Is Supply Chain really the secret behind ZARA’s retail success ?

Challenging the conventional belief

Let me give you a question to ponder while you read this article. If GAP replicates ZARA’s Supply Chain model successfully, will it be as successful as ZARA ?

Chances are high that you have jumped into this article fuming. Because as a Supply Chain professional, it is something that is totally unacceptable. Right ? We all know that ZARA’s key strength is Supply Chain. It has been subject of case studies across Business schools around the world, part of every textbook on Operations and Supply Chain and what not.

As a hardcore Supply Chain guy, I take pride in what my friends at ZARA’s Supply Chain department accomplish- the seamless, efficient, responsive flow that helps ZARA retain its position as an innovative fashion retailer.

But still…it is NOT the primary reason behind ZARA’s success. It is the primary enabler though.

Keep reading to understand where I am coming from.

Zara’s Supply Chain was built to support Zara’s branding strategy

At the core of ZARA’s success is their unique Branding strategy. And they have developed a Supply Chain that eloquently supports that branding strategy. ZARA’s Supply Chain is indeed innovative but that innovation arose out of a need to support a unique brand strategy.

ZARA has successfully executed a unique branding strategy. ZARA chose not to imitate the business model that almost every other mass fashion retailer (think likes of GAP) was pursuing. They decided to be different. Often, if you can plan it optimally, differentiation is the best form of competitive strategy. You don’t always have to leverage the same business model that everyone else is leveraging.

ZARA has developed a brand that offers “a sense of tantalizing exclusivity”.

Neurosciences have proven that the anticipation of rewards – or the potential of not getting what you want- will produce dopamine , which actively drives behavior. Consumers visit ZARA seventeen times a year, compared to only three or four times for traditional retailers, because they are compelled to see the twice weekly new line, because they are afraid of missing something new or exciting. The connection is so strong that customers are compelled to buy in fear of items being bought by someone else. ZARA’s whole business model is built around this goal.

But it was a beautiful Supply Chain design that made the brand vision a reality

Once ZARA decided this branding strategy, they built their value chain around it- the one which we are very much familiar with. A vertically integrated and highly collaborative value chain which has reduced its product development cycle to the point where new lines are released almost weekly.

So it is NOT that they are able to offer fast fashion because of their Supply Chain. They built their Supply Chain strategy AROUND a fast fashion branding.

If likes of GAP were to mimic the Operating model

So coming back to the question I posed right at the beginning of this article – my answer will be- (ignoring the entire cost of re hauling the operating model), it will leave GAP with high operating cost of maintaining a very responsive Supply Chain, and lots of inventory. Why the inventory ? Because GAP customer, go to GAP for a completely different value proposition.


Views my Own.

 

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