Flip by Peter Sheahan Read Free Book Online Page B

now perform that fast, good, cheap hat-trick better than any others, and Zara is perhaps first among equals in delivering fresh, exciting apparel to young consumers.
    The Zara chain is owned by the Spanish company Inditex, which has 70,000 employees and counting (they added 11,000 employees in 2006), 3131 stores in 64 countries and counting (they added 439 stores in 2006), and net 2006 sales of 8.1 billion euros (A$13 billion; an increase of 22 per cent over the prior year). Practising what it calls a 'fast fashion' system, Zara can design and distribute a fashion forward garment in fifteen days. Some Zara styles resemble the latest couture offerings, albeit in less expensive fabrics. Others beat the luxury fashion houses to market with Zara designers' fresh takes on the clothing trends of urban youth around the world.
    Equally significant is the number of styles and variations that Zara retails every year. Three teams of designers for women's, men's and children's lines generate 40,000 or more designs a year, and about 10,000 of these make it into actual production of five to seven sizes and five to six colours per garment. That means Zara's supply chain management must smoothly handle around 300,000 new stock-keeping units (SKUs) per year.
    The final flip, or should I say wrinkle, in Zara's unusual strategy is that it produces each garment in very limited quantities. Most clothing companies try to milk the most popular styles and sell them in high volume, which inevitably creates lags in inventory supply and turnover, and at the end of most selling seasons triggers unprofitable discounting to move inventory that no longer excites customers. Instead, Zara says, so to speak, 'We love stock-outs' (the retail term for being out of stock on a requested item).
    The speed with which Zara changes garment styles and colours encourages impulse buying and more frequent store visits. Customers know that if they see something they like at Zara, they'd better buy it right then and there, because it won't be available later. They also know that whenever they enter a Zara store, they're going to see new things. Thus, for example, Zara's London stores attract an average of seventeen store visits per unique customer per year, whereas their competitors attract an average of only four visits per unique customers per year. Zara's strategy makes its customers so curious to know what new clothes are on the racks that the company spends only 0.3 per cent of sales on advertising versus 3 to 4 per cent for most of the competition.
    Everything about Zara's organisation expresses the belief that they can never be fast enough, and that there is also no excuse for forgetting good and cheap while they're at it. Instead of isolating design, production and marketing staff in separate silos, Zara's offices, stores and other facilities are laid out to encourage the fast, free flow of information, with designers working in the midst of production and marketing so that feedback on new styles, production glitches, quality problems and customer behaviour becomes virtually immediate. This also sends a message to Zara's staff that no one is 'cooler' than anyone else or, to put it another way, that everybody in the company is as cool as the design team.
    Likewise, design and production move quickly thanks to an intensive use of computer-aided design (CAD) and just-intime supply chain management. The stores themselves are integrated into this blindingly fast feedback loop through daily PDA and weekly telephone communication on how customers are reacting to different offerings. The result is that whereas most competitors are hard-pressed to vary 20 per cent of the order mix in any one selling season in response to customer behaviour and other factors, Zara can adjust 40 to 50 per cent of the order mix without strain. 1
    Zara's 'fast fashion' system would break down if customers didn't think the clothes were of high enough quality or affordable enough, and the company