marketing activities on social media. For consumers, a product catalog that is updated twice a week is the best promotion.

  29. yujintao says:

    The trend of fast fashion is difficult to forecast and it takes long from design to sell. But in Zara’s case, they respond very quickly to the customers’ demand and shorten the period of the total production process, which makes them outstanding among other competitors. However, it’s difficult to copy that business model because, first of all, it needs a close coordination of production and retailing. For some companies, they choose to outsource the production to reduce the cost, which leads to long lead time and slow response. But Zara is vertically integrated, which is a necessity for their business model and means that they have the whole control of the supply chain. If a new design plan is come up with, a prototype can be made very quickly to test. Besides, vertical integration means the ownership of retailing, which brings them full information about selling, thus enabling them to respond quickly to the trend. Nowadays, with technologies like phones and cameras, companies can easily get data about the newest trend. But just like I said, it’s difficult to predict the trend, they don’t know when the cloth is out of date. So, it’s important to put the products into market quickly. Coordination and ownership of production and retailing and quick response to trends are keys here.

  30. XuanMai Nguyen - nguye685 says:

    Zara’s ability to maintain its competitive advantage is due to its unique business model that coordinate supply chains to apply just-in-time delivery, full controls on production and fast adaption to fashion trends. For fashion industry, to utilize all of these resources is hard that’s why it is very difficult for other companies to copy. Traditional fashion companies place orders average of 8 months in advance. The makes changes every 4 months accordingly to the market trends in order to lower the forecast error. However, it is not applicable for fashion industry anymore when customers preferences change quickly.

    With the help of technology including smartphones and big data, it is possible to forecast and predict customer preferences to future trends and demands. Big data could be use to understand customers behavior and preferences, studying in many dimensions can help companies understand their fashion taste and respond accordingly.

  31. Ali Amer says:

    Each year Zara launches A 10,000 new styles, this converts to nearly 1,000 new styles every month by the fast fashion giant. With new styles being developed and introduced frequently, each style would contribute only around 200k-300k sold items to the company sales, which is a far lower than other brands. The secret of Zara lies in its well coordinated and flexible supply chain, rather than forecasting the future trends as other competitors do, Zara quickly produces a small amount of what is hot with consumers, and move to the next trendy style fast. For instance their supply chain is so well coordinated and Robust that Zara only holds 6 days worth of inventory, whereas similar fast fashion retailers link H&M holds 52 days and GAP holds 94 days of inventory.
    Thus i believe other fast fashion retailers cannot play catchup to Zara in the near future.

  32. nishchaykhona says:

    I think if the aim of the company is speed to market then outsourcing might have some challenges as this will increase the lead times if they are outsourced out of the country. Also because of outsourcing, a control over quality and product is in a way lost hence if the company is focussing only on getting earliest market share then outsourcing option must not be feasible.

    I think technology can play a big role in understanding fashion trends. Sometimes after purchasing new clothing, people tend to use social network to post their outfit. Big data can really help in tracking such posts apart from the individual purchases being made. This shall help company to adopt to consumer needs much faster.

  33. Sheng Yu says:

    When we talk about retailers we have to be noted that not all retail categories can be treated as ZARA’s appeal line. For example, it would definitely be valuable for Walmart to catch the trend of pork sales – and if the production of pork can be adjusted accordingly it would be perfect. But no – pigs need time to grow and they need to be slaughtered at right time – meaning even Walmart controls pork farms they can’t alter production quick enough to “catch the trend”. However, for some retail stores focusing on a single product – like appeal, electronics, and household appliances, a deep dive into the supply chain and highly integrated production model would be beneficial – but this whole system takes time and capital to build, and the existing system needs huge investment to be shifted to git this new model.

  34. Adopting a fast-fashion approach has become a necessity to be competitive, the introduction of new products encourage customers to visit stores more often, which means spending more, a win-win situation between production and retailing, and I believe other companies can be inspired from the Zara model by using technology to understand the trends, while Zara sells over 11,000 designs each year, their rivals only sell 2,000 to 4,000, the key to this huge difference is big data and analytics, gathering data using smartphones can describe what trends resonate with consumers by analyzing online signals and engagement with the research and images that they are checking to make more informed merchandising decisions.

