Retail Innovation … How Zara Uses It to Swamp the Competition

Most innovative vision? We are always fascinated by this skill, especially when it correlates to impressive business results. This certainly pertains to Zara. Zara uses retail innovation to swamp its competition.

Check out our thoughts on building innovation.

 

Retail innovation
Retail innovation.

It is one of the best business skills to have in our view. Does it mean you see everything? Certainly not. It does say that you have the ability to see what many cannot. And then act on these items. It is what made Zara the most innovative fashion retailer in our mind.

 

All new ideas begin in a non-conforming mind that questions some tenet of the conventional wisdom.

 

That is what makes for the most innovative companies, don’t you agree? Lots of experiments and exploring. Adaptation doesn’t work well without experimentation and lots of action. And Zara knows how to do this well.

 

Related: Studying Innovative Change for Creative Business Ideas

 

Why may you ask? They certainly have learned to question convention wisdom. Many of us have wandered around their trendy shops or browsed their top-of-the-class website without knowing very much about the company behind that brand.

 

Zara’s business is on fire so says Business Insider.

 

And Zara’s mysterious founder, Amancio Ortega, is now the world’s second-richest man — surpassing Warren Buffett. For a brief time recently, he was the richest man in the world, richer than Bill Gates.

 

Fast-fashion brands like Zara are seeing sales explode, while other specialty retailers, including Abercrombie & Fitch, J. Crew, and Urban Outfitters, struggle to get customers in stores.

 

report by Goldman Sachs perfectly sums up why fast-fashion retailers are challenging traditional ones.

 

“Unlike fast-fashion retailers, which have buying teams sourcing current trending fashion from third-party vendors, traditional specialty retailers have design teams creating a product they believe is going to be trending 12 months out,” the researchers write.

 

The risk of trying to predict fashion trends a year in advance is weighing on the success of retailers such as Gap, Abercrombie & Fitch, Ann Taylor, American Eagle, and others, according to Goldman Sachs. But not Zara.

 

Zara’s unique business innovation process significantly reduces this risk. We will discuss this more shortly. But some, like me, may have never heard of Zara, until recently. So, let’s tell a bit more about this exciting business.

 

About Zara

 Zara is a Spanish clothing and accessories retailer based in ArteixoGalicia, Spain and founded in 1975.  There are over 2,000 Zara stores located across 88 countries, including 51 in the United States as of July 2014.

 

Zara stores are company-owned, except where local legislation forbids foreigner-owned businesses; in those cases, Zara franchises the stores.

 

Retail innovation … what makes Zara unique?

 It is claimed that Zara needs just two weeks to develop a new product and get it to stores, compared to the six-month industry average, and launches around 10,000 new designs each year.

 

Retail innovation technology
Retail innovation technology.

During the 1980s, Ortega started changing the design, manufacturing, and distribution process to reduce lead times and react to new trends in a quicker way, in what he called “instant fashions.” The company based its improvements in the use of information technologies and using groups of designers instead of individuals. But most of their process secrets are in this area.

 

Zara offers considerably more products than similar companies. It produces about 11,000 distinct items annually compared with 2,000 to 4,000 items for its key competitors. The company can design a new product and have finished goods in its stores in four to five weeks; it can modify existing items in as little as two weeks.

 

Zara’s innovation strategy secrets

The company’s strategy involves stocking very little and updating collections often. Unlike brands that update only once a season, Zara restocks with new designs twice a week, Suzy Hansen writes in The New York Times Magazine.

 

That strategy works two ways, according to Hansen. First, it encourages customers to come back to the store often. It also means that if the shopper wants to buy something, he or she feels the need to buy it to guarantee it won’t sell out.

 

Zara has already changed the fashion industry.

 

“They broke up a century-old biannual cycle of fashion,” an analyst told Hansen. “Now, roughly half of the high-end fashion companies” — Prada and Louis Vuitton, for example — “make four to six collections instead of two each year. That’s absolutely because of Zara.”

 

Shortening the product life cycle means greater success in meeting consumer preferences. If a design doesn’t sell well within a week, it is withdrawn from shops, further orders are canceled, and a new design is pursued.

 

Zara has a range of basic designs that are carried over from year to year, but some fashion forward designs can stay on the shelves less than four weeks, which encourages Zara fans to make repeat visits. An average high-street store in Spain expects customers to visit three times a year. That goes up to 17 times for Zara.

 

Retail innovation ideas
Retail innovation ideas.

It is essential that Zara has the possibility to quickly respond to market demands.  They have innovative manufacturing process, which allows them to be quick in responding and sending clothes to their shops, and they also do some re-designing in that time.

