Learnings from International Retail: Zara’s
— By | Dec 11, 2014 03:10 pm
As the competitive environment becomes more intense, retailers are planning new and effective ways to engage consumers. Today, consumers take the promised benefits of a product, its appearance, and features such as quality, usage, etc. as a given. Retailers therefore have to evolve and develop strategies based on a deep understanding of consumer needs.
By understanding the difference between needs and solutions, retailers can optimize products tailored to customer requirements. Separating needs from solutions makes it possible to better gauge a market’s receptivity to innovation as well. To provide value and win customers, companies must quickly and accurately identify changing customer needs and wants, develop products to satisfy those needs, and then provide excellent customer support and service.
In stores selling more than one brand, vendors mainly team-up with a retailer to provide in-store demonstrations. As a result, these outlets are often inundated with requests from companiess eeking an engaging outlet for their products. In certain categories, however, relevance arises from being in the neighbourhood. In such cases, brick-and-mortar stores can rise above heavy price competition from online retail by attracting local and walk-in customers. In order to take advantage of these trends and build towards long-term, sustainable and profitable growth, many top organisations in the retail industry are attempting to build upon existing competencies in producing and delivering products and product components by becoming ‘solution’ providers.
A leading example of a company which excels in innovative store retail is Zara. Today, over 650 Zara stores in 50 countries attract legions of well-heeled customers in the luxury shopping space. As a company, Zara practices multiple levels of innovation: in technology, business model, and processes. Zara operates in a lean and focused manner. With an emphasis on ‘Fresh/Fast’ – fast copying of leading styles, fast delivery to its own stores and limited editions. As a business strategy, fashion retailers start with a value proposition. The proposition from Zara is: To benefit the customer with fashionable clothing at an accessible price point.
Effective Supply Chain: Interestingly, Zara controls the product until a customer buys it. Zara’s super-responsive supply chain is organized to transfer both hard data and anecdotal information quickly and easily, from shoppers to designers to production staff. The company can design, produce, deliver and then display a new garment in its stores worldwide, in a mere 15 days. Such speed was unheard of in the fashion business before Zara! Because Zara offers a large array of the latest designs quickly and in limited quantities, it collects 85% of the full ticket price in its retail clothing lines, while the industry average is 60 to 70%.As a result, it achieves a higher net margin on sales than its competitors.
Knowledge Management: Zara utilizes human intelligence and information technology for efficient information flow from stores to headquarters. The synergy in integrating IT and Knowledge Management is the primary success factor. For example, managers at Zara stores use handheld devices to send standardized information with customer feedback and ordering needs directly to in-house designers. This not only keeps Zara’s designers informed of fast-changing customer trends and demands, it also provides the company with insights on less-popular merchandise.
Experiential Retail: In-store demonstrations and events can convert even a small store into an unforgettable retail experience for customers. What’s key is ‘getting the products in the hands of consumers with an eye toward ‘if they try it, they’ll buy it”. Modern customers want to be sold more than just attributes; they want to be ‘entertained, stimulated, emotionally affected and creatively challenged’.
The customer of today is an inspirational one. Zara’s solutions are robust and on the cutting-edge of brick-and-mortar retail and these principles can be applied to many industries, as consumers are searching for enhanced retail experiences.
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