Inditex (Zara) was once the worlds largest clothing manufacturer. {% include image.html src="https://cdn2.avada.io/media/resources/JwPDOo3.jpg" alt=" and then Add to Home Screen. Some Zara stores have very premium pricing, whereas others have much more affordable prices, based on the locations and targeted customers. While this amounts to something like a psychological ruse, low inventories enable Zara to decrease the number of price reduction events (sales). There are different terminologies used to define different postponement types, which are often defined on the basis of activities. In addition to a super-effective supply chain, Zara also involves customers in the design process and provides a unique competitive advantage. In this paper, we introduce concepts related to postponement, discuss successful industrial applications and identify key enablers and factors influencing the successful implementation of postponement. Amancio Ortega Gaona, Spain's wealthiest businessman, founded Zara in 1975 and later created Inditex as a holding company. It tries to capitalize on the store experience by always offering reasons for the buyers to revisit the stores. 808 certified writers online. According to Postponement and Supply Chain Structure: Cases from the Textile and Apparel Industry, Zara purchases more than half of its fabric in a raw state that is undyed so that it can later. Greenpeace.org, 20 November 2012, Zara: Taking the Lead in Fast-Fashion, BusinessWeek, 4 April 2006, Zara, a Spanish success story CNN June 15, 2001. and Choi, T.M.(2010). Through its business model, Zara aims to contribute to the sustainable development of society and that of the environment with which we interact." Zara fosters a highly-engaged workforce that translates into highly-engaged interactions with customers. In a very short time, Zara has become one of the most successful fashion retail brands in the world. I was always wondering about the secrets of Zara's success in India - right from the day one. Competitors can book factory space in advance abroad for less money and with greater production assurances. Finally, the full postponement strategy is the highest level of delay in the supply chain, which makes use of both manufacturing and logistic postponement. The brand's products look somewhat similar to the hottest items in the market, but they have different traits depending on specific markets. Zara is one of the most successful fast-fashion chains in the world, which is famous for its ability to keep itself up to date with fashion trends and the incredibly short time to introduce new products. Heidelberg: Springer, 54-57 Ferdows, K., Lewis, M.A., & Machuca, J. Zara likes to distinguish itself, too, by establishing stores in unique settings such as the San Antonio el Real, an 18th-century convent in Salamanaca; a historic cinema in Elche, Spain; and 666 Fifth Avenue in New York. Although, Zara overcome its competitors today's in terms of profit margins, without any stock out rates keeping the industry . The Copernican revolution in management mindsets in which the customer is the center of the corporate universe has yet to take place. Although in 2020, because of the COVID-19 epidemic, it closed 16% of its stores, for a while it was adding 500 outlets per year. The model comprises of different postponement strategies, which when analysed, indicated that Zaras postponement applications were supported by its dynamic value chain structures. The result is the brand's sales keep getting higher, and the market share keeps increasing. Yet as in other sectors, the economics is forcing the change. In other words, introducing a new product may limit the success of another product that would have otherwise done well. Zara manufactures most of its products in Europe where it is more costly. The "fast fashion" philosophy will be put into test in the future, and I'm looking forward to seeing how Zara adjusts its marketing strategy. Besides the supply chain efficiencies and marketing philosophies, one of the key factors for Zara's success is its postponement strategy. Postponement strategies can be applied to form, time and place (Hoek et al., 1998). In 2019, the Zara brand's value was approximately calculated at 16.5 billion euros. Still, the common strategic motivation is to gain better information about customer demand by waiting to customize a product for a particular market or customer. Zara uses data to understand customers' insights and current trends. The heart of the Zara supply chain is a huge, highly automated distribution center (DC) called "The Cube". Start your Shopify Free Trial now and get it for free! Every human being is innately programmed to satisfy it. Harvard Business Review, November 2004, 104-110 Garci-Dastugue, S. and Lambert, D.M. Zara fosters a highly-engaged workforce that translates into highly-engaged interactions with customers. Zara has nearly 3000 stores worldwide, but the even more incredible fact is that it is a vertically