Game Changer? – Zara’s Coming

Will the arrival of Zara on our shores herald the apocalypse for Australian retailers? Overdramatic? Maybe, but with Zara announcing the opening of their Sydney Store on 20 April 2011, with a Melbourne store soon to follow, Australian retailers will be paying close attention to how they perform. (Click here to get a sneak peak of what Australian shoppers can expect.)

With drops of new stock twice a week, current retailers in Australia will need to keep up in order to maintain foot traffic in their stores.

The secret to Zara’s success is that they have a pro-active approach to business.  Rather than wait three to five months to bring new season styles to shelves, each staff member is armed with a PDA which is used to record customer opinions on Zara products and what they want to see in the store.  This information is collated and fed back to head office in Spain on a daily basis. Fashion graduates will then design the desired styles, and with a vertical operating structure (i.e. Zara owns the manufacturing plants they use to produce their goods) there is no time wasted outsourcing production. Zara have one production site in Spain and are the only major retailer with this manufacturing structure. This means it has a strong advantage over its competitors when it comes to efficient production.

Zara are also ahead of the curve with monitoring stock. With their technologically advanced point of sale system, they effectively use sales data to determine what products sell best in a particular time of the year.  Their smart approach to business ensures they rarely have excess stock in store.

Zara also save money on advertising by being smart store locations. They will generally place stores in high traffic areas, letting the stores advertise the brand.

Even Gap, the leading clothing retailer in the world, is an amazing twelve times slower than Zara when it comes to producing stock. Although it costs 15% more for Zara to be efficient in their production, the percentage of stock write offs is significantly lower than their competitors.  This means the brand isn’t cheapened by regular sales.

While Zara’s business has a lot of advantages, it’s not without its weaknesses. If Zara’s manufacturing plant is damaged due to natural disaster or power fault, their stock will be seriously hampered as they have no other production sites.  Also, production in Europe is not cheap, especially with the savings that could come from manufacturing in Asia. This production cost is passed onto consumers in the form of higher prices.  This means they are restricted if they have to compete on price point.

With Zara dominating the European market, it remains to be seen how successful their foray into Australia is. There will be a lot of interested parties monitoring their progress. Watch this space.

Stayed tuned for a post on fast fashion…..

Images courtesy of www.zara.com

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