  35. Aman Pawan Arora says:

    Zara is able to introduce new styles in such speed because of the vertically integrated structure. The company’s expertise in understanding and recording customer feedback, designing and quickly translating it into an actual product is what ensures quick transition from ideation to liquidation. Most companies have one of the above areas as an expertise and depend on partners to provide their expertise on other areas and here is where the additional months get added. With all key areas in-house, the organization has its priorities set right. The flip side of the coin is heavy investment in building this expertise in varied departments. Crucially, lead times come into picture when supplier capacities are booked by competitors and skill sets need to be added to partner’s work force. With this inhoused as well, Zara saves time and is able to take advantage of the customer feedback immediately.

  36. Felix Fu says:

    Zara’s strength in fast fashion is attributed to both its ability to rapidly-produce a potential product that their customer might like. Their focus on a wide variety of low runs for clothing dwarfs the number of lines that other clothing manufacturers put out in a year. I believe that it would not be wise for companies to try to leverage the new technologies that might give them better insight into customer interests to directly compete with Zara without having additional competitive advantages. Zara has developed a supply chain that is highly suited for how it does business as it is able to exert more control in its vertical integration and avoid losing margins to suppliers. Unless the competing companies are able to use the customer insights technology and their supplier contracts in a way that is tailored to magnifying the advantages in their own business model, the gap between Zara and its competitors would persist.

  37. Rujuta Mamadapur says:

    Zara’s stronghold in the industry is due to innovation and understanding of the customer’s mindset. Zara knows and has in-depth information about the upcoming fashion trends and previous customer patterns to be able to come up with robust designs that last for the season. This is possible due to control over the IP even though the manufacturing has been outsourced. Moreover, lower lead times add to the in-stock probability making sure that customers find their seasons favourites in stock. There are certain competitor brands like H&M who are trying to do the same along with incentivising customers with member plus plans to obtain more discounts. Zara’s ideology utilizes speed and market value.

    Big data and technology can help other brands to achieve this level of competence. This can help to improve forecasting and understanding customer expectations with regard to their fashion choices, especially during the festive seasons.

  38. Jorge Chamorro says:

    Agility and quick response to industry trends is a coordinated strategy which required a high level of control. Also, this is information visibility is of high importance for the company. Information asymmetry, moral hazard and even potential hold-up or underperformance from the supplier might jeopardize the production adapting to the new market trend. Hence, it is best for any fashion company to have production in-house when deploying a quick response strategy. Technology can play a relevant role in the execution of this strategy, but it is not all in itself. A well developed agility strategy can leverage technology to understand social trends faster and analyze big amounts of data to take quicker decisions, but it still boils down to the ability of the company to adapt its capacity so as to reduce the production lead time.

  39. Karan Shah says:

    Zara follows an agile supply chain strategy that has significantly impacted its ability to reach customers quickly and outsource its production capability. Almost 60% of the brand’s products come from the supply chains that are very close to its target European market. Compared with other brands’ supply chains in Asia, its lead time is significantly reduced.
    Zara does not greatly utilize advanced AI capabilities to track consumer demand changes, but it effectively manages the trends and ensure coordination along the supply chain.
    Outsourcing carries a high risk of losing control and competency, therefore, other retailers should be careful of choosing a strategy that increases its competitive advantage and improves agility.

