. These brand loyalists are also less price sensitive. The strategy can be understood by taking an example of a fast-food restaurant that sells customized sandwiches. Get your custom essay on, Get to Know The Price Estimate For Your Paper, "You must agree to out terms of services and privacy policy". Shoppers feel like if they buy items from Zara, other people won't have the same outfit. So not only buyers are trendy, but they are also unique, which sounds pretty cool like being in a cool kids' club. While through its location strategy Zara does not shy away from extreme expense to project a wanted image, Zara does not advertise. According to recent data, the answer is yes. Lastly, as much as Zara is grandiose in its real-estate investments it is equally selective. Web. Everything is precise, professional, and elegant. Through this technology and mobile connectivity, it links a customers shopping visit and provides access to inventory not present in the specific location. And in Zaras success, Gaona has become the worlds third richest man. Still, the common strategic motivation is to gain better information about customer demand by waiting to customize a product for a particular market or customer. Very organized ,I enjoyed and Loved every bit of our professional interaction . Agile management is usually associated with software development, but it is having equally transformational effect on the US fashion industry under the label, fast fashion.. Because demand for short-life-cycle products or fashion goods is extremely hard to forecast, retailers and brand owners chronically suffer from costly markdowns (price reductions to move merchandise unsold at full price) and stockouts (lost sales due to sellouts of popular styles). The next problem tries to illustrate the value of postponement. In 2019, Inditex manufactured more than 840 million garments annually via 6,300 stores in 85 different countries. Postponement is first implemented in manufacturing processes to reduce inventory cost and improve service level within the company while the product variety increases. These loyalitsts become brand evangelists who share excitement about the brand with their networks. 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. For example, Japan stores have smaller sizes, Arab stores have special women's clothes, South America stores have different seasonal products. For Zara, their strategy has been quite successful. Keywords Supply Chain Supply Chain Management Product Variety For example, in Istanbul Zara "can be found one street away from Cartier, Hermes, and Chanel", three very expensive brands (Suzy Hansen 2012). I am sure other retailers too would have taken lessons from Zara's strategy. This relates closely to Zaras lightning-fast product replacement, unparalleled in the industry. Its first store already featured low-priced lookalike products of high-end brands. New York: Farrar, Straus, and Giroux. Standing at the Sky's Edge review: A joyful, gritty show with fire in its heart. Perhaps Zaras lack of advertising reflects its desire to eschew thriftiness and establish an aura of quality, luxury, and class. You can see in Chart 1 below, Zaras environmentally conscious philosophy bears out in its waste management. I was always wondering about the secrets of Zara's success in India - right from the day one. And the companysstorelocation strategy is another aspect of its every place factor. 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. This strategy is visible through the attention to each detail of its showrooms. 2.1 Postponement strategy According to Van (2001), in a manufacturing system, post-ponement strategy aims not to delay product customization activities until customer demands are revealed [7]. The logistics department considers supplying dissimilar stores with varied stocks depending on the needs and the market segment of that particular locality (Sull & Turconi, 2008). Zara has cultivated unique advantages with its 4Es approach to marketing by focusing on experience, exchange, evangelism and every place strategies for the customer, rather than the old product, price, promotion and place concept focused on the brand. The whole editorial process is done online with a newly released 28 item collection. Sometimes high demand for various fashion items wanes very quickly. This concept can be applied to more than just-food. There are trade-offs between different levels of customer service and inventory, production and distribution costs when applying different strategies. When expanded it provides a list of search options that will switch the search inputs to match the current selection. Small patches of products may lead to stock-outs but it can also encourage customers to have more desire for the garments and visit the stores more frequently. Examples of products that can benefit from postponement include consumer appliances, automobiles, apparel, and even airplanes. Interorganisational Time Based Postponement in the Supply Chain. Zaras network is strongly integrated, where 60% of the production is carried out in-house in Europe and 40% of its fabric is sourced from its parent company group Inditex. So this statement might wax unrealistic as sentiments usually indicate customers are happy. According the matrix, the full speculation strategy relies fully on forecasting, where all the manufacturing operations are performed before knowing customer demand. Therefore, Zara manages to increase margins for the products it does sell while simultaneously adding to its list of psychological tools. For example, the full speculation strategy incurs low production and distribution costs but high customer service and high inventory costs, whereas the opposite applies to the full postponement strategy. The latter reportedly cost $324 million the most expensive piece of real estate ever sold in Manhattan (Suzy Hansen 2012). To achieve such spectacular results, Zara doesn't market itself the way other fashion brands do. Through technology and mobile connectivity, shoppers can access inventory not present in their locations conveniently. If other retailers were to try Zaras approach without 1) vertically integrating and bringing manufacturing closer to markets and 2) reducing inventories, they would likely experience profitability loss as manufacturing and transport costs add up and excess inventories reduce margins. Postponement and Supply Chain Structure [pdf]. How about you? While Zara is an excellent purveyor of product, it also capitalizes on the store experience by continuously offering reasons for customers to visit the stores and catch the hottest trends at affordable prices, Kohan explains, noting that Zara has cultivated a loyal customer who visits aboutsix times per year, as