integrated retailer. In contrast, logistics postponement involves delaying the distribution or actual delivery of a product until customer demand is known. Manufacturers adopting postponement strategy can lower operational cost and quickly respond customers' personalized demands. The New York Times, 10 Nov. 2012. Speaking of loyal customers, Zara's meaningful experience and values tap the potential of frequent buyers to promote the brand. The company base thierkey strategy on every single customer who has a satisfied experience by purchasing fashion online and who wants to repeat online shopping. In the new retail economy, experience matters more than product in the mind of the shopper. By continuing, you agree to our Terms and Conditions. You can see from Chart 3 above that the quantity of products Zara discounts pales in comparison to other retailers. Zaras strategy is to get as close to them as possible, (Suzy Hansen 2012). That translates into great value. On social media channels, Zara has over 28 million Facebook followers, over 39 million on Instagram, and over one million on Twitter. Opinions expressed by Forbes Contributors are their own. This strategy is effective for the company's decision making process as the brand knows and understands the customer's mind. For instance, algorithms that combine the rate of sale of various products as compared to similar products during the same seasonal cycles could yield caveats enabling Zara to adjust manufacturing before peak demand is reached. That is what I'm going to show you in this article. 07 May 2014. Every store manager can talk directly to its counterparts in Spain regarding the situation. Appealing to the loyal segment of the target market, like Zara does, allows for higher profit margins and caters to customers who seek out branded value, she emphasizes. Not only are European workers more skilled, but European capital equipment is also more precise. It is the first-hand ear to the ground on buyers and market trends, as well as a tool to plan the next steps. Zara directly manufactures most of the products it designs and sells, and performs activities such as cutting, dying, labeling, and packaging in-house to gain economies of scale. N.p., n.d. With the dramatic introduction of "fast fashion" - which are affordable and stylish clothes, Zara was able to create a passion for fashion amongst a broad spectrum of customers. But this doesn't mean it has no focus on marketing. Shipments from the distribution centres to stores are made twice a week, based on customer demand in each individual store. Once common components are paired together in a platform, the number of options reduces dramatically. Exchanging dollars for product is no longer meeting the needs of todays shopper as they strive for deeper connections with the brand, Kohan states. Therefore, some innovative companies have integrated postponement strategies with their supply chain operations to gain control of product variety proliferation. While multiple product offerings can be useful in determining trends and aligning designs with demands, sometimes products can cannibalize each other. and Lee, H.L. Implementing a postponement strategy. Zara capitalizes on very inexpensive but highly effective social media advertising strategies. Lead times are reduced, working capital is cut, and waste is minimized. In contrast to traditional make-to-forecast approaches, postponement is a make-to-order tactic, where products are rapidly customized from stocks of almost complete products, often in close proximity to customers. Based on this research capability, Zara's products in every store reflect unique customers' needs in terms of physical, culture, or climate. "The New York Times. The key is the familiar Agile technique of postponement: transforming a product into its final form at the latest possible moment. By applying full postponement strategy in both logistics and manufacturing postponement, Zara is able to quickly response to the constant changes in the fashion world and achieves competitive advantages over its rivals. In 2015, a Zara store in Tokyo received a lady named Miko who asked for a pink scarf, but there was none. While the following examples may not meet the traditional criteria of a marketing campaign, they demonstrate the strategy that Zara pursues very well. Applying the matrix into Zara, the company uses the full postponement strategy, where the manufacturing and logistics operations are initiated after the knowledge on customer demand. Start Your Online Business with Shopify 12 Day Free Trial + Pay Only 1$ For Your First Month. Zara has two main distribution centres in Spain that distribute all its EU distribution and some of its global distribution, and a few smaller satellite distribution centres elsewhere. 07 May 2014. Don't use plagiarized sources. Zara does that for them. Zara limits inventories, but not at the expense of profits. 