  40. Aishwarya Marreddi says:

    Every business has its unique point of selling. For Walmart its EDLP, for Zara it is Fast-Fashion. Zara’s clothes are limited edition, high ended and low on durability. There is a segment of consumers for which Zara caters to. It wouldn’t be smart for another retailer/manufacturer to replicate the same model. Zara has done outstandingly well in the fast turnarounds of implementing what the customer wants. Zara is a perfect example of the benefits this can bring.
    So I would say every business needs to understand the pulse of the consumers and stay with it. Technology definitely makes things simpler in terms of faster communication. Customer feedback plays a key role. There are bits and parts of Zara’s story which other brands can implement. But as a whole everyone needs to concentrate on their uniqueness in selling and play it strong.
    Zara’s another strength is integration along the production line. Own manufacturing provides better control and flexibility on the supply chain. But it need not apply across all brands. Zara creates a lot of new products to sell. This uniqueness requires them to have the flexibility to manufacture them. If the business model is a standard product for example the standard Purdue T-shirts sold at book store. It has remained the same over the year and people like to wear it no matter what. If we have a decent outsourcing agent to do it, the store can save a lot of money leveraging the outsourcing agents experience and expertise.

  41. Miheeth Gala says:

    I strongly believe that what Zara does is an out-of-box approach in which it is extremely proficient in. The risk is super high and the returns are only good if the implementation is good. I believe that this is not something that is supposed to be copied. Other companies should not follow such a business model as it is not a cake walk for most of them. Also, Zara follows a vertically integrated approach and since it has been doing the same for a few decades they are proficient. This business model is very complicated and not easy to replicate. Also, technology could be used to get data and try to forecast, but Zara has efficiencies in the implementation as well which is unmatched. Therefore, businesses shouldnt risk their companies and run after pros to copy their model.

  42. Atharva Sabnis says:

    Apparel industry is known for highly volatile and uncertain demand with high rate of obsolescence driven by current trends. Inventory in pipeline can turn obsolete within weeks and companies lose their margin when they have to sell it off at markdowns. Local production may incur high labor costs but the degree of control over operations and rapid response to changes in demand, especially in such uncertain markets, is a leverage over others sourcing it from outside because of their dependency. If a company wants to outsource, because of reduced labor rate or availability of material, air freight can be employed to have a quick response. But it too has its own costs and complexities related to lead time, coordination and import transactions.
    As the article rightly suggests, any trend driven market with highly uncertain consumer demand will be hugely benefited with an integrated value chain with high degree of supply flexibility. Close coordination and information visibility play a crucial role in such scenarios. Postponement allows or greater flexibility as some portion of the uncertain demand becomes deterministic and helps in adjusting forecasts. Other manufacturers like Dell also follow a similar postponement model with their assemble to order model. It gives them high level of customization opportunity at high speeds. This surely should be considered with other factors like costs, core competency, lead time, demand uncertainties, product lifecycle and expected benefits before making any decision.

  43. Abhishek Tripathi. says:

    It is difficult to implement Zara’s approach cause it involves risk of capital investment and increased costs. Zara’s competitors can try this approach on a sample basis to see the results they get with this approach. To implement such fast paced approach with outsourcing is difficult because even with the latest technology, demand projection and communication, suppliers may not also have the same vested interests to meet customer demand. Having a strict contractual obligation and fines for unmet demand can solve this problem to an extent but dependency will be there on a third party supplier which entails risk. Companies can work on pilot projects to implement this strategy and I believe Tata’s Westside brand in India is trying to emulate this business design. I have read and talked to few people working in Westside and the feedback received from them is that they have started gaining traction among all customer segments.

  44. Mathews Oommen says:

    Had it been an easy business model to emulate, many other retailers would have adopted Zara’s fast fashion model by now. Tremendous amount of supply chain coordination is required to implement it in the fashion industry. Customer trend information can be collected quite easily. However, it is difficult to have the required coordination among all the entities involved in the supply chain.

    Zara has a vertically integrated supply chain which I believe gives it a competitive advantage. They have a direct control over production and sourcing which other retailers lack due to outsourcing. Technology plays an important role in obtaining and analyzing data to predict market trends. This indeed helps the retailers to plan in advance and push its products to the customers.

