Zara Bypasses The Gap; It’s All About Customers

The Spanish retail chain Zara has overtaken The Gap as the world’s largest clothing retailer. That’s amazing since many people outside of Europe probably don’t know much, if anything, about Zara. So what can we learn from Zara’s ascension to the top spot?

First of all, Zara is a division of Inditex, which is a vertically integrated apparel juggernaut. Unlike other large apparel corporations, the company owns all of its retailing, designing and manufacturing operations. This structural difference allows Zara to break some norms in the apparel industry.

Zara offers “instant fashions:” cheap, trendy clothing. In Zara shops, there are two new collections every week, and the company manages to design, produce, distribute and sell each of its collections in just four weeks. Here’s what Professor Isabel Díez Vial from the Complutense University of Madrid, who has studied Inditex, has said about the company:

The customer doesn’t go to the store at the beginning of summer or winter, and see what they want, and think about it and decide later what to buy. Instead, the customer has to go to the shop every 15 days because the collection is refreshed so frequently… This approach leads to a complete change in the production process. Instead of offering products that take a year to plan and sell, you now have a product that the customer demands.

In addition, Zara relies heavily on its front-line employees. Rather than squeezing costs out of its personnel costs, it sees them as a key to its advantage. By analyzing sales data, the retailer increases staff during the periods when there is heavy traffic in the store. Employees are also expected to provide feedback on any fashion trends they see or hear about — including what’s hot, what’s cold, or what’s missing from the current collection.

My take: Zara represents a great case study in how to change the paradigm by focusing on customers. Here are few lessons that others can learn from Zara’s approach:

• Break supplier-driven paradigms. In many industries you’ll find approaches that are based on some limitation of the companies. These supplier-driven paradigms, like very discrete seasons in apparel, aren’t optimizing customer experience. So there are opportunities to expand your business by challenging the status-quo.
• Disrupt with service amplification. Many firms view front-line employees as costs; which they try to minimize. That’s why there’s an opportunity for companies to differentiate themselves by investing in their people, like Zara. This approach, called service amplification, is one of the five disruptive customer experience strategies that I’ve mentioned before.
• Shorten cycle times. If it takes six months to define, design, and manufacture something, then you need to make decisions six months too early. Zara’s ability to cut the cycle times for getting products to market provides it with the ability to respond more effectively to changes in the market. So firms should find ways to cut down the time it takes to make changes in their offerings. 
• Look to customers for innovation. As I discussed in the post Customer Experience Innovation: As Simple As 1-2-3, companies need to focus their innovation efforts around the needs of customers. Zara’s growth shows that there’s a lot of opportunity to find new and better ways to meet their needs.

The bottom line: The path to the top is always fueled by customers.