Describe how Zara uses technology to improve functional responsiveness to customer prospects, and at the same time to lessen costs using areas.
Zara's main strategy is to give a quick response to end consumer needs and anticipate consumer fads through it and recruiting. It operates on the basis of heavy backward vertical integration, working its way from the end consumer all the way back to the developing and syndication. It ensures an extremely restricted control of development through simple and effective IT systems as well as a high tech circulation centre (DC. ) It realizes cost marketing on its basic items for creation and also time optimization in conditions of speed to advertise of its fashion items making use of technology. Zara adapted to trends and variations across market segments by interacting regularly with the store professionals using the PDA and cellphone systems to get updates on customer feedback, fashion sense etc. The Point of Sale system (POS) in the store computers also provided valuable sales data to the syndication center which experienced a mobile traffic monitoring system that docked hanging clothing in appropriate pub coded areas. The many garments were given Stock Keeping Systems (SKU's) and orders were located from the hand-held computer systems in the stores twice a week or even more, to the circulation center where if particular items were in short supply, allocation decisions were made on the basis of historical sales levels and other things to consider. After the requests were approved, the warehouse granted lists for delivery to the stores. Zara design clubs tracked customer preferences and used sales information such as sales research, store tendencies and product life pattern information from the store managers, based on a ingestion information system to transfer repeat orders and new designs to interior/external suppliers and the DC. The design teams thereby bridged merchandising and the backend of the production process plus they developed the right products within the growing season to meet consumer requirements. Zara's product development clubs attended high fashion fares and exhibitions to translate the latest seasonal tendencies into the designs. Hence, a brilliant fast rate of operational responsiveness to customers was retained and the DC was more of a place to merchandise than simply for storage.
Technology also helped keep Zara's costs in order. By using the POS systems waiting for you personal computers, handheld PDA devices for store professionals and phone systems, exact information regarding orders required were transmitted to the DC. The SKU's ensured exactness in terms of which products needed to be produced and in what amounts and the DC's might use all this information and responses from the look clubs to make requests of the right level of each kind of product. Thus, inventory costs were suprisingly low, works were limited and development costs were managed at very manageable levels in spite of the large numbers of new items that are constantly produced. Zara's factories were also closely automated, customized by garment type and focused on the capital intense parts of the production process, like routine design and trimming as well as last finishing and inspection. A 'Just-in-time' system was installed in collaboration with Toyota in these factories and this helped in faster conclusion of work and managing of costs through continuous improvement techniques.
Management Information System technology takes on a crucial role in Zara's customer responsiveness and cost control actions.
From what the simple truth is in the case, does Zara price to market or on the basis of other factors?
Zara always used a market structured costs method. In each country, Zara always located more focus on the market prices (local costing levels) rather than alone costs to forecast prices of items specifically marketplaces. These forecasts were later overlaid on cost estimations that included all concerns such as distance, tariffs, and taxes and so forth to see if the potential market could achieve success in a year or two of opening the first store. Zara followed a different prices strategy in each country, for example, in Italy and Paris the focus was more quality focused and so the price of the same items were much higher, however, in Germany where individuals are price sensitive the things were lesser costed. This thought in the several marketing strategy adopted in each country. Zara managed its costs through its production and distribution processes and was positioned in many countries as high fashion at affordable prices which though were centrally established, lower than competitor prices for comparable products in its major marketplaces. Ratio margins still organized, this was possible as a result of direct efficiencies of short, vertically integrated source chain, reduced advertising costs, and markdown requirements. Thus Zara competed at affordable prices via a cost control strategy, concluding Porter's common strategy through differentiated products and broad segmentation.
Zara's customers in many countries bore the excess costs of delivering the items from Spain although prices were market based, for example, prices were 40% higher in Northern European countries and 70% higher in the Americas than in Spain. This may be seen on the garment's price tag that was an 'atlas' to the customers. These higher prices outside Spain influenced Zara's positioning abroad as high end instead of mid market range products to better validate the purchase price variations. Like in Mexico where the target consumer platform is narrow, it is geared towards the top and middle class that knows fashion. Moreover, as with European countries, the 'unnatural scarcity' that Zara creates of its products in its stores need the customers to pay the price and buy somewhat than hang on it out. Markdowns are very low for Zara in European countries and anywhere else, 15-20% of its sales when compared with 30-40% for its Western peers. Zara will not completely compete on basis of price as the usual Zara customer isn't that price very sensitive; instead, it competes on fashion and its quick response ability.