  45. For Zara, they use some technologies such as RFID to track information so that Zara is able to track sales. At the same time, Zara has a cutting edge system that intergrate the whole supply chain to let Zara determine their invnetory policy and how they respond to the market. Therefore, the key for Zara to be successful is about the technology. Of course, no matter outsourcing or in-house production, if companies have ability to track every situation and are resilient to adjust their strategy, they can gain more trend information and make a quick response. However, if retailers simply outsource production part without a system to track every details, they will lose the opportunity to the trend because they can’t understand how sales trend is or even they now it, they still lack capability to respond to the actual demand. In addition, smartphones or big data are tools that can help companies be more reponsive to the situation, because nowadays everyone has a smartphone. People also are favor of convenience things. Big data can show people how market change by these numbers variation.

  46. Aakash Jangir says:

    1. In a fast fashion practice information flow becomes the most important flow along with financial and physical flow. Outsourcing a production can be a challenge as here you are relying on capabilities of the supplier and only a robust and integrated system could provide a proper flow of information. Outsourcing can save many costs to retailer as compared to ownership but for analyzing trend it can be difficult with third party suppliers. Conversely, with ownership of production a retailer is more likely to gain proper customer data on a regular basis that can help in analyzing the trend. However, ownership is a long term and expensive strategy and might not fit for many retailers and manufacturers.

    2. Looking at the technical solution to this problem, smartphones and camera’s can be used by retailers to gather real time data of customers and understand how they shop. Big data can be used to analyze the correlation between the products as well as anticipate the trend.

  47. SAYAK MISHRA says:

    First of all, the degree to which Zara is vertically integrated is unparalleled. Having control and flexibility in bringing trending fashion has set a different genre for Zara in this industry. With this is mind, a major reason for Zara to have maintained this competitive advantage is in its ability to bring clothes at a very short time. In other words, Zara maintains an unique niche with regards to lead time. This advantage has not only been exposed but also tried upon by the whole industry in general. A constant shift in localizing suppliers close to customers within apparel industry is an indication of that. However, so far none have been able to replicate what Zara has.
    In terms of technology, I am not sure how this might help in this industry. Fashion is extremely seasonal and varies rapidly with time. Suppose we get the data and analytics to find the current trend. Unless we’re able to fulfill the demand suggested by this trend, there’s hardly any point for using such technologies. For example, let’s say an analytical study suggests that a particular fashion be in trend for next five months, so the companies have less than 5 months to bring in the product. The average lead time in the industry is 4 months, which gives very little, if any, window for the company to capitalize. So unless the industry can fix its flexibility and agility issues, I don’t think big tech can bring much value. To be clear on one part, I think the process can bring at least some value with ecommerce platform or omnichannel presence.

  48. Wenzheng Jiang says:

    As we can see from the article, Zara’s model reduces inventory risk in a highly uncertain business. Zara’s incredible speed and flexibility are due to the fact that, whether vertical or virtual, it’s important to have the mindset of sharing full inventory risk rather than transferring them. In addition, getting to market quickly is a merchant and financial mindset that requires a cultural commitment to be competitive in the international retailing. Therefore, I don’t think that retailers and manufacturers must have ownership of production. At the same time, simply outsourcing production is just not enough. But what is certain is that there will be tremendous opportunities for businesses that sell in increasingly shorter cycles.

    I believe that technologies such as smartphones, cameras, and big data can help deliver this insight. As the author mentions, in the world of tech, the answer is always, how fast can you do it? These technologies clearly help to facilitate faster access to information, which can lead to increased responsiveness and reduced risk.

  49. Nagendra Kumar says:

    Zara’s competitive advantage lie in their supply chain flexibility and their time-to-market. Zara focuses on fashion to order production policy which helps Zara produce apparel with short lead times. Zara even holds a few days of inventory to facilitate their time to market policy. The trade off here is the more expensive capacities Zara need to maintain to ensure that fast fashion is successful.
    The expensive capacity investment may be a trade off that other companies may not be willing to make. Most companies rely on placing replenishment orders months in advance. To replicate Zara’s success will require a complete change in the business model which most companies will not be eager to implement.
    Technology can help provide more insights into customer trends, improved forecasting, etc. which may help bridge the gap a certain degree.

