Zara: Managing Innovation
1.0 Introduction
In the recent years, fashion and design industry has evolved to be one of the most productive sectors in the world of business. In a normal daily speech, when an individual hears of fashion, what comes to mind is the aspect of shopping clothing, shoes, and even jewelry. The major players in the industry enjoyed relative success for many years as the sectors continued to evolve. Nonetheless, in the contemporary business context, the industry has witnessed a considerable increased competition which has made the players and other brands to strategize and differentiate themselves for survival (Reinartz et al., 2011). In essence, differentiation may mean having not only an exceptional product or goods but also a manner in which the items are presented to the marketplace. Therefore, just having trendy and beautiful clothes may not be enough, and the company should offer innovative ways to their target customers and position themselves as a key player in the market (Zhenxiang, 2011). Many fashion companies often find it hard to attain this effective strategy since many consumers always receive plenty of fashion news from other firms, thereby making it hard for businesses to establish in the market. Thus, in a competitive industry like fashion and design, the best way companies can handle such a situation is to become innovative.
Innovation in a business context is vital since edging out competitors requires one to be few strides ahead of the other players (Reinartz et al., 2011). A company rooted in traditional ways of marketing may find it hard to survive in an environment where players have innovative business models. Zara, a company within the fashion and design industry, has been successful in implementing its business models. Central to its success is innovation in the way it does business (Zhenxiang, 2011). Briefly, Zara was founded in 1975 and Inditex, a Spanish group, owns the company. Since its establishment, the firm has grown to be one of the largest retail stores in the fashion and design sector and has been a success story in Spain. By March 2016, the company had 6570 retail stores across 88 countries it operates (Sperber, 2016). The company has been able to amass huge profits, yet 70 percent of its returns originate from Europe, and the firm itself is based in a nation where the macroeconomic condition of business is currently challenging (Scott, 2014). The fundamental question that would arise is that, why does Zara perform well than other players in the industry despite operating in an environment where other companies have struggled (Reinartz et al., 2011). Unique, innovative business model is the key to Zara’s prosperity in this industry.
2.0 Innovative Business Model
Precisely, Zara did not have to come up with a new brand of products to make it the largest fashion chain in the world. The company simply invented a new business process that has innovation in its entirety. An innovative business model does create value for the business, and it has been termed cheaper than the technology innovations (Sperber, 2016). Zara, the biggest fashion retailer in the global context, has employed innovative solutions to most of the marketing and fashion challenges common in the sector (Zhenxiang, 2011). Instead of hiring great and renowned designers, Zara politely imitates other competitors in the industry in an innovative manner to edge them out in the market share (Sperber, 2016). The company depends on the global network of customer feedback to adjust their designs. In fact, the company headquarters absorb several comments from the purchasers and sends them to their manufacturers based in Northern Africa and Europe, where the feedbacks are sewed on the next clothe designs and made available in few weeks (Scott, 2014). The process is rapid such that when customers come in the next few days, they can get the available and lovely trendy clothes in the stores. This demonstrates how innovative the company is while carrying out their business. They value customer feedbacks and do exactly what is based on the needs of their clients (Reinartz et al., 2011).
In plain terms, the company employs a user-produced strategy to market their fashion, and this approach has proved to be successful in the way they sell their products to the customers (Sperber, 2016). The industry is competitive such as when one firm remains rooted to classical methods of doing business then it would be hard to thrive in this sector. The kind of business process employed by Zara has translated into huge returns and has made the company one of the most successful businesses in the fashion and design industry (Scott, 2014). Therefore, the unique business model that places the customers at their heart in relation to the elements of design, distribution, as well as sales are essential for the growth of the firm. This shows that a business must become innovative if they want to remain above the rest in a competitive environment (Reinartz et al., 2011).
A company with a robust business model characterized by elements of novelties in the entire process would stay ahead of those that remain rooted in old and non-innovative ways (Wei, 2013). An effective business model has made Zara to realize increased market share compared to the rest that operate differently in the market (Reinartz et al., 2011). Zara has an exceptional business model compared to other old players in this industry because the firm has numerous approaches that others in the market have not been able to adopt. Mostly, the European fashion is an essential aspect of the society (Scott, 2014). Almost everyone wants to dress in a more fashionable way and wear trendy fashions. The society has a view that fashionable clothes attract a considerable number of people and thus retail chains such as Zara have often come up with strategies that attract customers (Wei, 2013). Zara has succeeded in this business model, it restocks the collections more frequently, and this has been excellent to the customers. Their customers understand that if they fail to buy the good the moment they see them in the store, then the products can run out and miss the chance of getting the trendy clothes (Sperber, 2016). This approach has been impressive and advantageous to those consumers who want to distinguish themselves from others. Thus, Zara has explored this opportunity to increase the sales. In addition, differentiation in the way business is carried out is essential. A clear understanding of the market and knowing what customers want is valuable to the business.