 

Only 15-25% of clothes are produced before the season and 50-60% at the start of the season. All other clothes are manufactured during the season according to customer wishes ( the design which has no good response is withdrawn). While I am not an expert in fashion design, that is most amazing to me. Very customer responsive.

 

Zara Design team is producing 18,000 different models of clothes per year, that’s about 70 every working day in a continuous process. The Zara Inditex group has more than 5500 stores in 82 countries and employs more than 110,000 people. Their product reaches customers in just four weeks. It is amazing that whole idea process is just four weeks long. Think about that fact … 4 weeks.

 

Zara is one of greatest examples of process innovation. It is, without a doubt, what makes this company fast and market-responsive, which is more than enough to keep their top position among fashion brands.

 

Minimal marketing and advertising

Zara claims to owe none of its success to advertising. That’s because it doesn’t advertise. It hardly even has a marketing department, and it doesn’t engage in flashy campaigns, as its competitors do, teaming up with fashion designers like Stella McCartney, Karl Lagerfeld, Martin Margiela and Marni.

 

Zara’s designers are completely anonymous; some would say this is because they are copiers rather than designers.

 

They don’t spend money on commercials because they are spreading their ‘brand’ with verbal communication between customers and with their label only on their bags. Also most amazing to me. Can you name one other retailer that does this? A firm believer in the importance of word of mouth marketing, eh?

 

Growth strategy success

In 1980, the company started its international expansion through Porto, Portugal. In 1989 it entered the United States, and in 1990, France. This international expansion was increased in the 1990s, with Mexico (1992), Greece (1994), Belgium and Sweden (1994), etc. until reaching its current presence in over 88 countries.

 

In the last five years, Zara’s overall sales have grown to 13.8 billion euros a year from 9.4 billion euros. Profit has risen to almost 2 billion euros a year. The company expanded to 110,000 employees in 2011, from around 80,000 in 2007. Remember, while Spain has been suffering through real estate and debt crises (following the global financial crisis), Zara has prospered.

 

Customer insight and feedback

Every day, store managers report customer feedback information to headquarters, where it is then transmitted to a large team of in-house designers, who quickly develop new designs and send them to factories to be turned into clothes.

 

The theory is that the customer is always determining production — not the other way around. An interesting thought isn’t it?

 

Every piece of clothing the company makes has, in a way, been requested. A business model that is so closely attuned to the customer does not share the cycle of a financial crisis, does it?

 

The bottom line

 Zara, I believe, is the most innovative fashion retailer in the global economy and within an industry built on constant design innovation and change. Why may you ask?

 

We believe there several good reasons. First, as one of the originators of customer responsiveness, they have some great process secrets and are built on a foundation of new ideas and constant introduction of new products.

 

Second, they know their future is based on those ideas. They also know how to do new things well, and they must be good at trying new ideas in many areas as experiments. These experiments, they realize, will not all work as planned, and some percentage will fail. They know and accept this without worry.

 

Is your business devoting enough energy to improving innovation? You can’t be as successful as Zara without it.

 

innovation_workshop

 

Need some help in improving the innovation process for you and your staff? Innovative ideas to help the differentiation with your toughest competitors? Or maybe ways to innovate new products and services?

 

 

Call today for a FREE consultation or a FREE quote. Learn about some options for innovation workshops to get noticeable results.

Call Mike at 607-725-8240.

 

 

All you get is what you bring to the fight. And that struggle gets better every day you learn and apply new innovative ideas.

 

 

When things are not what you want them to be, what’s most important is your next step. Call today.

 

 

Test. Learn. Improve. Repeat.

 

 

Do you have a lesson about making your innovation learning better you can share with this community? Have any questions or comments to add in the section below?

 

Mike Schoultz is the founder of Digital Spark Marketing, a digital marketing and customer service agency. With 40 years of business experience, he blogs on topics that relate to improving the performance of your business. Find them on G+Twitter, and LinkedIn.  

 

Digital Spark Marketing will stretch your thinking and your ability to adapt to change.  We also provide some fun and inspiration along the way. Call us for a free quote today. You will be amazed how reasonable we will be.

  

More reading on creativity and innovation from Digital Spark Marketing’s Library:

Learn How to Think What No One Else Thinks

Generating Ideas by Convergent Thinking

Amazon and Managing Innovation … the Jeff Bezos Vision

The Secrets to Building an Innovative Culture

 

Like this short blog? Follow Digital Spark Marketing on LinkedIn or add us to your circles for 3-4 short, interesting blogs, stories per week.

 

 

Retail Innovation … How Zara Uses It to Swamp the Competition