Zara (2010) has just launched an on-line, e-retail circulation service. For an clothing retailer what exactly are advantages and disadvantages of online syndication? Can Zara make it happen?
Inditex has long used the internet to market its various lines and commercial image which is also popular on Facebook, where they have 4. 5m followers. Its Smartphone application, launched about a year ago, has been downloaded by 2m people. Zara can quickly make its online e-retail syndication service work successfully. Familiarity with the Zara stores thus provides name recognition for the web retail site, and the blend of customer data compiled by the store and the online retail site (through Google Analytics, for example) may lead to substantial customized marketing efforts, using various stations. With Zara's coverage of a slim advertising budget, a web retail portal will add greatly in terms of branding and recognition.
Zara had initially decided not to sell clothes on the internet since the results rates were too much. However, by September 2010, Inditex put Zara top quality products online for its customers, waiting for online demand to generate. Customers can choose from the usual range of paying methods and choose either for a free store pick-up or paid-for postal delivery. The web return and exchange policy is equivalent to the store system, with consumers given 30 days to change their heads. iPhone and iPad applications that allowed purchasing will be available and online sales can help Zara reach potential clients who have no quick access to physical stores.
For an clothing retailer, the advantages of online distribution would be providing convenience to the consumers to buy from the comfort of their home, save well on travel time and costs and have quick access to the products. Customers will have 24 hour access to the shopping platform online and make better buying decisions through online chat and discussion. Experts' identify convenience as a 'fundamental target' related to online shopping (Schaupp & Belanger, 2005). This is relevant to 72% of online purchasers' claim that they would somewhat surf online than go to shop to achieve information in regards to a product (Lokken et al. , 2003). Costs on recruiting (Sellers, shop assistants, managers) can be kept by the shop and customers can make calm smart buy decisions without pressure from vendors. 'Infinite shelf space' will be accessible in that, products available at all store locations and around the world without physical boundaries, to the clients to choose from. Assessment shopping in terms of styles and prices will be easier on the web portal than in the store for the consumer.
Boston Consulting Group experts Evans and Wurster theorize that the three main strategic draws of online retail are reach, affiliation and richness. Reach is thought as "access and interconnection: how many customers a business can gain access to and how many products it can provide. " Furthermore, a retailer's selection of product offerings was usually limited by the size of its stores and the price of holding inventory while trusted online retailers as intermediaries between customers and suppliers need not necessarily have a listing by any means, only a catalog, often translucent to the customer. Affiliation identifies whose hobbies are displayed by the online retailer that can treat the products from other various distributors more objectively, providing more objective information and better product comparisons for their customers. Richness identifies "the depth and details of information, about products and about customers. " Evans and Wurster claim that traditional stores still are at an advantage to provide expert information about products to their customers, and they also are still in a much better position to assemble information about revenue and customer information and buying habits. Trusted online retailers are quickly getting up, however, gathering data about customer browsing behavior, purchasing record, and demographics. Online retailers are subsequently able to utilize this data to provide their customers with a completely personalized online shopping environment, including individualized webpages, targeted ads and offers, and specific product recommendations, something traditional merchants cannot effectively do at their retail outlets.
Some of the negatives of online retail would be the issue to gather trend information, product sales and customer recommendations. Zara could solution this by using analytics and customer feedback forms online that are user-friendly and attractive. The experience of shopping in a Zara store would be lost, but Zara would need to make its retail system very interactive and spellbinding. Zara's prime store locations are expensive of investment, and the introduction of online shopping could mean cannibalization of its retail store sales and a waste material of maintenance costs, this could put Zara into a fix. Customers will never be in a position to touch and try the merchandise like they can within an actual store, "[t]he odds of purchasing on the web decreases with raises in product risk" (Bhatnagar, Misra, & Rao, 20000, p. 100). Apparels in particular had negative rating in online shopping because of computer is difficult to feel and see the texture of color online that is incomparable to going to a shop. The biggest disadvantage itself would be the idea of 'infinite shelf space' that an online distribution provides, for Zara. Being truly a company that thrives on the creation of 'unnatural scarcity' of its products, the web distribution channel will have to be very carefully manipulated to ensure that customers buy the products with the same fervour as when they go to the store, understanding that it could not be accessible the next week. Zara can treatment this example by advertising only a limited number of models of each product online so customers will know if the numbers are dwindling and that they need to do something fast in order to acquire the merchandise just as in the case of the actual store.