Keywords Supply Chain Supply Chain Management Product Variety Zara considers only markets that promise strong demand for its products. These brand loyalists are also less price sensitive. The principle of this is that forecasting demand at component level is easier than that at finished good stage (Yang at al., 2005). Order winners are the competitive advantages such as quality, delivery speed, reliability, product design, flexibility, and image that cause a firm's customers to select that company's products. By understanding the target customers and providing a new way for fashion, Zara has successfully positioned itself as a stylish, affordable, and quick-changing fashion brand for the younger generation. Greenpeace.org, 20 November 2012, Zara: Taking the Lead in Fast-Fashion, BusinessWeek, 4 April 2006, Zara, a Spanish success story CNN June 15, 2001. Buyers now want an item's value to be beyond price, with more time-saving and convenience. The postponement and speculation matrix has helped us understand the factors that help Zara to become one of the most successful fast-fashion chains in the world. Initially launched in 120 stores worldwide, such technology is irresistible digital-honey to draw millennials into the store and shop. The items have their own fashion seasons that come and go even faster than the rest of the fashion world. Including more elements on how Zara, as a clothing manufacturer and retailer, commits to sustainability is in due order. Zara spends little in advertising but focuses on locations' uniqueness. Zara is also prepared to hold significant stocks of fabric to allow the clothingproduction system to be decoupled from the longer lead time fabric production system, which is helped by having a substantial level of fabric supply originating from Inditex. The retail strategy for luxury brands is to try to keep as far away from the likes of Zara. Journal of Business Logistics, 28 (1), 57-81. It does things differently and has been very successful because of it. Zara Postponement Strategy .The case of Zara - The Postponement strategy I) Introduction In order to compete in the world of rising globalization and shortening of product life cycle nowadays, firms have to deal with the demand for increasing product variety to meet the diverse needs of customers. Exchanging dollars for product is no longer meeting the needs of todays shopper as they strive for deeper connections with the brand, Kohan states. However, in order to decrease the risks outlined above, Zara might consider new technologies to anticipate parabolic demand. Guardian 3 June 2012 http://www.guardian.co.uk/business/2012/jun/03/zara-bucks-spanish-economic-gloom. In line with Zaras high-fashion-at-a-low-price mantra, Zaras location strategy does not lack grandiosity. Postponement is a business strategy employed in manufacturing and supply chain management which maximizes possible benefit and minimizes risk by delaying further investment into a product or service until the last possible moment, or where a manufacturer produces a generic product, which can be modified at a later stage before the final distribution to the customer. The flagship locations are located in the most critical markets that appeal to their most loyal shopper. Postponement is defined as "a strategy to intentionally delay activities, rather than starting them with incomplete information about the. According to Postponement and Supply Chain Structure: Cases from the Textile and Apparel Industry, Zara purchases more than half of its fabric in a raw state that is undyed so that it can later. Companies employing fast fashion tend to have significantly lower markdowns (both in items and in magnitude of markdown) than other classes of retailers.. Without close communication between supply chain units, rapid product replacement cycles would be impossible. Chaudhry, H.R. Women typically love the ideas by being more than half of Zara's target market, mainly because they prefer to change their styles once in a while more. The term postponement in the supply chain is similar to its actual meaning. But this doesn't mean it has no focus on marketing. Pagh, J.D. Postponement strategy enables managing demand uncertainties and benefits mass customization by improving operational efficiency. Products Postponement can be a powerful strategy for managing product variety. In addition to a super-effective supply chain, Zara also involves customers in the design process and provides a unique competitive advantage. Today, value is measured beyond price, but also in time and convenience.. The latter two elements highlight Zaras appeal to environmental sustainability (as evidenced by various initiatives in their product design and distribution) and a sustainable society. This enables Zara to realize the newest fashion trends. ISBN 978-0-374-29279-9. Zara uses data to understand customers' insights and current trends. Therefore, some innovative companies have integrated postponement strategies with their supply chain operations to gain control of product variety proliferation. Zara, the Spanish Inditex Group subsidiary, started its international expansion in 1988 in Holland where the first overseas store was opened. The more quickly and efficiently a customer can navigate through the store to explore and find hidden gems, the better the experience, she says. "Rapid-fire fulfillment".Harvard Business Review, 82(11). Its store's design is modern, luxurious, and predominantly white. For example, rapid product replacement cycles relate closely to vertical integration. Besides the supply chain efficiencies and marketing philosophies, one of the key factors for Zara's success is its postponement strategy. . Although in 2020, because of the COVID-19 epidemic, it closed 16% of its stores, for a while it was adding 500 outlets per year. What is different about retailers like Zara, H&M and Uniqlo is that they combine low cost production with speed to market and customer-focused agility. That said, it is a challenge for Zara in the future to adapt to a changing market. High product replacement also carries risks. Zara's stores have clothing for men, women, and kids as well. