What Is The Secret Of Success Of Fast Fashion Brand ZARA?

Looking at this year's global clothing retail market, American Apparel, once popular today, has submitted second bankruptcy applications in November this year.

The group is also gradually closing its bad stores, and its Banana Republic withdrew from the UK market in October, leaving only online business.

Profits also began to slide.

By comparison,

Beating all the competitors again, according to the website data, Inditex sales rose by 11.1% in the first half of this year to 10 billion 470 million euros and about 77 billion 830 million yuan, while profits recorded a 7.5% increase of 1 billion 260 million euros to about 9 billion 360 million yuan.

The fast fashion brand Zara has been established for more than 40 years, and the founder Amancio Ortega has once surpassed Microsoft's Bill Gates to become the world's richest person. The secret of Zara's success has been interpreted by a large number of media. However, recent research and analysis points out that the success of the Inditex group of Zara parent company is mainly due to the flat management structure and the importance of big data.

Compared with other high street fashion brands, Zara's corporate culture is not so easily replicated as the latest fashion trend. This is also the key to Inditex's continuous success.

Pablo Isla, the chief executive of the best CEO third group in Harvard Business Review, is not surprised by the trend of growth. He admits: "we can respond quickly to the latest data and market environment, adjust our strategy, and design teams have a high degree of control over the fashion trend of products, and the performance will not be affected by the downturn in the environment."

Zara brand design headquarters is the core of the whole brand, composed of 350 designers. Unlike its competitors Gap, H&M and Primark, Zara has no chief designer, and each designer has autonomy. The product style will ultimately be decided by the latest sales data from different regions. Therefore, the design department has an unparalleled independence, and two times a week, providing new products flexibly to the store according to the trend of the market.

Designers will analyze products that are salable and unmarketable based on daily feedback sales data, which will directly affect the style of products in the coming weeks.

In addition, Inditex group's products are about 2/3 produced in short term delivery, which means that Zara can flexibly design and produce according to market demand and avoid unnecessary inventory, so Inditex recorded the lowest inventory in the industry this year.

Richard Hyman, an independent analyst in London, points out that Zara's production mode has broken the traditional rules of the fashion industry and achieved the real sense of season free fashion.

Andy Hughes, a retail analyst at UBS, said that with the steady growth of Zara's performance, the focus of development has gradually shifted to internal management.

Pablo Isla revealed that group sales almost doubled since 2009. According to fashion headline data, Inditex Group recorded 20 billion 900 million euros in sales last year, and 7100 stores in 93 countries.

Other brands such as Bershka, Massimo Dutti and Pull&Bear are also growing, but Zara sales still account for 2/3 in total sales.

As the pace of global expansion of Zara is slowing down, Pablo Isla disclosure group will focus on developing flagship stores and online businesses to enhance consumers' shopping experience.

In the face of highly valued supply chain labor ethics, Pablo Isla refused to respond positively. He said people did not see the time and details behind the "fast" of fast fashion.

He stressed that the speed of Zara is not entirely dependent on the speed of production. Brand 60% comes from the supply chain of Spain, Portugal and Morocco. Compared with other brands in Asia, the pport time is greatly reduced. When competitors' new products are still floating in the Pacific Ocean, Zara's new products have already been sent to stores for sale.

Pablo Isla believes that the success of Zara also benefits from recognition in the minds of consumers. Compared to 4% of the annual income of H&M, Zara has no other advertising budget besides social media marketing activities.

For consumers, the product catalog updated two times a week is the best promotion.

According to the report, more than 50% of Zara's products are remixed and redesigned, so that products can keep up with the fast changing tastes of Chinese consumers.

At this point, the "quick response" mode shows its advantages, that is, it can react in real time to consumers' changing tastes, and many other Chinese consumer company can never do that.

This unique mode of operation also enables them to push the latest version of Paris, Milan and other low-level editions to the Chinese market in a matter of weeks.

However, Zara is not a worry in China. Some analysts have pointed out that Zara is facing a threat in the Chinese market, and the mainstream view may not be noticed yet.

First of all, China's e-commerce and O2O (online to offline) may weaken the traditional advantage of this fast fashion giant.

Fashion retailers are the primary source of change in e-commerce and online to offline activities in China.

Firstly, the way of contact with consumers is changing.

Consumption is no longer just a walk into a shopping mall, and then into a good store, and now consumption experience has become a combination of shopping malls and smart phones and online ecosystem.

What will be the eventual evolution of this offline and online blending mode is yet to be seen, but China's retail industry is one of its biggest goals.

Besides, clothing supply chain has been affected by new technologies and may even change.

This brings the question: can the fast fashion global operation mode be reformed through technology? Can Chinese companies acquire the traditional advantage of fast fashion giants through technology? From the data of Tmall double 11 this year, we can see that Zara has no advantage and is left behind by its competitors and some domestic brands.

{page_break}, in addition, it is not clear from the data that Zara can get the same profit in China. In particular, it is not sure that it can also see the increase of customers' arrival in Chinese companies, which leads to the rise of brand value.

China's fashion cycle has been very fast. Apparel brands actually carry out most textile production in China. Therefore, it is not clear whether Zara can maintain a high income and total profit margin in China, and the total profit margin in other parts of the world is generally 60%.

Another point of view is that Spain's Inditex group is too slow in management and Zara has been doing well in Spain for a long time, which can lead to complacency.

It may not be able to adapt to the fierce competition in the Chinese market.

A disturbing fact: until 2010, there were no online stores in Zara. At that time, Gap opened online stores for 10 years. Until 2014, Zara opened online shops in Tmall.

Zara's inventory and logistics management are first-class, but the reaction rate to e-commerce is incredibly slow. That's why the e-commerce /O2O crisis mentioned above is likely to happen.

What is more noteworthy is that according to data monitoring, the price of clothes sold by Zara in the Chinese market has fallen by 10% to 15% since this year. This may reflect from the side that the group has not reached the expected rate of growth in China, and has begun to feel the fierce competition between the industry and the domestic clothing brands.