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Zara Unveils a Strategy to Embrace and Integrate Physical and Online Presence

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Many analysts and academics in our supply chain world often point to Inditex SA and its fashion and apparel retail brand Zara as the iconic benchmark in retail supply chain agility. It seems that despite the many iteration of retail apparel industry challenges, this fast fashion focused retailer continues to demonstrate a resiliency to changing economic conditions or online buying trends.  Today, Zara is cited as the world’s largest fashion retailer.  121202_ZR_460 Oxford_Shooting

It should therefore be no surprise that Zara continues to provide the content basis for many business case studies related to demonstrating a and industry-leading systemic integration of fashion retail business strategy with consistently admired agile supply chain response practices.

Thus, retail supply chain industry focused readers should take note to last week’s unveiling of Zara’s newest flagship store in the retailer’s hometown of La Coruna Spain. The store, sized at 54,000-square-feet and spanning over five stories, will replace five other existing smaller footprint stores, and will reportedly serve as the model for Zara flagships around the globe. The apparel retailer is now transitioning to a new strategy to meet the challenge of the Omni-channel focused online fashion consumer.

In a press conference held last week, Inditex Chairman Pablo Isla declared that Inditex seeks “full integration of the brick-and-mortar stores and online businesses, with store openings that are increasingly more relevant.” According to a published report by The Wall Street Journal, the 2017 strategy calls for the opening of between 450-500 new larger retail stores that will merchandise a full range of apparel, while consolidating 150-200 existing smaller sized stores.

The larger stores are being designed to allow consumers the opportunity to browse broader fashion and apparel offerings while also embracing online capabilities, allowing the ability for shoppers to either buy in-store or order online with the assistance of sales clerks. Online order pickup or return of purchases can be exercised at the retail store as-well.

Despite a rather difficult year in retail, this retailer’s latest report of financial performance established a new record of nearly $25 billion in revenues with a 10 increase in profitability.

As noted in our 2017 industry-specific predictions for the retail industry, we observed that the implications of permanent reductions in physical foot traffic have taken a toll on traditional mall-based retailers and department stores. While well-known broad-line retailers such as Macys are undertaking additional store closings, Zara once again has a different strategy emphasizing larger, more integrated stores to appeal to the Omni-channel consumer, supported by one of the retail industry’s most responsive supply chain response capabilities.  As noted in our prediction, the physical retail store is now the virtual online store, and that brick and mortar stores are the one advantage that differentiates retailers in their ability to offer more timely fashion from that of Amazon and Alibaba.

Obviously, consumers will be the ultimate determinant for the success of Zara’s new strategy.  A successful record of accomplishment up to now provides evidence leaning toward success.

Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.

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