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters. "How Zara Grew Into the Worlds Largest Fashion Retailer. Whereas Zaras markdowns are typically around 15%, the markdowns at US apparel retailers and department stores are typically in the 50-70% range. The two-way communication between the customer and Zara allows for continual improvement of product and services, she says. More specifically, Zara could be counteracting natural human psychology that identifies more expense with greater quality and prestige. However, brand communication is crucial in Zara's marketing strategies. And secondly, it encourages customers to buy in a timely manner because the particular product or design that strikes your fancy today may be replaced by something else tomorrow. While the number of garments manufactured by Zara (in blue) has increased steadily since 2008, industrial waste (in green) has decreased or maintained very low levels. Slate Magazine. In 2019, Inditex manufactured more than 840 million garments annually via 6,300 stores in 85 different countries. Speaking of loyal customers, Zara's meaningful experience and values tap the potential of frequent buyers to promote the brand. The location strategy of Zara is to put stores in high-street retail areas of major metropolitan cities. (2004). I study the world's most powerful consumers -- The American Affluent, What Brands Need To Know: Search & Display Advertising In 2023, More Retailers Expected To Issue Pessimistic Forecasts This Week, EBay Head Of AI Talks About The Future Of Online Commerce, Metaverse Fashion Week 2.0 Line-Up Revealed With A Global First From Adidas, Why Dicks Sporting Goods Acquisition Of Moosejaw Is A Good Move, Phygital Retail and The Stores New Brand Ambassador, Pharrell Williams At Louis Vuitton: Why It Makes Sense, Walmart, Amazon, And The Home Depot Agree, Consumer Spending Will Slow In 2023, Zara has evolved to the new 4Es of marketing strategyExperience replaces Product; Exchange is new Price; Evangelism is now Promotion; and Every Place is new Placethat puts the customer at the center. Creating customer curiosity is a most powerful pull marketing strategy. The length of the delay is specific to a product. Through its business model, Zara aims to contribute to the sustainable development of society and that of the environment with which we interact." The company base thierkey strategy on every single customer who has a satisfied experience by purchasing fashion online and who wants to repeat online shopping. The long and guarded industry process of translating fashion design into street wearor from elite runway shows to department store floorsis now completely transparent to sophisticated fashionistas, young people whose purchase influence is 24/7 mobile access to stores, stars and sources that truly reflect demand- driven impulses.. There are trade-offs between different levels of customer service and inventory, production and distribution costs when applying different strategies. Perhaps impulsive buys are something common at Zara stores, and perhaps Zara wishes to create such an environment, but customers keep coming back for more Zara products. Mass customization has become a requirement for many businesses especially in the dynamic, fast-changing industries. Still, Zaras mission statement lacks a holistic approach, not including vital linkages to help customers understand its mission in the context of its business. It tries to capitalize on the store experience by always offering reasons for the buyers to revisit the stores. You may opt-out by. Supply chain postponement and speculation strategies: How to choose the right strategy. This proprietary software, on top of a specially trained professional workforce to do the same, capitalizes off of Zaras rapid product replacement cycles by cataloguing in real-time which products are being purchased, in what quantity, and where. Still, Zaras scale keeps many of these start-ups from competing and many others from expanding into Zaras territory. Its fast-fashion deliverable is available in the quantity, format and time in which the customer needs the product. Analysis of Zara's fast-fashion retailing strategy with FIT Shelley E. Kohan, based on the 4Es model of marketing, where Experience replaces Product, Exchange in new Price, Evangelism is now . It just simply doesn't market itself as aggressively as other companies. Opportunities for Zara Postponement Strategy can be obtained from things such as: Change in technology and market strategies Government policy changes that is related to the company's field Changes in social patterns and lifestyles. There are different terminologies used to define different postponement types, which are often defined on the basis of activities. In a very short time, Zara has become one of the most successful fashion retail brands in the world. It seems only newcomers have a real shot at replicating Zaras strategy. This example illustrates how postponement through platform design and individual stocking components instead of finished goods can mitigate the risk of producing a wide variety of products. The analysis also demonstrated that the information linkage across value chain is one of the most important factors towards the application of postponement strategy. The choice for these US fashion firms is simple: change or die. Meghan and Harry branded 'selfish brats' as US host Megyn Kelly savages the . (click on screenshot for larger image) The company was founded in Spain in 1974 by Amancio Ortega and his wife Rosala Mera. Zara has two main distribution centres in Spain that distribute all its EU distribution and some of its global distribution, and a few smaller satellite distribution centres elsewhere. Across 96 countries, Zara's fashion empire has over 200+ stores and is the world's largest fashion retailer. 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