Disclaimer: I am a hopeless shopaholic with a child-like enthusiasm for luxury fashion labels and even stronger budget management skills. Thank the latter, and partly self-control, I can see (sometimes) when it is not ok to spend an entire month’s paycheck on a Louis Vuitton purse. Budget sensitivity is also why retailers such as Zara have always been among my favorites. And, it wasn’t until diving into the intricacies of its operations, that I learned about a secret sauce of this Spanish born brand. Leveraging its ability to offer a high fashion look for a fraction of the luxury brand prices, Zara has built an international business empire and a cult-like following. Indeed, when I walk into a nicely organized Zara store, my inner Scrooge and a wild fashionista get lost in happiness. So how exactly does Zara trump its fierce fashion competition? The answer seems to fit with today’s trendy obsession: data analytics.
image source: www.gensler.com
The traditional fashion retailers refresh seasonal designs quarterly or bi-annually, which is often dictated by outsourced manufacturing and long production cycles. Contrary to this approach, Zara capitalizes on an efficient production cycle where trends get manufactured and appear in stores in 21 days or less. Zara has a group of 300+ designers who use inspiration from the catwalk to street trends to produce new designs daily. Moreover, the brand collects and constantly uses data in real-time for inventory management, customer and employee feedback, which allows the company to respond to consumer demand with exceptional speed.
Once it arrives at the store location, every article of clothing gets an SKU number (Stock Keeping Unit), and all Zara apparel has a microchip attached to it. This tracking mechanism makes it easier for sales associates to locate the desired item in the store or in neighboring store locations. The SKU information also tracks how many articles of clothing Zara sells daily. Combined with comprehensive feedback from local store managers and employees, this data paints a rich picture of consumer demand. Data collected from SKU numbers also enable Zara’s designers to produce more of what the customer actually wants. As a result of using data analytics to identify consumer preferences, Zara keeps its stock of inventory rather low, avoiding the risk of end of the season “dead” supply other fashion brands often get stuck with.
Designing and producing new looks continuously throughout the season, drawing inspiration from trends, actually listening to customer feedback, tracking and monitoring sales numbers in real-time, Zara wins customer loyalty and trumps conversion game with very little traditional advertisement investment. Once again, data analytics makes this possible.
image source: www.zara.com
Furthermore, moving and refreshing store merchandise rather quickly creates a sense of urgency and drives demand. An average Zara boutique gets its supply replenished every 11 days! In other words, Zara wants you to buy it now because it may not be available tomorrow (my case to the “T”).
Utilizing big data in every step of production, from design inception to its sale, Zara was able to revolutionize the world of the fashion industry and gave way to the term “fast-fashion.” Data inspired designs reflecting the most current trends are what Zara delivers consistently season after season, year after year. Considering most of its clothing is also reasonably priced, this brand’s ubiquitous success does not seem surprising!