500,000 items were stocked and sold out in just three days. Here is a quick recap of what you can learn from Zara's marketing strategy: The Zara brand was created with a keen focus on customer experience - which leads to its ability to provide trendy fashion quickly at affordable prices. Postponement is defined as a strategy to intentionally delay activities, rather than starting them with incomplete information about the actual market demands (Yang, Burns, & Backhouse, 2005). These are used to analyze what is on trend or being said on social platforms. : 12 : Now if the fall of them be the riches of the world, and the diminishing of them the riches of the Gentiles; how much more their fulness? Zara is a clothing retail brand owned by Inditex, a Spanish textile manufacturer that was established in 1963. While Zara is an excellent purveyor of product, it also capitalizes on the store experience by continuously offering reasons for customers to visit the stores and catch the hottest trends at affordable prices, Kohan explains, noting that Zara has cultivated a loyal customer who visits aboutsix times per year, as compared to other retailers in the contemporary market wheretwo to three visits per year are the norm. Give us your email address and well send this sample there. (2003). Zara really is heads and shoulders above many of its competitors and approaches retail fashion in a unique way. Opinions expressed by Forbes Contributors are their own. While the number of garments manufactured by Zara (in blue) has increased steadily since 2008, industrial waste (in green) has decreased or maintained very low levels. These elements might be collectively known as Zaras overall business strategy. This vertical integration approach gives Zara a lot of control over how it operates. Recycling efforts of furniture and decoration, organic manufacturing processes, and biodiesel fuel all contribute to Zaras environmentally friendly image. Since there are various varieties of sandwiches, They know that it is costly to try and predict individual customers' preferences, so they aggregate orders into common platforms, which consist of a bun, patty, and lettuce, reducing the options. Thorbeck lists the excuses that US retail executives offer: Thats not our customer. Kids, women, men, elders, all age groups, and cultures can try out Zara's items just to love them. This enables them to manage one of the most efficient supply chains in the fashion industry, and to create the fast fashion category as a market leader. This is a fundamentally different alignment than brands using the 4Ps approach to marketing operate. Inditex, which includes Zara, Bershka, and Pull & Bear, donated three million euros and 500,000 pieces of warm apparel to the Turkish organisation Red Crescent for the humanitarian emergency. 1) The Postponement strategy Besides the supply chain efficiencies and marketing philosophies, one of the key factors for Zara's success is its postponement strategy. Zara's strategy allows products that are not labor-intensive to be outsourced; nevertheless, the items that require more resources are produced in the brand's factories (Ferdows et al., 2004). We will write a custom Essay on Zara Company's Distribution and Promotion Strategy specifically for you. Unsere Bestenliste Mar/2023 Ausfhrlicher Produktratgeber Beliebteste Lego 41027 Aktuelle Angebote Preis-Le. A fascinating story that can show this is how Zara creates its products to leverage the buyers' input. The total revenue of Inditex in 2019 is estimated to be 23.31 billion euros. ISBN 978-0-374-29279-9. To achieve such spectacular results, Zara doesn't market itself the way other fashion brands do. This means Zara does all of the designs, manufacturing, and distribution itself without third-party suppliers. Firstly, Zara is vertically integrated. It has a clever marketing strategy that can differentiate itself and find higher visibility as well as loyalty. God forbid: but rather through their fall salvation is come unto the Gentiles, for to provoke them to jealousy. Therefore, by keeping manufacturing at home, Zara circumnavigates this cost. This creates a throughout strategy for the company's growth, and it seems to work because Zara has managed to establish itself as one leading fashion retailer globally. New York: Farrar, Straus, and Giroux. It is beneficial to delay commitment to product-specific characteristics as late as possible to avoid a mismatch between orders and inventory on hand. Product modularity and process design enable the successful implementation of this strategy. For example, the most loyal customers for retailers typically account for 80% of the sales. Zara works closely with its suppliers and customers, to enable constant information to flow smoothly and quickly up and down the supply chain. While this quote does highlight Zaras low-inventory strategy (to be talked about next) and its rocket-fast product replacement cycle, it may miss the mark on the experience Zara creates. 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