Zara Fast Fashion: Case Study

Zara unwavering Fashion Case StudyDescribe how Zara go fors technology to improve operational responsiveness to customer expectations, and at the same beat to reduce address in certain argonas.Zaras main schema is to give a agile answer to end consumer demands and anticipate consumer trends finished cultivation technology and military man resources. It operates on the basis of heavy backward vertical integration, meeting its counseling from the end consumer all the way back to the manufacturing and statistical distribution. It ensures a genuinely(prenominal) roiled control of crossroadion by means of simple and effective IT systems as well up as a high tech distribution center (DC.) It realizes personify optimisation on its basic items for fruition and also time optimization in call of speed to foodstuff of its fashion items making practise of technology. Zara adapted to trends and differences across markets by interacting regularly with the terminal manag ers using the organiser and phone systems to get updates on customer feedback, fashion sense and so on The Point of Sale system (POS) in the store com jellers also provided wrongless sales entropy to the distribution center which had a mobile bring in system that docked hanging garments in appropriate bar coded atomic number 18as. The various garments were effrontery Stock Keeping Units (SKUs) and armys were placed from the hand-held computers in the stores twice a week or more(prenominal), to the distribution center where if particular items were in pathetic supply, allocation decisions were made on the basis of historical sales levels and separate considerations. After the orders were approved, the w atomic number 18ho economic consumption issued lists for delivery to the stores. Zara design teams tracked customer preferences and utilize sales information such as sales analysis, store trends and production life cycle information from the store managers, base on a co nsumption information system to transmit repeat orders and new designs to intrinsic/external suppliers and the DC. The design teams thereby bridged merchandising and the backend of the production process and they developed the right products within the season to meet consumer demands. Zaras product development teams tended to(p) high fashion fares and exhibitions to translate the latest seasonal trends into the designs. Hence, a passing fast rate of operational responsiveness to customers was maintained and the DC was more of a place to merchandise than merely for storage.Technology also helped backing Zaras cost under control. By using the POS systems in store computers, hand-held PDA devices for store managers and phone systems, accurate information regarding orders required were genic to the DC. The SKUs ensured accuracy in terms of which products needed to be produced and in what quantities and the DCs could use all this information and feedback from the design teams to m ake orders of the right quantity of apiece kind of product. Thus, inventory be were very low, runs were curb and production be were maintained at very manage adequate to(p) levels in spite of the bighearted number of new items that are continuously produced. Zaras factories were also heavily automated, vary by garment type and center oned on the capital intense parts of the production process, like pattern design and cutting as well as final finishing and inspection. A Just-in-time system was installed in collaboration with Toyota in these factories and this helped in faster completion of break down and autocratic of costs through continuous improvement processes.Management Information frame technology plays a crucial role in Zaras customer responsiveness and cost control measures.From what you see in the case, does Zara price to market or on the basis of other factors?Zara always followed a market based pricing method. In each country, Zara always placed more focus on th e market prices (local pricing levels) quite a than on its own costs to forecast prices of items in particular markets. These forecasts were later overlaid on cost estimates that include all considerations such as distance, tariffs, and taxes and so on to see whether the electromotive force market could achieve profitability in a year or two of opening the first store. Zara followed a different pricing strategy in each country, for example, in Italy and Paris the focus was more timbre oriented and so the price of the same items were much higher, however, in Germany where consumers are price sensitive the items were lesser priced. This figured in the different merchandise strategy followed in each country. Zara controlled its costs through its production and distribution processes and was positioned in many countries as high fashion at cheap prices which though were centrally determined, much lower than competitor prices for comparable products in its major markets. Percentage m argins still held up, this was possible because of the direct efficiencies of short, vertically merged supply chain, reduced advertising costs, and markdown requirements. Thus Zara competed at reasonable prices through a cost leadership strategy, completing Porters generic strategy through differentiated products and broad segmentation.Zaras customers in many countries bore the extra costs of supplying the items from Spain though the prices were market based, for example, prices were 40% higher in Union atomic number 63 and 70% higher in the Americas than in Spain. This could be seen on the garments price tag which was an atlas to the customers. These higher prices outside Spain affected Zaras lieu overseas as high end instead of mid market puke products to emend validate the price differences. Like in Mexico where the propose consumer base is narrow, it is geared towards the upper and middle class that knows fashion. Moreover, as in Europe, the painted scarcity that Zara cre ates of its products in its stores urge the customers to pay the price and steal rather than wait it out. Markdowns are very low for Zara in Europe and elsewhere, 15-20% of its sales as compared to 30-40% for its European peers. Zara does not completely compete on basis