The fast-fashion success of Zara
Zara, the world’s largest clothing retailer, thrives in one of the world’s most volatile industries. What is its secret to success? The Spanish flagship brand of Inditex (which also owns Pull & Bear, Stradivarius, and other brands) has a business model that applies open systems thinking.
In the fashion industry, customer preferences change quickly and have limited predictability. Zara maintains a close fit with that turbulent environment by experimenting with numerous new styles, receiving almost immediate and continuous feedback about which ones are most popular, learning what minor adjustments would make the styles more appealing, and quickly producing and delivering new or revised styles to match current demand. Zara practically invented the notion of “fast fashion,” whereby the company responds quickly to customer preferences and fashion trends. Most other retailers instead produce a limited variety of styles, offer only two or three batches of new designs each year, and require up to six months for those designs to show up in stores.
The nucleus of this open systems process is an aircraft hangar–sized room at Zara’s headquarters in A Coruña, Spain. In the center of the room is a long line of facing desks where regional managers from two dozen countries are in daily contact with each of the company’s 6,000 stores in 86 countries. Equally important, sales staff are trained to ask customers about why they bought a garment or how a garment could be designed more to their liking. These customer comments are then quickly reported back to head- quarters. On both sides of the room are designers and other staff who use this continuous store feedback to revise existing styles and spark ideas for new designs.
Suppose several regional managers receive reports that the new line of women’s white jackets is selling slowly; how- ever, customers have told sales staff they would buy that style of jacket in a cream-color with silkier fabric. Designers receive this information and quickly get to work designing a cream-colored jacket with the preferred material. Some regional differences exist, of course, but Zara reports that most of its products are in demand globally. Zara also produces limited stocks of a large variety of designs. Thus, the company can sample a wider array of market preferences while minimizing the problem of having too much inventory. In fact, knowing that Zara’s products are constantly changing attracts customers back to the stores more often.
Rapid and rich feedback from stores is vital, but Zara also thrives because of its quick response to that feedback. Most fashion retailers rely on independent manufacturers in distant countries that require several months’ lead time to produce a garment. Zara uses such low-cost manufacturers to some ex- tent, but half of its garments are made “in proximity” by nearby Spanish companies or companies in Portugal, Morocco, and Turkey. Nearby manufacturing costs more, but it often takes less than three weeks for a new design from these nearby sites to arrive in stores, which receive new stock twice each week.
1. Apply open systems perspective to explain how Zara has been effective in the fast fashion business. What does the open systems perspective suggest might pose future risks to Zara's success?
2. Identify other perspectives of organizational effectiveness that explain Zara’s success in more detail.