Updated on June 8 , 2015
In the world of fast fashion, quality is no longer an issue, because you need clothes to last just until the next trend comes along.
Meet Amancio Ortega: the fast mover on Forbes billionaires list. Ortega, 79, is the 2nd richest man in the world after Bill Gates. His net worth of $71.5 billion has surpassed Warren Buffett in early 2013. He is the founding chairman of Inditex SA, best known for its retail store giant, Zara.
Zara’s secret to success: fashionably fast
Zara has cracked the formula to fashion retail success: fast fashion.
According to a study by Cambridge University, people bought around 30% more clothes in 2006 than they did in 2002. Women bought around four times more clothes than they did in 1980, and they also dispose more clothes each year.
That style is so last month
Fashion trends change as quickly as tech trends, courtesy of real time online coverage of street style and fashion weeks. Fashion labels use to produce two main collections per year, and what used to be six month long fashion trend cycle has been slashed down to as short as three weeks.
As clothing brands compete for larger market share, they introduce more affordable clothing line at relatively cheaper prices and more collections produced in a year to respond to the changing consumer behavior. This leads to a new fashion retail revolution – fast fashion.
What is fast fashion?
The term fast fashion is largely associated with disposable clothing as retailers produce mass designer products at relatively affordable prices.
Fast fashion is basically producing affordable clothes based on catwalk designs and sell it as fast as possible in order to respond to the latest fashion trends.
This means fast manufacturing, fast shipment, and fast customer purchase. This model was developed around late 1990s, and Zara has been at the top of this revolution along with other large retailers such as H&M and Topshop.
Zara’s fast fashion philosophy: process innovation dominates the global economy
You don’t have to come up with a new product to be the biggest global fashion retailer. You just need to invent a new process.
How to be a successful fashion retailer for dummies
1. Produce wearable clothes that people will buy
2. Sell them
3. Repeat from step one.
Sounds easy, right?
Not so much. Again, fashion trends change quickly, and it is hard to distinguish yourself from your competitors. Advertising and world-class designers cost a lot of money, and these are the two essential factors if you want to stand out from your competitors.
Good artists copy, great artists steal
“Only those with no memory insist on their originality.” – Coco Chanel
Rather than relying on designers, Zara subtly copies their designs and modifies them based on Zara’s network of global customer feedbacks. Zara’s headquarter collects feedbacks from shoppers from all around the world and sends these comments to manufacturers to be incorporated into the next line of production.
Zara’s approach to customer feedbacks is very admirable. They monitor shoppers’ reactions based on what they buy and what they do not buy, as well as what shoppers are saying to their sales clerks such as “I love this red pants” or “I hate zippers at the back”.
Store managers report these feedbacks to the HQ where it will be communicated to their in house designers. They will come up with new designs based on these feedbacks and quickly ship them to stores all over the world.
The speeding bullet: Zara’s supply chain secret
Zara invested massively in their IT infrastructure that when I was studying, Zara’s IT infrastructure and supply chain case studies came up several times as reading materials.
Zara has cracked the formula needed to differentiate itself from competitors by performing their supply chain activities differently that it gives them competitive advantages over their competitors. Instead of the conventional 5-7 months supply chain response, they slashed it down to 2 months.
Instead of procuring fabrics after design and development, Zara turned this process the other way around. Designs are based on available fabrics and materials, which eliminates the time consuming process of fabric formation.
Smaller and more frequent shipments are also keys to keep inventories fresh and unique. A shipment might only contain around four or five shirts or pants in each style for each store, but store managers can request more if there is demand.
Clothes hit the stores less than 3 weeks after being designed, while most apparel production time can vary from 30 to 60 days. Garments are shipped to retail stores and the inventories change so quickly that shoppers are tempted with a “buy now or never” choice each time they come in to the store.
If shoppers in Tokyo, New York, and Singapore respond well to maroon skinny jeans, Zara will deliver more maroon skinny jeans, or a variation of skinny jeans, or maroon colored clothing to stores within weeks. Inventories move so quickly that the company’s higher labor costs can be offset by fast turnaround with way less inventory in the warehouse.
So successful is the philosophy of fast fashion. Instead of waiting to buy that gorgeous blouse next month, a customer who tried it on will most likely purchase it now, because it might be gone next week or even tomorrow. Masoud Golsorkhi, the editor of Tank magazine in London, on how Inditex changed consumer behavior:
“When you went to Gucci or Chanel in October, you knew the chances were good that clothes would still be there in February. With Zara, you know that if you don’t buy it, right then and there, within 11 days the entire stock will change. You buy it now or never. And because the prices are so low, you buy it now.”
Why Zara doesn’t do advertising
Have you ever came across a flashy Zara advertisement on magazines, newspapers, online newspapers, anywhere?
Thought so. Compared to other major fashion retailers, Zara only spent around 0.3 percent of sales on advertising, and these are typically new store opening announcements in local newspapers or magazines. Even their designers are completely anonymous, and they hardly own a marketing department.
Their advertising focus is on real estate, the company invests mainly in their store locations.
“The high street is really divided according to brand value,” says Masoud Golsorkhi, “Prada wants to be next to Gucci, Gucci wants to be next to Prada. The retail strategy for luxury brands is to try to keep as far away from the likes of Zara. Zara’s strategy is to get as close to them as possible.”
The fast fashion revolution
In the competitive environment of fashion retail, Zara treats customer feedbacks and demands as a center focus of their product development and supply chain as the heart of the fast fashion revolution movement. Golsorkhi on fast fashion:
“Now, pretty much half of the high-end fashion companies” — Prada and Louis Vuitton, for example — “make four to six collections instead of two each year. That’s absolutely because of Zara.”