of price as the usual Zara customer is not that price sensitive instead, it competes on fashion and its quick response capability.Zara (2010) has just launched an on-line, e-retail distribution service. For an apparel retailer what are the advantages and disadvantages of online distribution? Can Zara make it work?Inditex has long used the internet to promote its various lines and corporate pictorial matter and is also popular on Facebook, where it has 4.5m fans. Its Smartphone application, launched slightly a year ago, has been downloaded by 2m people. Zara shadower very easily make its online e-retail distribution service work successfully. Familiarity with the Zara stores thus provides name recognition for the online retail site, and the combination of customer data gathered by the store and the online retail site (through Google Analytics, for example) could lead to veridical personalized marketing efforts, using various channels. With Zaras policy of a heel over advertising budget, an online retail portal will add greatly in terms of branding and awareness.Zara had initially decided not to sell raiment on the internet since the returns rates were too high. However, as of September 2010, Inditex put Zara branded products online for its customers, waiting for online demand to build. Customers fanny choose from the usual range of paying methods and opt either for a free store pick-up or paid-for postal delivery. The online return and exchange policy is identical to the store system, with shoppers precondition 30 days to change their minds. iPhone and iPad applications that allowed purchasing will soon be available and online sales will help Zara reach potential customers who make no e asy access to physical stores.For an apparel retailer, the advantages of online distribution would be providing convenience to the shoppers to buy from the comfort of their home, save on travel time and costs and have easy access to the products. Customers will have 24 hour access to the shopping platform online and make better get decisions through online chat and discussion. Researchers identify convenience as a positive objective related to online shopping (Schaupp Belanger, 2005). This is relevant to 72% of online shoppers claim that they would rather surf online than go to retail store to attain information near a product (Lokken et al., 2003). Costs on human resources (Vendors, shop assistants, managers) can be saved by the retailer and customers can make relaxed chic buy decisions without pressure from vendors. Infinite shelf space will be available in that, products available at all store locations and virtually the world without geographical boundaries, to the custome rs to choose from. Comparison shopping in terms of styles and prices will be easier on the online portal than in the store for the consumer.capital of Massachusetts Consulting Group analysts Evans and Wurster theorize that the three main strategic draws of online retail are reach, affiliation and richness. Reach is defined as access and connection how many customers a business can access and how many products it can offer. Moreover, a retailers range of product offerings was conventionally limited by the size of its stores and the cost of carrying inventory while online retailers as intermediaries between customers and suppliers need not necessarily have an inventory at all, only a catalog, often lucid to the customer. Affiliation refers to whose interests are represented by the online retailer who can slightness the products from their various vendors more objectively, providing more objective information and better product comparisons for their customers. Richness refers to th e depth and detail of information, about products and about customers. Evans and Wurster argue that traditional retailers still are at an advantage to supply expert information about products to their customers, and that they also are still in a better position to gather information about product sales and customer profiles and buying patterns. Online retailers are quickly catching up, however, gathering data about customer browsing behavior, purchasing history, and demographics. Online retailers are subsequently able to use this data to provide their customers with a fully customized online shopping environment, including individualized weather vane pages, targeted ads and offers, and specific product suggestions, something traditional retailers cannot effectively do at their retail outlets.Some of the disadvantages of online retail would be the unwieldyy to gather trend information, product sales and customer suggestions. Zara could remedy this by using analytics and customer fe edback forms online that are user friendly and attractive. The experience of shopping in a Zara store would be lost, but Zara would need to make its retail platform very interactive and spellbinding. Zaras prime store locations cost a lot of investment, and the orgasm of online shopping could mean cannibalization of its retail outlet sales and a abandon of upkeep costs, this could put Zara into a fix. Customers will not be able to touch and try the product like they can in an material store, the likelihood of purchasing on the Internet decreases with increases in product put on the line (Bhatnagar, Misra, Rao, 20000, p. 100). Apparels in particular had negative rating in online shopping because of it is difficult to feel and see the texture of colour online that is incomparable to going to a retail store. The biggest drawback itself would be the concept of infinite shelf space that an online distribution will bring, for Zara. Being a company that thrives on the creation of arti ficial scarcity of its products, the online distribution channel will have to be very carefully controlled to ensure that customers buy the products with the same fervour as when they tittle-tattle the store, knowing that it might not be available the following week. Zara can remedy this situation by advertising only a limited number of units of each product online so customers will know if the total are dwindling and that they need to act fast in order to acquire the product just as in the case of the tangible store.