FT has a nice feature on the spectacular success of fashion retail brand Inditex, the world's largest fashion retailer, which retails using its over 6400 Zara shops spread over 88 countries. One area where it outclasses competition is in the speed with which it reacts to fashion trends, using its efficient information feedback mechanisms to swiftly turn sketches into products ready for shipment. It churns out over 30000 individual designs on nearly 900 clothing items every year,
The essence of the Inditex model is to push the moment of production as close as possible to the moment of sale... Many of the items you see in Zara stores today will have been designed back in Arteixo as little as two weeks before... Inditex’s success is based not on speed but on accuracy, on understanding exactly what customers want, week by week, and store by store. Take the new trenchcoat. Once it goes on sale, Mr Ruyman Santos and his colleagues will know almost immediately how it is faring with shoppers around the world. Every day, tens of thousands of customer reactions are fed back to the design teams. Is the sleeve too tight? Are the fringes too long? Does your bottom look big in this? The answers are analysed and swiftly incorporated into new designs, creating a never-ending cycle of iteration and innovation. Even successful designs will never get a second run. You need to evolve, and you must never repeat...
Every Inditex store receives fresh deliveries twice a week – a feat of logistics that helps encourage customers to return to the store as often as possible... Zara customers typically visit the shop four or five times more often than clients of a more traditional fashion store. They sell in small batches and they are producing what they already know will sell. This means, crucially, that Inditex has much lower inventories than its rivals, and less need to discount unsold goods. According to research by Société Générale, the investment bank, only 15-20 per cent of Inditex stock is marked down, as opposed to 45 per cent for a competitor like H&M.
This is a very good example of what Jim Collins calls "empirical creativity", where when faced with uncertainty, firms respond by relying upon "direct observation, practical experimentation, and direct engagement with tangible evidence". This strategy of "experiment, collect evidence, learn, iterate, and adapt" is equally relevant to social policy making as is to business management.
Update 1 (19.02.2023)
One key point is that Inditex, whose brands include Zara and Pull & Bear, has always kept its supply lines local and nimble. “If you have the fabric, you can send this fabric to a factory in Galicia or in Morocco, then you could have in two weeks the garment coming back to the logistics platform and being sold,” says Pablo Isa who just stepped down as Inditex's chief executive. The company’s capacity to produce sought-after garments on a very quick turnround became a template that other high-street retailers have since tried to imitate. Inditex produces about half of its clothing close to home in factories near its headquarters in the town of Arteixo in Galicia, north west Spain, as well as in Portugal and Morocco. One of Isla’s most significant improvements to this process was to shepherd the development of technology that turned a largely bricks and mortar operation into a hybrid retailer, using its global network of 6,400 stores as display windows and mini distribution hubs for people buying garments on their smartphones. The move was successful, and by 2021, a quarter of Inditex’s sales came from online purchases... Inditex operates a very flat dispersed management structure, giving country managers the power to make decisions quickly.
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