Zara - the world’s largest clothing retailer by sales – reported a 12 percent surge in net profits to $2.68 billion for the fiscal year ending January 31. How did Zara get so successful?
Zara’s success mainly draws on its’ short lead times in fashion. Unlike other retail stores, Zara can identify trends and produce these ‘trendy’ clothes in their stores within 30 days. This allows them to capture their consumers while their apparels are still in fashion, and minimizes the risk of their clothes being unsellable.
Zara also limits its production quantities; thus creating an artificial scarcity for their apparels. This makes their apparels much more desirable. This artificial scarcity also ensures that minimal amounts of clothes are sold at the sale price- maximizing their sales margin.
Zara’s success also draws on its’ ownership and control of production. Unlike other large retail stores, they do not outsource their production to low cost Asian countries. Instead, they keep their production close to their headquarters in Spain, such that they would be able to have a high level of control on both quality and quantity. This production in Europe draws many youngsters in Asia, where they would identify European production to be as of high quality.
All these closely linked processes result in a highly efficient manner which clothes are produced and eventually presented in the Zara retail shops.
However, today, we can look into another aspect which Zara has not been very well-known for: Online shopping. With online shopping becoming more relevant in many countries, especially Asia (Eg. Singapore, Taiwan, HongKong), will Zara be able to obtain a piece of that market? Online shopping allows many individuals to purchase their clothing, books, or even groceries amidst their hectic schedules. It may be that online shopping will soon become a way of life for many – which is why many corporations have hopped onto this bandwagon, hoping to reach out to those customers.
Looking at the actual Zara website, people from Asian countries would be unable to purchase these clothing directly from the website itself- instead, the website would only load a browsing catalog, allowing customers only to look, and not derive the thrill of placing the apparel into their virtual basket cart. They would only be able to pinpoint the pieces that they would like to try on in the physical stores, which, sadly, may not actually exist in some countries. With the large market in Asia, the ability of being able to purchase directly would definitely increase the sales of Zara. We can take the successful example of ASOS, which after identifying their large customer base in asian countries, offer free shipping to worldwide countries. They know that by doing this, they would be able to capture as many customers as possible.
Zara, however, does offer online shopping for their European counterparts. In European countries, there is indeed online shopping available. It is not to say that Zara should immediately join the likes of ASOS and Urban Outfitters and immediately offer online shopping to all countries. It is but a humble suggestion that they could take infant steps by allowing Asian customers to reserve pieces online for trying in their physical outlets.
We cannot deny that the world is entering the digital stage, and that many routines are now reliant on digital processes. Online shopping is only one of the many major changes in the 21st century. Physical retail stores cannot afford to lose out to online stores as people tend to spend more of their money online. If Zara wishes to continue its’ streak of being the largest clothing retailer by sales, it cannot afford to avoid this trend. Like what many say, ‘If you can’t beat them, join them.’ That is exactly what Zara should do.