So what else does Zara do that gives them a nearly unbeatable position in the fashion industry?
Well, besides their jaw-dropping supply chain, they avoid “penny-wise” and “pound-foolish” decision-making, notes Georgetown’s McDonough School of Business professor Kasra Ferdows in a Bloomberg article.
They realize that if they don’t discount as frequently in some areas, they have more capital to invest in others that helps them keep margins high.
As a result, they can afford extra labor and shipping costs when both are needed to meet customer demand.
Compare that to a company who might not get this. What’s their first reaction when they hit a crisis?
At Zara, layoffs may need to happen in the event of something they can’t control, like a global recession. But, knee-jerk solutions like layoffs wouldn’t necessarily be the first solution they would turn to.
Coordinated, Centralized Order Fulfillment
Zara has figured out how to make rapid deliveries to its stores – and keep everyone on the same page without causing extreme confusion.
Each outlet stores makes two orders per week on weekdays. Trucks leave with their shipments and arrive at stores at specific times.
Clothes are labeled and priced by the time they reach the stores, so they simply have to be placed on the floor for sale.
Every team member understands all the steps in the supply process, and they know how their actions impact all other people and processes.
And guess what?
Customers know exactly when to go to Zara’s stores to find the latest fashion trends.
This leads to Zara having remarkably efficient workflows.
And, Zara can even ship new test inventory to stores in small batches. That limits their risk.
If it doesn’t work out, Zara’s out only a small amount of product.
This process is so effective that European customers, who typically visit most fashion stores just 3 times per year, go to Zara 17 times annually.
Rapid Expansion Into New Markets
Because Zara gets product to market so fast, it can rapidly expand before competitors get a sense of what sells.
This allowed Zara to increase revenue in India by 19% year-over-year from 2016 – 2017.
So, what did you learn from Zara?
Regardless of the industry you’re in, you know of something you can do better than everyone else.
How can you actually execute on that idea and get a competitive advantage that’s impossible to match?