The one thing in life which I dread more than shopping for clothes is actually working at a clothing retailer. As part of the stock team, I slaved away at 6 in the morning by folding hundreds of sweaters in virtually every color imaginable. After the store opened at 9AM, I’d sort through mountains of extra-large shirts in hopes of finding the last small in our inventory (or so the computer told me…) Finally, as my shift neared an end at 2PM, I folded the poofy pink button-up shirt that’s been making its way around our clearance section for the 20th time, knowing that no one in their right minds would ever decide to buy it.
In an era where retailers focus on outsourcing to cut costs, international retailer Zara has instead targeted information technology as its means of increasing their bottom line. Zara is known for its affordable yet trendy fashion, which it often imitates from other clothing companies. While this method might be brand suicide for some retailers, Zara has made it its competitive advantage (with the help of information technology, of course). Here are some ways that Zara has used IT to improve its business operations:
As mentioned earlier, Zara employs many tactics in order to stay on top of trends. Traditional retailers design a couple sets of looks for a season, and wait a few months before moving onto the next season’s “looks”. Zara, on the other hand, is constantly looking at new fashion trends to innovate on and produce. To do so, store managers are all equipped with tablets to constantly update the production and design teams with changes in consumer demand.
Low barriers to contact between managers and designers, coupled with real-time sales data, allows Zara to adapt to the ephemeral tastes of fashionistas everywhere. CEO Jose Castellano explains that “the technology we use is mainly information technology and the communication between the shop managers and the design team here in the headquarters. Designers are in daily contact with store managers, discussing which items are most in demand and which aren’t.”
Not only is Zara able to stay current in terms of fashion, their store layouts are another aspect which is in constant flux to meet the demands of their customers. Given the company’s dexterity in understanding consumer demand, their store inventories are stretched thin at any point in time. Instead of losing sales, the short supply creates a sense of exclusivity. Frequent shopper and student Elisabeth Cueto points out that, “If you see something and don’t buy it, you can forget about coming back for it because it will be gone.”
Just in Time
Naturally, a flexible and innovative sales team requires an innovative supply chain. Zara’s lean supply chain is a result of its efficient use of information technology to push new products out. Instead of outsourcing its manufacturing process, Zara handles 100% of its own design and production. In a business environment where most retailers relinquish control over manufacturing, Jeffrey Ballinger, researcher at Harvard University, heralds Zara’s innovative methods, “it’s really quite exciting to see a new model like this — one that actually breaks all the rules of the apparel industry as it has developed over the last two decades: contract out all production and spend obscene amounts to advertise your brand.”
So how does this all work? First, designers converse with store managers on a daily basis to gain up-to-date insights on fashion trends. The designers, located in A Coruna, Spain, then pick and cut cloth which will be sent to Galicia, Spain to be dyed and sewn. During production, Zara employs optical reading devices to account for articles of clothing instead of workers, reducing the variable costs of production. Finally, the clothing makes a return trip back to A Coruna, where finishing touches are made, before shipping out twice a week to Zara’s international store locations. This streamlined process allows Zara to design, produce, and distribute new looks in three months, whereas other competitors will take over nine months.
Embrace the Change
All in all, low inventory costs means less capital wasted while inventory hibernates on stock shelves in the back room. In Zara’s case, a slim inventory creates a sense of exclusivity, which increases demand for its products. These slight innovations could not have existed without the use of information technology.
Here’s to ditching the outdated walkie-talkies all retail representatives use to complain about customers and the incorporation of technology that makes the shopping experience for everyone just a bit better.