ZARA, And Why Is It Necessary To Change?

At present, garment enterprises are undergoing a period of transformation from seller's market to buyer's market. How to deal with the challenges brought by them?

Han Yongsheng, a professor of the Chinese Academy of Sciences and a clothing supply chain management expert, put forward that we should pay attention to the transformation of supply chain. When clothing enterprises start with customer value, the origin of the entire supply chain will change. The storefront with customers will be the starting point of the new supply chain mode, and thus welcome the transformation derived from it. This is the industry challenge that enterprises must overcome in the next 3~5 years.

　 01 why must we change?

Traditional clothing enterprises, design and planning are based on the order meeting. In the industry, enterprise planning has developed a lot of good products, and it is indeed welcomed by ordering businesses.

But in fact, after ordering these orders, there is no shelf concept. They never consider where the product should be placed in the store, which leads to thousands of shops with thousands of stores, and the communication between goods and consumers is ineffective.

In fact, a commodity from clothing enterprises to customers, through the order providers, distributors and other links, but whether to meet customer needs, the source of this supply chain is difficult to perceive. This is a typical characteristic of the seller's market, just selling.

Now, the turning point of change is coming. About 2011 to 2017, market supply and demand has changed.

Before that, the industry has been in the 2 era of industry. The clothing market is a seller's market. What clothing companies produce, customers buy.

The status quo of the market determines the structure of the bureaucracy of the garment enterprises, from the design director, the purchasing director, the production director, to the sales director. They are responsible for one area, and the understanding of customer needs is fragmented. The supply mode of all garment design, purchase, wholesale, and channel stores are all extensive, and what products to sell will be sold; there is no interaction between them, nor is it a community of interests.

After that, the new world, the 4 era of industry, has arrived. The seller market becomes a buyer's market and what the customer needs, what clothing enterprises should provide. Studying customer needs is the beginning of adapting to this change.

In the industry, the best mode of supply chain is the "drinking model", how much to drink, and the last cheers - zero (inventory). This requires the supply chain to rapidly and rapidly respond to products in a weekly unit. But at present, the supply chain practice of most garment enterprises is the "order model". At the very beginning, a table is served well, some dishes are too many people to eat, there is a shortage, others are not eaten, and there is a backlog.

Therefore, the 2 era and the 4 age are two completely different worlds, but now it seems that half of the garment enterprises in China can not turn around, and then 2/3 will ruin their brands in keeping with the old.

A company wants to be long-lived and has long life. There are two necessary conditions: first, to ensure the cash stability of enterprises; second, enterprises must grow in order to become evergreen.

In the past, the growth of garment enterprises was promoted by channels, and more stores could grow faster. Can we do that now? Clothing companies need cash profits, passenger flow is not available, shops will only lead to increased costs, profits fell sharply.

But at the moment, most garment enterprises also think that the market is growing. The annual growth is the growth, growth and growth of sales. Today's market is basically cold. Enterprises can no longer blindly pursue sales targets.

The world has changed. Under the new situation, we must think about how to make the capital flow high. How to make inventory turnover fastest? How can we get the highest selling price? How can we minimize our risk and make a profit?

02 what to change: comparison of garment enterprises at home and abroad

The biggest cost of clothing industry today is inventory, which is the loss of product discount and the loss of surplus inventory. But domestic enterprises have always believed that the more stock, the better, the more sales opportunities the better.

Here is a case where a famous brand of women's shoes sold for 8 billion 500 million yuan, but 4 years ago, the company suffered losses and sales of single products dropped to 3 billion 600 million. The whole profit and inventory have deteriorated seriously, and the inventory turnover has reached more than 200 days. But what is even more frightening is the selling out rate. The goods sold only reach 60%~70%, and if the sales rate is less than 80%, the risk will be greater.

Another case is a dark horse brand that has developed rapidly in recent years. Sales of other brands have dropped, and it has grown rapidly, with sales close to 20 billion. Profits were good, but inventories increased sharply and inventory turnover lasted for more than 300 days.

As a popular brand, the brand is characterized by low gross profit margin, high performance price ratio, and 3.5 times the rate of traditional brand, which is 7 times, which brings great passenger flow and conversion rate. However, the supply chain of this enterprise is not good, the sales rate is only about 65%, and a large number of suppliers are dragged to death.

Therefore, with the customer value and no efficient supply chain operation, enterprises can not do long. There is also a listed company, futures orders up to 95%, the order will be regarded as the "gambling club", the gambling list as a valid order, requiring timely procurement, production and delivery.

As a result, the total sale price of goods is only 30%, plus only 60% of the discount, leaving 40% of the stock left for the next year. Many clothing listed companies lose 50% of their profits every year, so no one will take responsibility for such a big loss. No one will care about it.

Therefore, inventory has become the biggest cost of today's clothing enterprises. But where does the enterprise focus? Buy it a little cheaper and make it cheaper. The financial concern is who you eat every day and how much you eat. And tens of millions of billions of inventory input, pen to wave the whole line of water. Typical of sesame and lost watermelon.

So, is there any good way to learn from it?

