Zara Farewell To The Golden Age, How To Break Through In The Fast Fashion Winter?

Zara performance growth slowed sharply.

In today's fast fashion brand shops, such as stormy weather is coming, can Zara support?

In the first three quarters of 2018, the income of Zara parent Inditex group increased from 3% to 18 billion 400 million euros, compared with 10% in 2017.

Net profit increased by 4% to 2 billion 400 million euros, up from 6% in 2017.

As a matter of fact, Inditex's weak performance has long been reported, and gross profit has declined since 2015.

Affected by exchange rate and store rentals, net profit growth in the first half of 2018 was only 3%, which was 11.5% in 2017.

In the December 2018 conference call, analysts were generally concerned about why Zara did not participate in the promotion.

Every year from September to December is the period of discount sales promotion, but Zara rarely participates in 2018.

CEOPablo Isla said the discount is not due to confidence in product quality, business model and execution capability.

Zara is the backbone of Inditex group, and its revenue is more than 2/3.

At present, Inditex group has brand Bershka, Massimo Dutti, ZaraHome, Oysho and other brands, and has opened 7442 stores in 96 countries and regions in the world, of which more than 2000 Zara stores.

On the surface, there is a conflict between the weak Zara performance and the self-confidence of the management of the company.

In fact, Zara is in pition. As the leader of fast fashion brand, how to break through the existing predicament is of reference to the whole industry.

"Fast" does not work for electric providers.

"Fast" was once a must kill skill for Zara. Zara's rapid design, production and outsourcing business model has always been the benchmark of the industry. It is the driving force for the rapid expansion of the Spanish apparel brand and the status of global leaders.

Zara headquarters has a design team of 300 people who design products according to the current trend.

After designing the manuscript, make the sample, and let the model try it on to decide whether it is mass production.

In some production lines, the machine is responsible for tailoring. For thinner cloth, 200 pieces can be cut at a time.

After the cutting is completed, the workers are sent to the external factories for splicing and sewing.

All sewing and splicing works of Zara are completed by outsourcing factories.

After the sewing work is completed, the basic products will be sent to the distribution center uniformly. The front fashion products will be sent back to Zara headquarters for ironing and testing.

In terms of electricity providers, Zara is the latecomer.

In December 2018, Forbes, partner of OC&C management consulting company, said in an interview with "Forbes" that only 10% of Zara's sales came from online, while most competitors had 20% to 30%.

In fact, Zara's electricity revenue jumped by 41% in 2017 to 10%.

Even so, Inditex has great ambitions in the electricity business. It plans to expand the business to 202 global markets by 2020, covering almost all markets.

Fast fashion brands do business with natural difficulties, from design to shelf only 2 to 4 weeks, to continue to maintain such a speed on the electricity supplier, great challenges.

Nokes said that Zara needs to improve its supply chain and product design to adapt to the business of e-commerce.

"Optimizing online customer experience will bring challenges to operation, product classification should be clear, website maintenance should be close, delivery of end to end need to use physical stores to reduce the number of delivery of electricity providers."

The challenge also comes from rising competitors.

AnneCritchlow, an analyst at Societe Generale, once said that parity retailers are most likely to be overturned by online brands.

For example, the online retail brand Asos in the UK has a good performance in terms of cost performance, new speed and fast delivery.

Its App built-in image recognition search function, users can upload photos of products, you can search for similar products.

AndrewRoss, an analyst at Barclays Bank, said: "pure electric companies can freely use the most efficient inventory management system recently built up by technology, but offline fast fashion retailers tend to experience the cumbersome process of online operation on the existing infrastructure."

Weak marketing

As for the use of social networking, fast fashion brands can not compete with emerging brands.

The domestic Amoy brands can not compare with Zara in terms of supply chain capability, but they are well versed in interaction with fans and improving stickiness.

Amoy brands communicate with fans through social media before designing products, which helps brands understand consumers and predict sales volume. Meanwhile, fans participate in product design and enhance brand identity.

Zara has realized the importance of customer focus and is replacing the traditional "4P" marketing theory with "4E" theory.

4E includes Experience (experience), Exchange (exchange), Evangelism (sermon) and Every Place (each location), corresponding to Product (products), Price (price), Promotion (promotion) and Place (location) in 4P respectively.

The difference between the two theories is that 4E takes consumers as the center and starting point of all marketing activities, while 4P theory places the company and brand at the core.

Shelley E.Kohan, assistant professor at New York Fashion Technology Institute, analyzes the importance of Zara in providing quality experience to customers, exchanging value and information with customers, spreading through customers, and staying with customers at any place.

Sales of fast fashion retail brands usually consist of 80% of loyal customers.

These loyal customers are not very sensitive to price.

Kohan believes that if Zara knows how to maintain customer loyalty, it can bring higher profit margins and serve customers who are good at brand value.

According to Kohan, Zara's loyal customers enter the shop 6 times a year on average, which is much higher than that of the fast fashion brands of 2 to 3.

"Today's consumers are no longer satisfied with spending money on products. They look forward to building a deeper connection with the brand."

Kohan said, "two-way communication between consumers and Zara can continue to improve product and service levels."

Physical stores need pformation

There is a voice that Zara should put its main business in supply chain and entity store.

Cheng Weixiong, general manager of Shanghai Liang habitat Brand Management Co., Ltd., Zara is still focusing on the responsiveness of the supply chain: fast imitation and fast growth.

The focus of online and offline access is still in the physical store, "using new technology and new tools to make the store experience better", pforming the online as the traffic entry.

Zara has introduced virtual reality technology into 120 shops around the world to pform the store.

Consumers choose products through mobile phones, model them on trial, and then shoot through shop sensors in AR shopping windows, which is intended to attract more young customers to shop.

RFID technology has also been applied to all products of Zara.

When the product is packed and boxed, RFID will be placed on the box to track the product from the distribution center to the consumer purchase process.

RFID is an important step in digitization. Zara can accurately understand inventory and sales.

In addition to Zara, Inditex has begun to try digital sales strategy on its other platforms. In Berkshka, consumers can make an appointment to send the selected products to the fitting room by phone.

Shopping in stores is like finding treasure, finding hidden jewels quickly, and experiencing the better.