3.0 Innovation in the Supply Chain
The supply chain can sometimes sound boring, but it is one of the key secrets behind the success of the Zara. The company applies a short supply chain approach that regulates the stages present in the supply chain: design, manufacture, and distribution of the products. Precisely, Zara has a vertically incorporated business process, one lacked by its competitors (Sperber, 2016). The firm exhibits some aspects of flexible structure, robust customer focus. It can adjust and provide customers with what they need in the shortest period. The short supply chain strategy used by Zara is itself an innovative approach that suits the company with a short product cycle and is magnificent to the customers’ preference (Sperber, 2016). This strategy in the supply chain has been efficient and, perhaps, the best approach that differentiates Zara and its rivals in the market (Wei, 2013). Instead of shipping clothes from the Chinese plants where they tend to arrive late in their distinctive stores after the style may have outdated, Zara makes the bulk of their products in Spain as well as Morocco and coordinate everything in an efficient manner (Sperber, 2016). This remarkable achievement has seen the firm employ more than 110, 000 workforces, despite operating in a depressed economic situation Spain (Scott, 2014). Zara is a perfect example of a fast-fashion chain that has trumped the traditional giants in the market (Reinartz et al., 2011).
Most traditional players in this fashion industry have employed a strategy where they have design teams tasked with creating products that they trust would trend for 12 months (Wei, 2013). The danger of attempting to forecast the fashion trend in this volatile industry by a period of one year appears like trying to finish the business. The industry often has trendy styles that may not last longer, and when a company adopts an approach of predicting what may happen in the next one year, then it becomes non-effective. Therefore, Zara’s innovative approach eradicates that risk and makes it successful (Sperber, 2016). In fact, Zara’s innovative business model incorporates stocking little but bringing up to date its collection more often. This is contrary to other brands that refresh the stock once a season.
Predominantly, Zara updates and replenishes the stocks biweekly. This innovative approach works well in two major ways. Firstly, it inspires consumers to come back to the retail stores more frequently (Zhenxiang, 2011). Secondly, it also infers that when a customer wants to purchase some products, they do it because they may have the fear that the product can run out of the store (Wei, 2013). In essence, the innovative strategy that has been adopted by the company is productive, and the results are reflected in the overall performance of the firm (Reinartz et al., 2011). The aspect of supply chain has turned to be one of the most frustrating things in the business. Sometimes it takes longer to obtain goods and in a business context like this where trend and fashion may sometimes last just a few months, then it infers that it can damage the business in a great deal. Zara’s short supply chain model has reduced this gap between distribution and selling, and this has seen the company get many customers thereby translating to huge profits (Reinartz et al., 2011).
4.0 Value of Customers
It is evident that Zara has employed innovation in many ways that they carry out their business. Innovation has seen many firms prosper not only in the fashion industry but also in other business contexts (Zhenxiang, 2011). Even though technology has been revolutionary in the business world, it cannot make companies attain huge steps if it is not supplemented with innovation. Thus, valuing customers in an innovative way is essential factor that can make a business realize huge returns (Reinartz et al., 2011).
Precisely, Zara is a company that has been able to create value to their customers in innovative ways, and it performs it in many ways. Firstly, it values customers by providing them with the latest and trendy fashions and designs (Wei, 2013). This has been attained since the company does not have to source their products miles away. The manufacturing plant is based in the home country, and this eliminates longer shipping orders (Wei, 2013). In addition, this advantage reduces the waiting time, and the customers can receive their products of choice for short periods. Customers then remain trendy and updated on new fashions in the shortest time possible (Reinartz et al., 2011). Zara has attained this aspect of reliability of new trends within the shortest time, and the company has created a robust customer loyalty, where one wants to be first to be seen wearing new-fashioned clothes. This is essential since it improves the frequency at which the customers pay a visit to the shop (Sperber, 2016). Zara has also been innovative in the way they price their clothes, and this has been differentiated based on the regions they operate (Zhenxiang, 2011). The company has mastered the environment where it operates, identified the pricing strategy that would fit that particular location, and finally executed the strategy that would see it generate more revenues to help make the company remain competitive in its operations. Customers are the bosses to any business and, therefore, much attention must be paid to them (Reinartz et al., 2011). The company must understand the dynamics of the market needs and efficient strategy should be employed to fit the situation.
