The company's flagship brand, Inditex, is known for its old-fashioned approach to spotting trends.
But won't this hinder him in the era of Big Data?
The fashion hit of the summer was a polka dot dress from Zara, costing $69.90. It is worn with pleasure in various countries. It even got to the point that someone created an Instagram account in which he began to post photos of women wearing this dress in a variety of situations - on the street, in transport, at various events. All this suggests that Zara specialists know how to make sure that their brand is always on the crest of a fashionable wave.
As you know, Zara is famous for its short supply chain, which allows it to quickly update the entire range. It is argued that from the start of development to the receipt of a new product on sale, no more than 2 weeks are required, while competitors often require at least 6 months for this.
This speed has always been a strength of the brand. At the same time, Zara is known for its "old-fashioned" approach to doing business. Inditex is not particularly keen on using the latest technologies designed to keep up with the latest market trends. But won't this be a big problem for Zara in the very near future?
Zara business model faithfully serves her for more than 4 decades. But right now this approach must prove its strength and withstand the onslaught of competitors. Otherwise, Inditex will face serious losses. After all, it is Zara that brings the company up to 70% of income.
It all starts with an army of Zara store managers telling you what's selling best and what's trending. This information is reviewed at the Inditex head office, after which the designers sitting nearby are given all the necessary instructions. Approximately 57% of products are produced near the company's headquarters in Arteijo, northern Spain, and at facilities in Turkey, Portugal and Morocco nearby.
Proven over the years, simple and reliable system. But the world is becoming more and more complex and unpredictable. More and more companies are appearing in it, ready to challenge the famous Spanish brand (Zara was founded in 1975 by the Spanish magnate Amancio Ortega). So manufacturers like Irish Primark or the UK's Boohoo can also get caught up in the high speed of introducing new products. Actively working in this direction The Gapalthough the company still has some work to do.
Another risk is the growth in the number of online purchases. Most stores find that the high cost of fulfilling these sales reduces their profitability. However, the processes in Inditex are built in such a way that the company is actually protected from this side. Store managers who tell the head office they need three sleeved blouses and two pairs of sandals are like people placing the same order from home on their laptop. In fact, Inditex was a digital company even before such a trend appeared.
A lot of attention in the company is now paid to people holding key positions. Through regular management replacements, Inditex strives to make the most of its business model by continually attracting new blood.
However, in recent times, the Internet is literally filled with stories about companies that have made a dizzying rise using the latest technology. So, recently Stitch Fix Inc. and Revolve Group Inc. delighted investors with stories about the latest algorithms that allow them to choose products in the best way. You can constantly hear about the achievements made possible thanks to Big Data.
We also do not forget about social networks, which allow you to track the latest trends in the fashion world literally in real time. In theory, representatives of any company can take advantage of this opportunity.
Zara prefers to work "the old fashioned way". And although the brand does not shy away from the latest technology, much of its achievement is based on experience, on an intuitive understanding of what people want. But as sales growth has slowed in recent years, questions have begun to arise whether Inditex has lost its talent for fashion design? The company's operating margin has been declining over the past six years. The group is opening fewer large stores and plans to increase space in priority locations by 5-6% this year. It's the right strategy, but it means Inditex won't be able to rely on big store openings to boost revenue growth.
However, the polka dot dress mentioned above suggests that Zara still knows how to create unique proposals. So the technique used by her continues to work. Whether the brand will follow the newfangled trends, whether it will succumb to the temptation of high technology or continue to work in the old fashioned way, time will tell. It is highly likely that Inditex management will simply decide to improve on proven technology, rather than start experimenting with the latest advances in science and technology. Indeed, in the world of technology, as well as in the world of fashion, something is constantly changing. But proven solutions can serve perfectly for decades.