Zara’s hidden ingredient of success
Zara has become one of the most consistent success stories of the increasingly tough and competitive retail marketplace. Yet even this Spanish giant is not immune to the impact of currency swings and consumer sentiment - more on that later.
But at a proposition level, what makes Zara 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. Competitive pressure is everywhere, and it's dynamic too. Primark is expanding aggressively outside of its home market while improving the quality of its stores, making them more like boutiques than bargain basements. That makes Zara look more expensive.
Elsewhere, the robust euro brings challenges too. Zara produces about 60 percent of its garments close to its headquarters in northwest Spain, but sells globally. A stronger euro should force up prices, but Zara has been choosing not to pass these higher costs on due to concerns about rival store brands, especially online. This has been pressuring Zara margins - something that cannot be absorbed forever.
One defence against competitors is innovation - something that the deep pockets of Zara's owner, Inditex is well place to provide. Take a look at Zara's latest flagship store in London, and you'll find holograms, smart mirrors and robots. And of course, alongside the cutting edge tech, Zara has a slick set of checkout and ordering features that fit with every type of shopper profile.
Overall though, the customer experience at Zara remains industry-leading not because of its forward-leaning technology implementation, but its combination of linking store staff information into a slick supply chain - a finely-tuned feedback loop that keeps its offerings fashionable and desirable.
Editor's Note, May 2018 - Of course, it doesn't hurt their brand image to have The Duchess Of Cambridge buying Zara summer frocks either!