Let's take a look at ZARA. Its inventory turnover days remain unchanged, and turnover is only more than 80 days at 80 billion annual sales. When sales reach 200 billion, the inventory will remain more than 80 days, that is, 3 months of liquidity to complete all inventory operations, and ZARA accounts receivable for only more than 10 days.

What is Ping efficiency? Our traditional method is the sales volume per unit area, but the international brand's efficiency is the gross profit margin excluding the store operation cost, and this method is used to evaluate the operation efficiency of the store.

Only when the shops are profitable and the rate of return on investment is not risk-free can they expand their stores. This requires quick turnover of inventory and ensuring the profitability of the stores. Based on this, we can achieve steady growth and enterprises can become everlasting.

Look at UNIQLO, its inventory is more than ZARA, 100 days and a few days, sales are rising all the way, this is also Ping effect, with a return on investment of more than 20%.

Nike, its inventory is different from ZARA and UNIQLO, the latter is direct selling, stock is in its own hands, Nike is distributed, its supply chain control is slightly weaker.

But in the management of these three stores, stock is a dead line and cannot exceed a certain quota. Once it is over, no production is allowed, no purchase is allowed.

Finally, the proportion of finished products, raw materials, OTB (Open-to-Buy, management method of large chain retail enterprises: procurement quota scheme) of apparel enterprises at home and abroad is compared.

ZARA: in the whole quarter, OTB of goods purchased, 25% of finished products, 50% of raw materials and 25% of cash outflow, 90% of the total sold out price, 10% of discount sales, 100% of sales per quarter. UNIQLO: 30% of finished products, 70% of raw materials, and then weekly production. The selling price is 80%, the discount rate is 15%, and only 5% of the products are sold. Domestic enterprises: 95% purchase of finished products, about 5% replenishment. The selling rate of the positive price is 30%, the discount rate is 30%, and the remaining 30% will be sold again next year.

Why are there many problems in the growth of many clothing brands in China? Why is there no traffic in domestic garment enterprises? Why did ZARA and UNIQLO enter the shopping mall and their competitors died?

Look at the price performance ratio, ZARA's increase rate is 2.65 times, UNIQLO's increase rate is 2.5 times, and we grant to channel agents 2.8 times, store retail tag price 6~8 times, ZARA/ UNIQLO's retail tag price is similar to our clothing brand wholesale price, then our brand retail price will still be competitive? So domestic clothing enterprises where there will be traffic.

Are customers stupid? Are they willing to pay more for products that are not cost-effective? What is the value of customers? Why are we far from international brands, both in terms of stability and growth?

This is caused by the wholesale mode of traditional clothing brand. How long can this wholesale mode last? At present, most of our clothing brands are wholesale models. If the pattern remains unchanged, 3~5 years later, I really don't know how many of them can survive.

03 what is the change? How did it change?

Why is the growth and stability of traditional clothing brand enterprises (inventory, receivables) a problem? This requires us to consider second questions: assessment. Because people only do what you do.

What does domestic clothing enterprises assess? The first is sales and profits; the second is product cost and operation cost; the third is the rate of selling out.

What are the leading brands in the world assessing? The first is inventory turnover (including sold out), and the second is Ping efficiency. To expand the store, we must maintain a flat efficiency greater than a certain value.

From the assessment index, international leading brand enterprises first establish stable competitiveness, and then make rapid growth on the basis of stability. Many domestic brand enterprises blindly pursue growth.

Brand enterprises must be stronger and bigger. "Strong" refers to the ability of risk control. The key is cash flow speed, high turnover of inventory and receivables. The fast supply chain with full value flexibility for shops is the foundation for the development of a brand enterprise. Without good foundation, how can we build 100 billion, 100 billion brand?

The supply chain has 3 main factors: quality, cost and delivery. But often the conflict between cost and quality, cost and delivery conflict, and enterprise cost priority, so the quality and delivery time can not be guaranteed. This is our mistake in cost evaluation. One sidedly considers procurement production cost as commodity cost.

The cost of real goods depends on the cost of selling at full price and total sales. The essence of supply chain management is liquidity and the speed of capital flow. With the speed of flow, the quality will be guaranteed, and the turnover rate and the selling price of positive price can be controlled at a speed, so that the cost of the entire supply chain can be ensured.

Flexible supply chain will play an important role in this process. Many domestic enterprises are now building intelligent manufacturing, but the direction of some intelligent production is wrong, in pursuit of production efficiency. The so-called flexible fast supply chain, the production line should be multi variety, small batch flexible rapid production.

There is little time left for us to change the time window. Now we must change immediately, and must be a revolution initiated by the enterprise. The strategy is to build up the competitiveness of high inventory turnover first and then to Gaoping's effective competitiveness.

Today's market is a stock market. The green hills are not afraid of firewood. Otherwise, 3 or 5 years later, you will never hear your brand again.

For enterprises, change is first driven by the boss and the desire is the same. At the same time, the enterprise needs to start a new business at once, break down the functional departments, set up a new vertical integration department, open up all links of planning, design, procurement, production and sales, and truly establish a hypothetical business model that takes the target customers as the center, stores as the starting point, and Zhou as the unit to promote a brand new start.