The strategy can be understood by taking an example of a fast-food restaurant that sells customized sandwiches. Perhaps linked to the fast product replacement and turnover that makes customers think I need to buy this now! is Zaras artificially low inventory environment. The key promotion strategy of Zara is based on experience, exclusivity, affordability, and differentiation. Zara limits inventories, but not at the expense of profits. In studying these two oft-compared brands, the essential differences revolve around their overall approach to marketing. So this statement might wax unrealistic as sentiments usually indicate customers are happy. Not only does it reduce the cost but it also reduces the chances offorecast errors. Products with highly uncertain demand are sourced from Europe whereas products that are more predictable are sourced from its Asian locations. This button displays the currently selected search type. Implementing a postponement strategy. . Understanding that they want trendy but affordable fashion items, Zara sharply provides the latest styles at low prices. Figure 5: Zaras Demand-Driven Approach (Cheng and Choi, 2010) Zara focuses its forecasting efforts on the type and quantity of fabric it purchases. 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". So we can hope for more in the future. As the brand ethos is so embedded in the customers mind, the customer becomes the brand manager, Kohan explains. Fashion trends come and fade quickly, but Zara is always able to quickly jump on the wave and bring exactly what buyers desperately need to buy. Keywords Supply Chain Supply Chain Management Product Variety The result is the brand's sales keep getting higher, and the market share keeps increasing. And Zara fully understands this. Since there are various varieties of sandwiches, They know that it is costly to try and predict individual customers' preferences, so they aggregate orders into common platforms, which consist of a bun, patty, and lettuce, reducing the options. The strategy is executed. It currently operates in 2,213 stores across 93 markets and 39 online markets. Marketing aims and objectives Zara mainly operates thier business on objectives which range from being short term and long term. - 6 to 12 month cycles -Zara doesit in 15 days - Manufacture in SE Asia -Zara nearsources (manufacture nearby) - Regular price to sale ---Zara never puts anything on sale - When possible re-stock popularitems ---Zara shirts never restock, once it's sold, it's gone forever. The executive vice president leading the initiative was convinced of speed-to-market benefits where demand forecasts improve with time. This proprietary software, on top of a specially trained professional workforce to do the same, capitalizes off of Zaras rapid product replacement cycles by cataloguing in real-time which products are being purchased, in what quantity, and where. In some ways, Gaonas character is reflected in Zaras approach. According to Postponement and Supply Chain Structure: Cases from the Textile and Apparel Industry, Zara purchases more than half of its fabric in a raw state that is undyed so that it can later. So, what is so special about Zara's marketing strategy that can turn it into a global fashion powerhouse as today? But Zara should be wary of the growth of ultra fast fashion retailers. When expanded it provides a list of search options that will switch the search inputs to match the current selection. Friedman, Thomas (2006). 2004. According to Zaras official website, sales by geographical region show Europe with 66%, Asia with 20%, and America with 14% of sales. The local strategic partnerships that Zara maintains with manufacturers in Europe allow for a product throughput time of 3-4 weeks from conception to distribution. THREATS: Following points can be identified as a threat to company: Company's facing obstacles. This leads us to a traditional marketing research method, which is called the 4p's strategy, which includes products, place, price, and promotion. I write about 21st century leadership, Agile, innovation & narrative. Thorbeck lists the excuses that US retail executives offer: Thats not our customer. (2003). And as we explored early, there may be some vertically integrated evidence to back that assertion up. Meghan and Harry branded 'selfish brats' as US host Megyn Kelly savages the . This example illustrates how postponement through platform design and individual stocking components instead of finished goods can mitigate the risk of producing a wide variety of products. It offers significant business value to a range of retail companies whose product cycles are accelerating and influenced by celebrities, luxury brands, and media hype. postponement, and fulfillment services . Initially launched in 120 stores worldwide, such technology is irresistible digital-honey to draw millennials into the store and shop. In 2016, the service agents responded to more than 17 million customer inquiries, Kohan found. Zara actually listens and reacts to customer feedback as its most valuable brand asset to improve its products and services, she says. Still, Zaras mission statement lacks a holistic approach, not including vital linkages to help customers understand its mission in the context of its business. 