By Wharton University of Pennsylvania
Inditex, a Spanish trailblazer, has disrupted the retail industry with its fast fashion concept through its Zara brand. While other retailers have been closing stores, Zara continues to open new stores across the globe. What does Zara do that its competition has struggled to replicate? The fashion retailer has turned conventional industry wisdom on its head by listening to its customers.
Instead of having corporate planners and designers decide what styles to offer — making assumptions about customers’ tastes up to a year in advance, like other fashion companies do — Zara gave that decision to those who know their customers best: store managers. This global network of on-the-ground store personnel send daily updates to a 600-strong design team in Spain on what is selling and what isn’t. Based on this sales intelligence, Zara can rapidly produce new designs and get them to market.
Zara’s business model innovation has had implications for cost structures, management processes, and manufacturing arrangements, because not only did they want to offer clothing better aligned with customer preferences, but they wanted it in their stores faster than their competition. They worked to avoid what Swedish retailing giant H&M, another purveyor of fast fashion, announced in its most recent quarterly earnings report: it had $4.3 billion in unsold inventory in its stores.