Article | What I learned in Supply Chain
What is the Zara Gap and Why Does it Matter?
April 27th, 2021
10 minute read
Zara is a global retailer headquartered in Spain. They are famous for their fast fashion — ”fast” because they turn over their store inventory every 2 months. Conversely, a slow fashion retailer can take up to a year to bring products to market.
The business advantages of fast fashion are massive, including less working capital, delighted customers, and less waste. The result is that Zara has one of the highest market caps in their industry.
So why doesn’t everyone replicate this model?
Because it’s hard. It requires both collaboration and technology very similar to the McDonalds fast food model.
There is a reason McDonalds sells 2.36 billion hamburgers per year (or 75 per second) and they taste exactly the same in Hong Kong as they do in New York (read The Truth About How Many Burgers McDonald's Has Sold and McDonalds - Every Second). All their systems are connected, updated in real-time, and digital, providing for the most accurate and up-to-date information on food inventory status, production, and more.
Similar to McDonalds, Zara uses technology and connected teams to make their fast fashion model happen.
They start with the point of sale data from their 2,259 stores across 96 countries. Their POS data is aggregated and analyzed on a daily basis, and that data is then sent to the designers who use it to spot trends and place new orders. The suppliers (a combination of owned and outsourced) receive the orders electronically and produce the products from “staged” raw materials. When the product is complete, it is flown to the stores and sold. And from there, the process repeats over and over again. All of these steps are designed to ensure the fastest order-to-store time in the market.
Until recently, only companies with massive resources could “pull this off.” However, today’s technology makes it possible to replicate this model at scale, for even the smallest fashion companies.
So why doesn’t everyone replicate this model?
Because it’s hard. It requires both collaboration and technology very similar to the McDonalds fast food model.
There is a reason McDonalds sells 2.36 billion hamburgers per year (or 75 per second) and they taste exactly the same in Hong Kong as they do in New York (read The Truth About How Many Burgers McDonald's Has Sold and McDonalds - Every Second). All their systems are connected, updated in real-time, and digital, providing for the most accurate and up-to-date information on food inventory status, production, and more.
Similar to McDonalds, Zara uses technology and connected teams to make their fast fashion model happen.
They start with the point of sale data from their 2,259 stores across 96 countries. Their POS data is aggregated and analyzed on a daily basis, and that data is then sent to the designers who use it to spot trends and place new orders. The suppliers (a combination of owned and outsourced) receive the orders electronically and produce the products from “staged” raw materials. When the product is complete, it is flown to the stores and sold. And from there, the process repeats over and over again. All of these steps are designed to ensure the fastest order-to-store time in the market.
Until recently, only companies with massive resources could “pull this off.” However, today’s technology makes it possible to replicate this model at scale, for even the smallest fashion companies.
About the author(s)
About the Series
Each week, Mercado CEO Rob Garrison pens his latest learnings from the supply chain industry as part of a series run for his LinkedIn followers. Each article aims to share a little insight into what's going on that week and to help foster discussion amongst industry professionals across levels, geographies, and companies.
You can connect with Rob on LinkedIn by following this link.
Each week, Mercado CEO Rob Garrison pens his latest learnings from the supply chain industry as part of a series run for his LinkedIn followers. Each article aims to share a little insight into what's going on that week and to help foster discussion amongst industry professionals across levels, geographies, and companies.
You can connect with Rob on LinkedIn by following this link.
