Can Zara Keep Up with Speed Chic?
Essay Preview: Can Zara Keep Up with Speed Chic?
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In the fast-paced world of fashion retailing, nothing seems more important than time to market. Express, the large U.S. clothing retailer, rotates the front displays of its stores every week. Instead of the traditional four-clothing fashion seasons (spring, summer, autumn, and winter), styles now change once a month or even faster. Many womens clothing store chains get a delivery of new styles twice a month. Welcome to the world of Speed Chic.
Fashion retailers have taken two very different approaches to satisfy the need for Speed Chic. Many retail chains sell through franchises and farm out their production to low-wage countries, hoping to benefit from lower labor and operating costs. To turn out new fashions at a fast pace, firms, such as Levi Strauss, Ann Taylor, and the Limited, contract with outsourcing firms, such as Hong Kongs Li & Fung, that manage the production and shipping of their garments. Li & Fung provides a one-stop shop for product development, raw material sourcing, production planning management, quality assurance, and shipping. By using the Internet to communicate with clients and its global network of more than 7,500 suppliers in 40 countries, Li & Fung can have a new product in retail stores five weeks after it receives an order.
Time to market is even faster for Zara, a worldwide apparel chain headquartered in La Coruna, Spain, which is one of eight chains in the Inditex global retail conglomerate. Zara took a different approach to turning out fast-paced fashions, opting for vertical integration. Instead of relying on outsourcers, the company owns its factories, stores, and distribution network. It manages most of its own production because it believes it can minimize time to market by meticulous coordination of the entire production process. Zaras management believed that this ability to respond quickly to shifts in customer tastes is much more efficient and profitable than outsourcing to low-cost contract manufacturers. Vertically integrating production and retailing enables Zara to react much more quickly than competitors to percolating fashion trends.
About half the items Zara sells are made in its own factories, the rest are outsourced. Zara restocks its stores twice a week, delivering both reordered items and completely new styles. Zaras prolific design department churns out about 12,000 new products each year. No competitor comes close. “Its like you walk into a new store every two weeks,” observes Tracy Mullin, president and CEO of the National Retail Federation. If Jennifer Lopez appears in a stunning new outfit, Zara can get a version of it on its store racks in a matter of weeks. Because Zara stores merchandise changes so frequently, customers return often to check out what is new-and often return home with another Zara purchase. Zaras clothes are considered “very hip, ” very trendy, many resembling the styles of big-name Italian fashion houses but with moderate price tags.
Every working day, the manager of a Zara store continually reports customer preferences and behaviors to a central planning office using a personal digital assistant. In addition to placing orders, the manager makes recommendations for colors, fabrics, cuts, or even new products, such as a mans knit vest. This information is quickly relayed to the Zara design department, which can create or alter products in a matter of days. Zaras 200 designers draw the latest fashion ideas on their computers and send them over Zaras intranet to Zaras nearby factories. Within days, the new garments are cut, dyed, stitched, and pressed. In only three weeks the clothes will be hanging in Zara stores all over the world. Zara was able to launch a new line of apparel featuring the color black in only two weeks after the terrorist attacks of September 11, 2001, a time of great mourning. Zaras time to market is 12 times faster than rivals such as the Gap.
Zara does not concern itself with the possibility that its methods may sometimes result in product shortages. The store believes that shortages give the impression of product scarcity and exclusivity, causing customers to buy immediately and then return often to see what the next hot product is.
Zara maintains a gigantic 9-million-square-foot warehouse in La Cornua that is connected to 14 of its factories through a maze of tunnels, each with a rail hanging