FI zara secret to retail success

[dropcap size=small]B[/dropcap]efore the doors open daily at each of the 2,213 Zara outlets around the world, floor staff and store managers huddle to have an all-important meeting.

During this time, they share details of the previous day’s best-selling items, pieces returned by customers, shopper feedback as well as trends that staff have been noticing on the ground.

Has that new khaki jacket been flying off the shelves? A request has already been made for a restock. Are more customers returning that flouncy pink skirt? The design has been flagged.

No detail is too small for the flagship brand of Spanish clothing company Inditex, the biggest multinational fashion retailer in the world.

Even casual chats with Zara staff are not off-limits. The prized information you share about quality and new trends you would like to see on the racks is likely scribbled down.

“We speak to our product teams in Spain daily to discuss what is or isn’t selling well, as well as customer comments on what they do and don’t like,” says a store manager from Zara Singapore when asked about the brand’s daily pow-wows.

“We’re always keeping a close eye on how our customers are responding to the current collections and the trends they may be asking for.”

And while gathering such information is by no means unusual – after all, traditional sales reports are the norm in a retail-driven business – in the case of Zara, big data forms the backbone of the enterprise.

Using a sophisticated technology- driven system, specialist market analysts based in Inditex’s headquarters in La Coruna, Spain, data-mine the daily updates and use them to paint an accurate picture of exactly what Zara’s customers are demanding.

This information – culled from 93 markets from Portugal to Kazakhstan – is quickly translated by a vast team of more than 300 in-house designers into tangible designs that are trendy, decently made and sold at pocket-friendly prices.

The time it takes for a design to go from concept to retail floor? A mere 21 days or less.

NIMBLE SYSTEM

FI zara secret to retail success

At Inditex’s headquarters in the semi- rural seaside town of La Coruna, more than 4,000 staff sit abreast in a sprawling hangar-like space.

This officemirrors its nondescript location on the Atlantic coast of northern Spain – modern but bare, bereft of posters of advertising campaigns, fashion magazines or, in fact, any slogans at all.

In the centre of the white-walled room sit the sales managers, fielding calls from individual store managers from around the world. They are flanked by the design and commercial teams.

Farther along the periphery are the pattern- and sample-makers, ready to turn design ideas into tangible creations. Nearby are full-fledged photo studios, where finalised designs are styled and shot in-house.

“The system we work on here is very flat and nimble,” says Mr Jesus Echevarria, the company’s chief communications officer and one of the few people who speak publicly on behalf of Inditex.

Zara’s founder Amancio Ortega, 81, is notoriously media-averse, as is Mr Pablo Isla, 53, who took over as chairman of Inditex in 2011 when Mr Ortega stepped down.

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“Proximity means that decisions – be it about design, cost or suppliers – can happen rapidly and sometimes over the course of just a few hours. Our designers can create more than 50,000 design references so these quick discussions help designs get narrowed down quickly. We discard over 50 per cent of designs on average,” he tells The Straits Times in a meeting room at the company’s headquarters.

Today, Inditex – which also owns Zara Home and Zara Kids as well as fashion labels Bershka, Massimo Dutti, Oysho, Stradivarius, Pull&Bear and Uterque – makes more than one billion garments annually and has 7,292 stores in 93 markets around the world. Last year alone, net sales reached €23.3 billion (S$36.2 billion), up 12 per cent from the year before.

Big on its agenda now is a rapid advance into the online space, with its e-commerce arm now operating in 41 countries, including Singapore as of March this year.

None of this breakneck growth can be attributed to advertising though, given that Zara rarely advertises.

Compared with other fast-fashion brands – such as Uniqlo, H&M and Forever 21 – that frequently push out marketing efforts or team up with luxury fashion designers to produce capsule collections, Zara has, like its founder, chosen to stay mum.

Instead, the group as a whole chooses to put its money in real estate, opening flagship stores in historical buildings and outlets in prime shopping belts next to luxury brands such as Prada and Chanel.

According to Mr Echevarria, nearly 80 per cent of Inditex’s investments goes towards opening or refurbishing stores. Last year, 279 stores were opened in 56 markets.

