Retail is in a transformational period.
The dawn of e-commerce and rapid delivery have changed the way people buy products.
Some older companies, like J.C. Penney for instance, are having a hard time dealing with the new reality.
Meanwhile companies like Amazon and Bonobos (recently purchased by Wal-Mart) have been able to thrive as online retailers.
But some brick and mortar retailers seem to have cracked the code to success in today’s fashion market. H&M has long been a poster-child for what has become known as “fast fashion” strategy. The technique uses rapidly changing selection to put new fashions in front of customers often.
Typically, like with H&M the clothes must be kept inexpensive to encourage shoppers to buy often. But Spanish retailer Zara has been successful in using the fast inventory turnover tactic, but also at maintaining higher pricing.
Jeannette Neumann reports on Zara’s success in The Wall Street Journal:
Chains such as J.C. Penney Co. and Sears Holdings Corp. are closing hundreds of outlets to stanch their losses. Just this week, J. Crew reported its 11th consecutive quarter of same-store sales declines, days after its longtime chief Mickey Drexler announced he will step aside.
By contrast, Zara’s pace-setting fast-fashion model is powering ahead.
Parent company Inditex makes 60% of its garments in Spain and nearby countries. That allows it to respond quickly to feedback from its store managers around the world, who feed daily updates to a 600-strong design team in Spain on what is selling and what isn’t. The creative crew whips up fresh ideas that go into production in days. The company’s Spain-based logistics centers are then able to constantly refresh the stores with small batches of new designs.
Inditex is leveraging that model into a winning online strategy, which it launched in 2010.
Zara’s quick turnaround time from design to the rack means fresh fashions are readily available—something that is particularly attractive to shoppers surfing for something new. While other fast-fashion retailers are starting to move their suppliers closer, most still order the bulk of their clothes far from home and order them several months in advance.
“This works online as it works offline,” Andreas Inderst, an analyst with Macquarie Group, says. “People are drawn to the homepage of Zara because they offer newness, which most other fashion retailers are not able to offer because of long lead times and the slow reaction to current demand.”
Read more here.
Latest posts by Dick Young (see all)
- Do You Have the Tools to Carry Out Your Investment Plan? - October 18, 2019
- Four Ways to Win the Investment Horse Race - October 11, 2019
- This is the Most Persuasive Test of High-Quality Investing: Does Your Portfolio Pass? - October 4, 2019