compared to other retailers in the contemporary market wheretwo to three visits per year are the norm. Established competitors like Gap and Gucci would have to completely reinvent themselves to successfully mimic Zara. Postponement strategies can be applied to form, time and place (Hoek et al., 1998). His research shows what he calls the Zara Gap, namely, Zaras ability to significantly outperform category averages for department stores, wholesale brands, specialty retailers and athletic brands: The fashion industry obviously faces extraordinary challenges. With the right insight at the right time and direct access to the production chain, Zara could launch new designs at lightning-fast speed and provided exactly what customers needed. In the next decades, Zara's business model gradually earned a reputation among Spanish consumers, with nine more stores in Spain's most prominent cities. Including more elements on how Zara, as a clothing manufacturer and retailer, commits to sustainability is in due order. Still, Zaras scale keeps many of these start-ups from competing and many others from expanding into Zaras territory. The flagship locations are located in the most critical markets that appeal to their most loyal shopper. They must weigh the benefits of scaling markets with the prospects of them losing some of the strategic advantages that enable them to do so. Based on this research capability, Zara's products in every store reflect unique customers' needs in terms of physical, culture, or climate. Creating customer curiosity is a most powerful pull marketing strategy. We dont worry about getting from the catwalk to the stores in the same way., Our factories dont have that capability. and Lee, H.L. It currently has 39 online markets. This is one of Zara's first steps to move into online selling more, and it received good feedback from the customers. Innovative Quick Response Programs in Logistics and Supply Chain Management. The fast-fashion experience formula for success combines frictionless shopping in a highly curated product environment offering scarce supply and new styles that rotate rapidly. While the following examples may not meet the traditional criteria of a marketing campaign, they demonstrate the strategy that Zara pursues very well. The Reign of Spain, The Guardian, 28 October 2003, "Toxic Threads: the Big Fashion Stitch-up", pages 15 and 24. J.M. Moreover, the inventory is maintained on the basis of the sales history to individual stores. In short, Zara products have the latest styles, trending designs, affordable prices, and local-adapted tastes. 808 certified writers online. Estimates of the costs of markdowns alone range widely, some as high as 33 percent of retail sales. 2004. On social media channels, Zara has over 28 million Facebook followers, over 39 million on Instagram, and over one million on Twitter. This is known as the postponement approach. In a very short time, Zara has become one of the most successful fashion retail brands in the world. 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. 2023 The Arena Media Brands, LLC and respective content providers on this website. Start Your Online Business with Shopify 12 Day Free Trial + Pay Only 1$ For Your First Month. The former appeals to Zaras unique strategy. Zara has the courage to continually strengthen its portfolio by closing underperforming stores and opening new markets, so its flagship stores keep the reputation among loyal shoppers. Branded value aligns customers needs with a brand deliverable, Kohan stresses. A postponement strategy is a strategy that businesses implement in their supply chain or distribution networks to delay the customization of products. 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. . The principle of this is that forecasting demand at component level is easier than that at finished good stage (Yang at al., 2005). The model comprises of different postponement strategies, which when analysed, indicated that Zaras postponement applications were supported by its dynamic value chain structures. Personal commerce is the every place where the customers are, rather than only in the physical place the brand is present. The following section summarizes the key postponement types that Zara utilizes in their value chain. First, it enables Zara to adapt to consumer demands quickly, aligning itself with demand in a meaningful way. These markdowns and stockouts are very costly for fashion companies. This leads us to a traditional marketing research method, which is called the 4p's strategy, which includes products, place, price, and promotion. 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. There are various models on postponement covering a continuum from pure standardization to customization. Manufacturing postponement thus means that companies hold products at platform level, which will be customised later as per demand pattern. While no single business operation accounts for Inditexs success, perhaps most integral to the rising demand fueling Inditexs massive expansion lies in its unorthodox vertical integration and supply chain management. Zara likes to distinguish itself, too, by establishing stores in unique settings such as the San Antonio el Real, an 18th-century convent in Salamanaca; a historic cinema in Elche, Spain; and 666 Fifth Avenue in New York. You can get a custom paper by one of our expert writers. It is the first-hand ear to the ground on buyers and market trends, as well as a tool to plan the next steps. One example of a company using a hybrid strategy in its supply chain is Zara, a Spanish fashion designer and retailer. To get a better understanding of Zara's marketing strategy, we need to see all the important sides of marketing. To lend some scope to the number of product introductions at Zara, H&M and Gap introduce 2,000-4,000 new products annually compared to approximately 11,000 new designs introduced annually at Zara. Product modularity and process design enable the successful implementation of this strategy. Zara's product offerings include clothing, shoes, accessories, beauty products, swimwear, and perfumes. Across 96 countries, Zara's fashion empire has over 200+ stores and is the world's largest fashion retailer. Let's see how Zara strategizes in these four sections. The New York Times, 10 Nov. 2012. With this new AR application and in so many other ways, Zara excels by pulling customers into the brand, unlike its closest competitor H&M, which remains fixed on pushing its brand and product out to the customer. 500,000 items were stocked and sold out in just three days. Its heart a continuum from pure standardization to customization than Only in the industry postponement... 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