The remaining 20 per cent is spent on building up its technology capabilities.

CUSTOMERS AS CO-CREATORS

It is no surprise then that all of Inditex’s eight brands follow Zara’s technology-focused, big-data template to a T: imitating designer trends, rushing those designs out at stores and selling them in boutiques for a fraction of the price.

While most fast-fashion brands try to anticipate what customers want, Inditex bucks the trend by pulling customer feedback instead.

Its unique business model can be traced back to the company’s origins as a clothing manufacturer.

Founded by Mr Ortega – the second richest man in the world on Bloomberg’s Billionaires Index, given his 59.3 per cent stake in Inditex – in 1963, the company started off making housecoats and robes in La Coruna.

In 1975, the then 40-year-old started Zara – as “his first-choice name for the store, Zorba, was already taken”, quips Mr Echevarria – as a retailer of low-priced designs that mimicked the looks put out by high-end boutiques.

His background as a manufacturer provided him a unique perspective to retail, given that he was always keen to make and sell only what his customers wanted.

This laid the foundation for a distribution system that, compared with its fast-fashion competitors, is much more nimble and sensitive to the demands of consumers.

While traditional ready-to-wear retailers design by season and manufacture on the cheap in bulk in countries such as China and India, Zara creates designs daily – based on feedback, global trends and customer reactions – and makes items in small quantities in factories near its headquarters in Spain.

Zara also owns factories in countries such as Morocco, Turkey, Bangladesh and China, but the latest trends are always produced closest to home, making the turnaround time faster.

“Stores are stocked twice weekly – individual stores make orders once before the weekend and once after – meaning stock is fresh and the customer can usually always find items that are new,” says Mr Echevarria.

It is a system that has a big impact on the way consumers shop because a dress or a pair of pants that catches their eye in a Zara store will likely no longer be available a week later.

Bank executive Liza Ng, 33, who regularly buys office wear at Zara, says: “When I go to Zara, I usually end up buying anything I like because items there sell out so fast and they don’t replicate the same design. It helps also that the prices are quite reasonable for the quality.”

INSPIRED BY GLOBAL TRENDS

FI zara secret to retail success

Still, the speed at which Zara gets its designs onto the shop floor has had its fair share of issues – prime of which has been concerns about plagiarism.

It is a charge Mr Echevarria denies, saying that the more than 300 designers who work for the company have made the sacrifice of “renouncing their names to work anonymously”.

“At the scale that we produce designs, we create nearly 50,000 unique references and much of that requires being inspired by other designs or global trends, which is common to any fashion label,” he says.

Unsurprisingly, the brand has been sued in the past – by indie designers and high-end brands such as Christian Louboutin. In 2011, the latter took Inditex to court for selling red-soled shoes, the label’s signature.

Most of these court cases, however, end up in Inditex’s favour. The company, it seems, tweaks its designs just enough to evade copyright laws.

And so while the creatives at Zara may be more copiers than designers, it is a win-win for the shopper: high fashion at a high-street price point.

Zara’s constant challenge is replicating its agility in regions such as Asia, where stores do not have proximity to the logistics, factories and distribution hubs in Europe.

Spain still accounts for the bulk of the brand’s business with 313 stores. China comes next, with 193 stores.

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Mr Echevarria hardly seems concerned by this, though. The company has already started opening factories in China and Vietnam, he says. It also helps that fashion trends tend to be universal, varying only slightly between countries around the world.

“What we’ve noticed is that differences are more sociological rather than geographical,” he says.

“Stores in different parts of the same country are likely to have more differences in demands, given the different consumers in different neighbourhoods, compared with the general trends coming out of Singapore or Sao Paolo. In that sense, we can still design out of La Coruna and cater to the world.”

It also helps that since 2010, Zara has rapidly expanded into the e-commerce space, catering to the demands of the millennial shopper. Consumers in Singapore can now get the latest designs online and pick them up at a store or have them delivered in two to five working days.

Zara is ever poised to give consumers what they want or, better yet, what they do not even know they need. And that, it seems, is the secret to its success.

Adapted from The Straits Times