What can small retailers learn from Zara?

By: David Courtier-Dutton

Date: 17 January 2017

Woman shopping in ZaraBack in the first dotcom boom of the late nineties, internet analysts were predicting the imminent death of the high street. This didn’t happen; but 15 years on, we may finally be at the point where this retail apocalypse will finally arrive.

The relationship between retailer and consumer is evolving rapidly – it used to be more akin to a one-to-many relationship with the retailer knowing their customers and customer insight/focus groups helping to drive innovation. But increasingly this has become a many-to-many relationship and now the consumer is in charge.

The end of brand loyalty?

This is most notable in fast fashion, with teenagers as likely to buy online from Asos, BooHoo or Misguided as New Look, Topshop or Primark. Brand loyalty is all but gone.

What was a pull model (shoppers come to the bricks and mortar stores) has become a push model - retailers are frantically trying to chase consumers, bombarding them with emails, promotions and targeted marketing.

Right now, the traditional retailers are losing and the market is getting tougher with retail prices falling every month for the past 36 months and clothing down a whopping 7% year on year.

Bucking the trend

Looking at the UK high street, one business stands out and that is Zara. Zara controls its entire supply chain – that means it can take a design from concept to store in just four weeks and use real-time sales feedback to restock or design and manufacture new items to meet emerging trends.

Zara tests a design in store and if it sells fast they ramp up manufacture. In effect, they ask the customer what they like then go and produce it, knowing that it will sell. Consumer ratings and reviews allow retailers to predict what will sell and how strongly. This allows them to order with confidence.

The ability to trial all your products with potential customers before buying stock can transform a retailer’s business and cut down on waste.

What can we learn?

Zara's competitors cannot replicate this as they have resorted to the cheapest manufacture in the Far East to stay competitive, a strategy that involves longer lead times and damages their ability to compete.

Is this the end for some of the existing retailers? Or can other retailers, including independents, learn from Zara? Retailers that listen to their customers can order just the right amount of stock to ensure a sellout on every line every time. Although promotions will always be around, sales will no longer be necessary.

This, in turn, will improve margins and create leaner, smarter retailers.

Sponsored post. Copyright © 2017. David Courtier-Dutton is ceo of SoundOut.