Zara understands what its customers need and adjusts the clothing design using the suggestion offered by the same clients (Zhenxiang, 2011). For example, the price of clothing that Zara charges its customers tends to be cheaper in Europe and slightly more expensive in North America and some Asian nations because the customers from the following regions are capable of meeting the costs compared to Europe customers. This price strategy is not just used in the regions named above. Zara has various pricing policy in every nation that it operates and this has been effective (Reinartz et al., 2011). The difference in prices allows the company to attract customers across the countries it operates (Scott, 2014). Predominantly, this innovative approach has worked for Zara (Wei, 2013). The competitors have failed to create value for the customers, and this has made them lag behind in market share.
An effective customer relationship is another aspect that Zara has excelled. Zara’s customers are often happy with the steps taken by the company to understand and listen to their demand. A customer-oriented sales have been the best, and it ensures the products in the stores are the correct and trendy to make the purchasers happy (Zhenxiang, 2011). A happy customer will often want to shop in that particular store as frequent as possible since the company values the efforts.
5.0 E-commerce Model
Zara does not spend a lot of money in the advertising. In fact, the company does not set aside any budget on advisement. Instead, Zara spends vast sums of money in buying and locating their stores next to some luxurious and established brands (Zhenxiang, 2011). They term it an affordable luxury. The company tries to situate its stores in busy streets to reach its target market. Nonetheless, the company majors in the online market. The background research on the company reveals that it has a robust online influence (Sperber, 2016). For example, Zara has huge following on Facebook alone, and most of these customers describe the company in a positive way: the most innovative fashion retailers ever (Wei, 2013). The company e-commerce approach is similar to the store itself. It is essential since the shoppers can buy the products around the clock (Sperber, 2016). Zara expects that online retail wing to improve and grow considerably in Europe. The company launched an online website in Spain, Germany, and the United Kingdom. It then proceeded to the United States of America even though late but it is up and operational. Precisely, the company hopes to realize a 10 percent increase in the revenues generated from the online wing (Scott, 2014). The brand has even released an iPhone and iPad apps so that the consumers can shop via online platform more comfortable and in any time. This is a clear way to demonstrate that the company comprehends the technology-based society where communication and technology gadgets dominate. Online retailing has indeed shaped the landscape of business, and companies that employ it effectively have proved to be prosperous.
Many people, especially in the countries where Zara operates, are tech-oriented and thus, by doing an online business, the chances are that direct communication is attached to the consumers (Reinartz et al., 2011). The company uses the e-commerce platform innovatively to edge the competitors in the market. With determined competitors such as H&M, Zara has been able to edge them out in the e-commerce sector. Other firms in the fashion retail industry have been struggling to get customers, but Zara sees its sales explode every year (Zhenxiang, 2011). A clear understanding of clients’ demand is a key factor, and this is instrumental in the success of the business. Thus, the web has become one of the greatest innovative models (Scott, 2014).
Despite the fact that Zara is an affordable and leading company in the world of fashion, it has continually targeted young customer base that tends to be much sensitive to the trendy and latest fashion in the society (Scott, 2014). In fact, Zara majorly deals with children, women, and men’s’ wear. The company has clear strategy and customer target (Scott, 2014). This makes the brand have advantage over other competitors in the same market since they cannot define the target age groupings or even lifestyle and this makes Zara have huge target market and sells immensely. The aspects of marketing must be incorporated into the business to ensure that the customers value the business brand. The company effectively uses online marketing to increase the sales (Scott, 2014).
6.0 Conclusion
Managing innovation in business is essential to the growth and developments of the company. Zara’s innovative business model is the key to its success in the most competitive and crowded fashion and retail industry. Through using innovation in the right way, the company has been able to make huge profits than any other player in the market. The researches have also revealed that Zara has been able to employ innovation in the major areas such as supply chain, business model, e-commerce, and in customer trust to realize the success it has been enjoying.
7.0 References
Reinartz, W., Dellaert, B., Krafft, M., Kumar, V., & Varadarajan, R. (2011). Retailing innovations in a globalizing retail market environment. Journal of Retailing, 87, S53-S66.
Scott, Kemmis, D. (2014). Business innovation: Beyond technology. In Global Perspectives on Achieving Success in High and Low Cost Operating Environments (pp. 209-240). IGI Global.
Sperber, S. C. (2016). The luxury market in the fashion industry: A conceptual segmentation. In Handbook of Research on Global Fashion Management and Merchandising (pp. 156-185). IGI Global.
Wei, Z., & Zhou, L. (2013). E-commerce case study of fast fashion industry. Intelligence Computation and Evolutionary Computation (pp. 261-270). Springer Berlin Heidelberg.
Zhenxiang, W., & Lijie, Z. (2011). Case study of online retailing fast fashion industry. International Journal of e-Education, e-Business, e-Management and e-Learning, 1(3), 195.