Zara’s hidden ingredient of success

Zara’s hidden ingredient of success

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Zara is still on a roll – global turnover is €16.7bn, up from €15.9bn in 2014.

And whilst online sales have soared by 42% to a record €553m, that’s only 3% of overall turnover – suggesting that there is plenty more room for Zara to grab online shoppers from competitors.

So what makes them so special? And what can we learn from them?

Much has been made of the speed to market that Zara brings its new designs, and that is certainly central to its business model. But a less celebrated reason is how Zara truly empowers its employees to work together in teams, always with its fashion-conscious customer at the front of its mind.

Here’s how it works:

Twice a week, Zara Store Managers place their orders, based not only on recent sales figures, but on what customers asked for and about. It’s a kind of impromptu vox pops that demonstrates the high value that Zara places on its employees listening and responding to the voice of their customers.

Commercial teams then allocate appropriate stock, including best sellers but also newly arriving lines that fit with the insight, even though store staff will rarely know of the latest items being delivered. There is a mutual trust and respect between these two teams that invariably works to the customers’ benefit – getting the latest and most wanted items at their local store….fast.

Meantime, that same data and insight is feeding design teams, creating new garments to stay one step ahead of trends – this means the Zara product range is constantly adapting, as the turnaround time from design data to delivery at store is an amazing 3 weeks!

It’s very much in Store Managers’ interests to take this kind of involvement and trust seriously, as sales performance rewards can be 100% of a salary that is already above the average for individual markets.

As a customer experience designer, I see this kind of employee engagement as critical in bringing to life and delivering what customers want. It’s easy to see consumer insight as a formal process that happens within a market research framework. But like Zara, we advise embedding it in everyday employee life, both in terms of capturing needs and delivering them.

Is this system perfect? Of course not. In some markets, like Venezuela where grocery shortages are commonplace, Zara cannot keep pace with demand, and has taken to rationing its stock, allowing only 5 items per month, per customer.

Elsewhere, Zara has the opposite problem – it posted its first profit decline and slowest sales growth in India, suggesting that its brand novelty factor may be wearing off, as well reflecting rising expansion costs and a weakened rupee impacting margins. Prospects may not get easier any time soon either, with global rivals Gap, Uniqlo and H&M set to launch Indian stores within the next 12 months.

But these challenges also illustrate Zara’s determination to trade in as many markets as possible, whatever the obstacles (they retail in 88 countries at last count, with online stores in 28 markets).

And no matter where Zara opens its stores either physically or online, the model remains the same – a drive towards relentless innovation and supply chain efficiency, that brings product and target customer together.

Zara’s latest target? Responding to demand from shoppers, the first UK standalone menswear Zara store will open in Birmingham’s Bullring shopping centre in just a few days time……

Bibliography:

http://www.theguardian.com/business/2014/nov/19/zara-owner-online-sales-553m-inditex

http://www.retail-week.com/property/zara-to-open-first-uk-standalone-menswear-store-in-bullring/5065968.article

http://latino.foxnews.com/latino/money/2014/11/17/zara-rations-its-stores-in-venezuela-allows-only-five-items-per-customer-month/

http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11172562/How-Inditex-became-the-worlds-biggest-fashion-retailer.html

http://articles.economictimes.indiatimes.com/2014-10-22/news/55318913_1_inditex-trent-zara-elargir-solutions

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