The retail industry has been deeply changed by new technologies and ways of conducting business.
We have focused on two innovative retailers who have reaped the benefits of innovative technologies in two very different ways.
It is commonly believed that new technologies clash with conventional brick-and-mortar locations. Zara is the perfect example which shows that It is not always the case.
Zara combines cutting-edge technology and traditional stores to maximize value.
The most notable example is its use of RFID (Radio Frequency Identification) along all of its supply chain. Garments are tagged with RFID chips which allows for tracking items from where they are manufactured to the store. While it is true that this is helpful to gather information about the location of items as well as the efficiency of the supply chain, Zara uses the chips for another value-creating reason: inventory management.
When an item is sold in-store, it is instantly recorded and this can allow staff to know when to order more of an item, or less in case it does not sell as well as expected. Thanks to this, Zara knows what they have in the inventory at any point in time. Keeping track of inventory is costly for all companies and this is an ingenious way to do so.
Real-time tracking of sales also allows for predictive analysis of sales. It takes no more than 15 days for Zara to move a garment from where it is manufactured to the store. This means they are very flexible when it comes to emerging fashions and can satisfy the customers’ needs as efficiently as an online retailer.
Zalando, on the other hand, leans towards the “conventional” disruptive retailer model. They are an e-retailer which sells products offered by partner companies. Their competitive advantage rests on the relatively low-cost structure of retailers who do not have to maintain expensive physical locations and their respective staff.
Zalando is in many aspects concordant with academic research when it comes to the new generation retail industry.
Firstly, Zalando focuses on the “Long-tail”, they sell an extremely wide range of different products in very low quantities and have a few main products (“best-sellers”).
They do not have physical locations but take advantage of the concept of virtual shelf space. If managed well, their supply chain allows for the “just-in time” logistics method which means they do not have to stock everything they display on their website. This is a great advantage over traditional retailers as costs of warehousing are high.
Zalando’s return policy also immensely helped them gain market share. Any item can be returned within 100 days, which means customers no longer have to worry about buying online because there is a risk that the item does not fit, that it is defective, or that they just do like it as much as when they saw it on their computer or phone screen.
In conclusion, while structurally different, Zalando and Zara’s business models satisfy the same customer needs.