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. In contrast to traditional make-to-forecast approaches, postponement is a make-to-order tactic, where products are rapidly customized from stocks of almost complete products, often in close proximity to customers. These are used to analyze what is on trend or being said on social platforms. The more agile, horizontal mindset with a total focus on delighting customers through continuous innovation has yet to take a hold in an industry that is crying out for it. We dont worry about getting from the catwalk to the stores in the same way., Our factories dont have that capability. The length of the delay is specific to a product. So far, Thorbeck is suggesting, the US fashion industry still shows signs of opting to die. How Do They Do It?" In effect, they are still living in the world of traditional management, with the vertical mindset of shareholder value and command-and-control. Zara is able to maintain a good pricing strategy by optimizing development and distribution costs. Don't use plagiarized sources. Recycling efforts of furniture and decoration, organic manufacturing processes, and biodiesel fuel all contribute to Zaras environmentally friendly image. 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. While the number of garments manufactured by Zara (in blue) has increased steadily since 2008, industrial waste (in green) has decreased or maintained very low levels. These loyalitsts become brand evangelists who share excitement about the brand with their networks. Those points develop a continuum indicating different extent of application of the postponement strategies in supply chains - Fig.1. The synergy between Zaras individual stratagems makes it difficult for competitors to copycat. Postponement can be a powerful strategy for managing product variety. 1) The Postponement strategy Besides the supply chain efficiencies and marketing philosophies, one of the key factors for Zara's success is its postponement strategy. In the new economy, the customer's experience matters more than the product itself in the mind of the shopper. Its store's design is modern, luxurious, and predominantly white. So its prices have to be catered to the price-sensitive buyers as well. 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. Zara mainly focuses on opening new stores and word of mouth. Still, Zaras scale keeps many of these start-ups from competing and many others from expanding into Zaras territory. 1 of 18 Supply Chain Management of ZARA Nov. 14, 2013 116 likes 390,878 views Download Now Download to read offline Business Technology Sai Praveen Chettupalli Follow Deputy Manager at IndusInd Bank Advertisement Advertisement Recommended ZARA Case Study: Role of Supply chain in organizational Success sadia butt 9.5k views 27 slides Online selling has been carefully planned and limited to specific countries as well. On social media channels, Zara has over 28 million Facebook followers, over 39 million on Instagram, and over one million on Twitter. It is a big win for both the customer and the company, she says. Moreover, the inventory is maintained on the basis of the sales history to individual stores. The total revenue of Inditex in 2019 is estimated to be 23.31 billion euros. Outsourcing to Asia necessitates very costly transportation costs back to its biggest market. Exchanging dollars for product is no longer meeting the needs of todays shopper as they strive for deeper connections with the brand, Kohan states. This creates a unique brand image and grows the brand's market share faster, especially among millennials. Students looking for free, top-notch essay and term paper samples on various topics. Then the designers will go to all the trendy places to get the feel of the last fashion trends and give adaption to the models from the library after carefully examining the trends. Zaras strategy is to get as close to them as possible, (Suzy Hansen 2012). Postponement is first implemented in manufacturing processes to reduce inventory cost and improve service level within the company while the product variety increases. Yet as in other sectors, many US managers are still in the grip of traditional management thinking and are slow to respond. Shoppers feel like if they buy items from Zara, other people won't have the same outfit. Sometimes high demand for various fashion items wanes very quickly. The items have their own fashion seasons that come and go even faster than the rest of the fashion world. Although in 2020, because of the COVID-19 epidemic, it closed 16% of its stores, for a while it was adding 500 outlets per year. 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. The Copernican revolution in management mindsets in which the customer is the center of the corporate universe has yet to take place. This brings the same environment and experience for customers everywhere. Order winners are the competitive advantages such as quality, delivery speed, reliability, product design, flexibility, and image that cause a firm's customers to select that company's products. It is the first-hand ear to the ground on buyers and market trends, as well as a tool to plan the next steps. 808 certified writers online. There are various models on postponement covering a continuum from pure standardization to customization. Retailers must adapt to the changing consumer where the top characteristic is value. Everything is precise, professional, and elegant. Harvard Business Review, November 2004, 104-110 Garci-Dastugue, S. and Lambert, D.M. 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. There are trade-offs between different levels of customer service and inventory, production and distribution costs when applying different strategies. 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