You can learn more than an MBA about business tactics, marketing and startups by reading this small case study on Zara.
A thread🧵
A thread🧵
ZARA is a Spain based fast fashion retail clothing brand which was founded by Amancio Ortega in 1975.
It's the largest company operating in the fashion industry with more than 2000 stores in approx 96 countries.
It's the largest company operating in the fashion industry with more than 2000 stores in approx 96 countries.
Now so many questions arise with the above tweet. Let's understand them one by one.
The first, is- What is fast fashion?
Fast fashion means inexpensive clothing produced rapidly by mass-market retailers in response to the latest trend.
The first, is- What is fast fashion?
Fast fashion means inexpensive clothing produced rapidly by mass-market retailers in response to the latest trend.
To understand the relevance of fast fashion we have to understand a bit about the fashion industry first.
There was a time when the fashion industry used to be "seasonal" than "fast", and trends used to take months if not years to reach the common masses.
There was a time when the fashion industry used to be "seasonal" than "fast", and trends used to take months if not years to reach the common masses.
Mr Ortega discovered this gap, along with some observations.
He discovered that people are willing to spend money on status symbols.
They prefer variety & designs over quality and the new designs are not accessible to the general household on time.
He discovered that people are willing to spend money on status symbols.
They prefer variety & designs over quality and the new designs are not accessible to the general household on time.
That's it. He addressed this market discrepancy by incorporating a fast-fashion company to keep up with the pace of the latest designs, with average quality and affordable pricing.
ZARA changed the fashion industry forever by working on the most important aspects of their business:
The company introduces a new collection based on the latest trends in just 4 weeks to contrast with its competitors who usually take 4-6 months to put a new garment on a shelf.
The company introduces a new collection based on the latest trends in just 4 weeks to contrast with its competitors who usually take 4-6 months to put a new garment on a shelf.
So shorter lead time allows the company to offer what the customers want to buy, at a given point in time.
The fact that the company will take their pieces off the shelf in 30 days, creates a sense of urgency among the customers and its boosts sales.
The fact that the company will take their pieces off the shelf in 30 days, creates a sense of urgency among the customers and its boosts sales.
Other than being incredibly fast, ZARA skips the storage part from its supply chain.
Their production system is inspired by the 'Just-in-time' production system of Toyota (automobile manufacturer).
Their production system is inspired by the 'Just-in-time' production system of Toyota (automobile manufacturer).
ZARA carefully organizes its production line and the fresh garments are delivered straight to the stores, skipping the need for storage and huge inventory.
In this way, the inventory management cost of the company is exceptionally low.
In this way, the inventory management cost of the company is exceptionally low.
Other than this, it creates artificial scarcity to be exclusive.
The company doesn't manufacture huge quantities of a particular design.
So lesser availability makes ZARA's product more desirable.
The company doesn't manufacture huge quantities of a particular design.
So lesser availability makes ZARA's product more desirable.
Lower quantities of a particular style come with another advantage.
It makes it easier for the company to dispose of those pieces that fail to generate traction.
It makes it easier for the company to dispose of those pieces that fail to generate traction.
And this is the main reason that ZARA has only 2 time-bound sales with lesser discounts compared to its competitors.
ZARA introduces 12,000 new designs every year in contrast to the industry average of 2000.
So rather than producing more quantities, it produces more styles.
ZARA introduces 12,000 new designs every year in contrast to the industry average of 2000.
So rather than producing more quantities, it produces more styles.
This revolutionary co. keeps a close tab on the needs of the customers and keenly observes the new styles their customers are wearing.
By understanding the target customer, ZARA can provide stylish and affordable products.
By understanding the target customer, ZARA can provide stylish and affordable products.
Once, ZARA started selling pink scarves because they observed many customers who walked in, wearing them.
500,000 pink scarves were sold out in merely 3 days.
500,000 pink scarves were sold out in merely 3 days.
Unique customer needs are reflected in their product offerings across the globe.
Small size clothes in Japanese stores, huge overcoats and boots for European stores are quite some examples of it.
Small size clothes in Japanese stores, huge overcoats and boots for European stores are quite some examples of it.
Their design team and agents visit clubs, social gatherings and universities for scouting new fashion trends and designs.
They track influencers rather than attending red carpet events.
They track influencers rather than attending red carpet events.
There are still more things about this global fashion powerhouse.
It doesn't market itself the way other fashion brands do.
It does not spend money on regular advertisements like TV commercials, billboards etc.
It doesn't market itself the way other fashion brands do.
It does not spend money on regular advertisements like TV commercials, billboards etc.
But it invests heavily in the location and appearance of stores around the globe, like Apple.
It pays very high rent to be in the most luxurious buildings, next to big brands like Armani, Gucci and Louis Vuitton.
It pays very high rent to be in the most luxurious buildings, next to big brands like Armani, Gucci and Louis Vuitton.
This creates the Halo effect, which occurs when a company or its products gets success due to its association with another successful company.
ZARA carefully designs their big glass windows with the help of neuro marketers to present the collection for window shopping which unconsciously takes consumers inside the store.
The company focuses on the customer experience because that matters more than the product itself in this fast-moving world.
The interior of ZARA stores is strategically planned- minimal and artistically subtle.
The interior of ZARA stores is strategically planned- minimal and artistically subtle.
ZARA grew in a way like no other because it always kept it simple- whether it's about business strategy or marketing.
It understood the fact that no one is a better trendsetter than the customer itself and they just have to be careful and observant.
It understood the fact that no one is a better trendsetter than the customer itself and they just have to be careful and observant.
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