  50. Soumya Ajmera says:

    Fashion industries introduce us to an interesting dimension of demand forecasting, where these prominent fashion luxury brands first create the demands by psychologically appealing the consumers, and then they tend to forecast on the basis of the reaction of various segments of the market. Zara stands out as an epitome of an efficient supply chain and it demonstrates how better management of the supply network can do wonders for companies in terms of revenue, profit, and goodwill. Zara’s strength lies in their potential to respond quickly to market demand as a result of shorter lead times, courtesy of their closely located yet relatively expensive manufacturing facilities. This results in them always being the first influencers in the fashion sector, which greatly affects their reputation and, maintaining lower inventory levels affect their profit calculations. Other companies, even though are able to reap profits from their cost-efficient manufacturing and sourcing strategies, they still are not able to stand up to Zara’s level, maybe due to the fact that when consumers purchase fashion products, they do it with a very different mindset, where the priority is not just satisfactory prices but it’s more about creating a statement. People relate their fashion sense to their individuality and therefore, the reputation and innovation of companies matter more than anything else. And Zara has very well analyzed the consumer’s mindset to design their entire company’s business structure. There is no generalized method to achieve supply chain profits, both outsourcing and vertical integration can result in better management if the model of the supply chain ensures good coordination and visibility to deliver flexibility and quick response to market uncertainties by designing strategic supplier contacts. Taking the consumer mindset at every stage of strategizing is of utmost importance for the fashion industry to thrive.

  51. Haowei Lai says:

    One important characteristic of the fashion industry is its timeliness of products. A design can reach the market and be popular for less than a month yet still bring great profit. Most of its core values come from the brand or designer themselves because of the public or some elites’ recognition. Similar industries can benefit from learning the Zarya model such as luxuries and arts. Yet similar industries usually do not need to outsource manufacturing because their need for labor is not as strong as the fashion industry, therefore the ownership of production is usually held at hand. Technology and big data can defiantly help companies gain insight to trends and better forecasting by analyzing customer behavior and defining product life cycles. It is a strong tool for above industries.

  52. lvargass says:

    Just by looking at Zara supply chain we could say that ownership has been a very important factor for them to be able to have and an immediate response to the information received from customers and control of their production, this does not mean that the production by outsourcing can’t be competitive as well, but the factor of having your production locally plays an important role for how fast the new products can place in your store.
    Technology it’s already involve in the way businesses are obtaining information and immediate feedback from their customers. Smartphones especially are able to collect data from searches in their web sites, purchases online, even they can track parts of the store that are visited the most thanks to GPS’s or sensors that already exist inside stores, it’s just a prove that all the interaction customers have with technology is helping the industry to obtain data from them.

  53. Matt Wright says:

    In order to achieve a model similar to that of Zara’s, one which embraces “fast fashion,” the company would likely need to own its productions. The biggest drivers of outsourcing are usually cost reduction or expertise gain, with the fashion industry especially relying on low labor cost production in southeast Asian countries. In order to have a fast response to fashion trends, the company must have a highly integrated and fast design and manufacturing system. This could not be achieved through outsourcing half way around the world. Both long lead times and communication between the company and the contractor would be difficult. Technology could mitigate some of the communication issues, however there are still challenges to working across different cultures, especially when you are trying to compete on such a short timeline as Zara does. Often times, what enables companies to take advantage of outsourcing is their ability to forecast far enough in advance to utilize shipments by sea. These are cheap and, unlike air shipments, would not cancel out the savings from lower labor costs.

  54. Sheng-Yang, Chou says:

    Zara can react very quickly thanks to their short lead time between production and sales. And using salvage to reduce their cost. Other retailers and manufacturers can be hard to do that if they outsource production. Thus, utilizing customer data, the application of forecasting models is one of the fastest and effective ways to incorporate business insights today and this can certainly prove helpful to retailers as well.

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