Fast Fashion FTW(For the Win): How Zara and Fast-Fashion Retailers are Rapidly Changing the Game with Technology…and Making the Rules
Zara and fast fashion retail giants leverage technology and real-time data to serve up a winning formula
When I first moved to Boston 11 years for College, I had a ritual every Friday after class with some of my fellow dorm mates: head to Filene’s Basement in Downtown Crossing for somewhat stylish, affordable clothing friendly to the budget of a college freshman who had yet to earn her first real paycheck. Mind you, these significant markdowns were items that had gone way out of season or were being liquidated due to poor selling rates, imperfections, etc. However, our ritual soon came to an end when the store shuttered its doors for good.
Fast-forward to Fall 2015, and to say things have changed would be an understatement. Recently, I visited the site as I learned a new store had finally been built in its place: Primark, as fast-fashion retailer. The prices are as rock-bottom as of those in Filene’s Basement; however, in contrast, these low-priced items featured mirrored what’s currently hot and trendy—not liquidated has-beens. The replacement of Filene’s/Filene’s Basement with Primark is symbolic of what has been taking place in the world of apparel retail: where large department stores once dominated, many have been shuttered to make way for fast-fashion retailers liks of Primark, Forever 21, and Zara. With $200Billion in buying power in the U.S. alone, Millennials worldwide seek to scoop up the latest trends, exercise value-consciousness in splurging on desirable items, and share their finds/opinions online—and fast-fashion retailers are here to do deliver.
When I first moved to Boston 11 years for College, I had a ritual every Friday after class with some of my fellow dorm mates: head to Filene’s Basement in Downtown Crossing for somewhat stylish, affordable clothing friendly to the budget of a college freshman who had yet to earn her first real paycheck. Mind you, these significant markdowns were items that had gone way out of season or were being liquidated due to poor selling rates, imperfections, etc. However, our ritual soon came to an end when the store shuttered its doors for good 4 years later.
Fast-forward to Fall 2015, and to say things have changed would be an understatement. Recently, I visited the site as I learned a new store had finally been built in its place: Primark, as fast-fashion retailer. The prices are as rock-bottom as of those in Filene’s Basement; however, in contrast, these low-priced items featured mirrored what’s currently hot and trendy—not liquidated has-beens. The replacement of Filene’s/Filene’s Basement with Primark is symbolic of what has been taking place in the world of apparel retail: where large department stores once dominated, many have been shuttered to make way for fast-fashion retailers liks of Primark, Forever 21, and Zara. With $200Billion in buying power in the U.S. alone, Millennials worldwide seek to scoop up the latest trends, exercise value-consciousness in splurging on desirable items, and share their finds/opinions online—and fast-fashion retailers are here to do deliver.
Zara boasted about $19.4B in sales last year alone and operates over 1900 stores in 88 countries. The secret sauce to its ability to meet consumer demand for frequently stocked, affordable, trendy clothing lies in the technology used in its vertically-integrated supply chain. Imitating the runway’s hottest looks and selling them inexpensively (and of decent quality) in high-end store formats, Zara’s parent company Indetix has a data-centric, sophisticated business model.
Each Zara store analyzes real-time sales information based on daily sales patterns and customer feedback (e.g., sales clerks are trained to monitor customers’ reactions to products and product features), reporting this information back electronically to headquarters. Subsequently, a team of in-house designers uses this feedback to quickly tweak and develop new designs frequently, learning what sells and doesn’t sell well and better customizing tastes to specific market locations and stores. Most of Zara’s factories are located close to company headquarters. Items considered “in” or “trendy” are made closest to the target market to minimize production time (only 2-3 weeks compared to industry standard of 6 months) and subsequent delivery on the shelves.
With this sophisticated real-time feedback and supply chain system, Zara is able to produce an in-store experience specific to market tastes that offers a wide variety of items. Consequently, while competitors may make on average 2,000-4,000 items annually, Zara can produce over 11,000 distinct items per year while carrying very little leftover stock (and subsequently keeping inventory carrying costs on the lower side). Such high turnover of desirable merchandise encourages frequent repeat visits and impulse purchases due to relatively low price and the prospect that a desired item may become unavailable soon—so Zara gets to keep bringing in revenues through high traffic, and consumers get their fix of new fashion finds with each visit.
Of note, Zara has increasingly been leveraging special chips in its merchandise to improve the consumer in-store experience. When a particular item is rung up at the register, an automated order to the stock room is communicated to bring out a similar item. If a customer can’t find a particular item of interest, a sales clerk can scan the item’s barcode with an iOS app to bring up a list of close substitutes in the store or pinpoint nearby stores that have the item of interest in stock. In the increasingly digital world of Milennials, shoppers can also use the Zara app to shop and locate items of interest.
Traditional retails have also sought to capitalize on the increasing demand for fast-fashion items and have been strategizing accordingly (e.g., JC Penney’s). As retailers increasingly adopt fast fashion models, technological advances are critical in connecting with retail consumers and delivering what they want how they what it and when they want it–quickly.
I absolutely love this post mainly because I am probably Zara’s number 1 consumer but also because I completely agree with the fact that Zara’s competitive advantage is its technology and vertically integrated model. In my opinion they’ve done a great job of tackling the omnichannel dilemma that many retailers, both mass and luxury face today. I use Zara’s app religiously both in store and on the go. It is sticky because they continuously add skus to the website so even if I don’t need to buy something I often peruse the app to see what’s new. In addition, they have a convenient feature that allows consumers to prompt an email when a sold out item comes back in stock. There is also a feature that allows you to check for specific items in physical stores locally. These two features combined make for an easier customer experience cross platform but also allows Zara to capture some pretty important data with regard to consumer behavior and inventory management. It will be interesting to see how other fashion retailers, who are not vertically integrated will adapt.