Retailers nowadays extract a lot of value from the online activities of their customers. For instance, A/B testing can be used to check if changes to a website are actually resulting in a higher click-through rate or not. If you are an online retailer, this is obviously a great way of identifying what your client’s wishes are. However, if you are offering your products both online and offline, you should ask yourself if this should be the only way of figuring out what your client wants or why he or she wants it.
This is illustrated by the fashion retailer Zara. Zara is very well able to quickly turn their customer insights into new products. Their employees are trained to pick up customer comments and ideas that are proposed by customers in their stores. They can then communicate this to their manager who will upload this to a centralized system. If similar ideas are identified in this way, Zara will decide to actually design and make the product based on the customer’s input without the customer actually knowing it.
I think this concept could also be of great value to other companies, even if they do not produce products themselves. Reasons why a product is bought or sometimes even more important, why a customer decides to look elsewhere, may not always be captured in the best way using only online technology. A customer may tell a sales-man that he does not like a specific car he just tried because he does not like the fabric of the interior. This information would be hard to capture online. To give another example, a company selling electronic goods may pick up in one of their stores that multiple people decided to not buy a specific headphone because they did not think the headphone fits well. Such information can be hard or even impossible to capture online though it could be very valuable.
I think employees should be trained to pick these sings up. Moreover, just as important, an IT-system, which enables companies to actually capture, categorize and aggregate this data, should be created. This combination, as demonstrated by Zara, could be of great value to companies that are trying to identify what their customer’s wishes are.
What do you think of this? Do you think offline interaction contains valuable information that cannot be retrieved from online activities? And should companies focus on gathering and categorizing this information?
Used source
The Secret of Zara’s Success: A Culture of Customer Co-creation
Hi Floris,
Very nice piece ! Very interesting read about the things Zara is doing nowadays :).
I was wondering a couple things while reading your post though, and I wonder what you think.
– Do you think that, in the age of AI, Zara’s strategy is sustainable? It is not unimaginable that an advanced NLP algorithm would be able to detect “customers’ wishes” within their comments much more efficiently and accurately.
– With regards to your questions, I totally agree that offline interaction can play a vital role in an online business model, I even wrote a blog about it ! 🙂 Check it out here: https://digitalstrategy.rsm.nl//2020/10/08/online-to-offline-revolution-the-return-of-brick-and-mortar-in-china/
– I was triggered by your title haha. Taking Zara as an example, what?! Aren’t they spearheading the extremely unethical fast-fashion industry? But you clearly discussed a very different aspect of their business. Bit off-topic then, but what do you think about putting unethical companies on a pedestal for their non-unethical best practices? Should we refrain from writing about such companies in this way or do you belief they are valuable lessons nonetheless?
Nice piece nonetheless, thanks for the contribution!
Best,
Gerbrand van Dijk
Hi Gerbrand,
Thank you for your response. With regard to your question about Zara and its unethical practices; I do not necessarily think that if a company indulges itself in such practices that it should be ignored.
I strongly agree that we, especially as university students, should be very critical towards companies’ (unethical) practices but ruling them out and not looking at things other companies could learn from could be a massive loss of potential value.
What do you think of this? Should we, or maybe I, in this case, leave Zara out of consideration?
Kind regards,
Floris
Hi Floris,
I find this post very interesting. Personally I visit Zara stores regularly but I never knew about their initiatives to pick up customer comments and ideas, which are then actually used for new ideas. Now that I know that Zara trains its employees to do so, I will definitely take this into account and propose ideas when needed.
Also, one of my blog posts was about brick and mortar stores in the digital age. I posed the question of whether physical stores will still be necessary in the future. I came to the conclusion that physical stores can complement digital channels. However, physical retailers do have to change rethink their strategy to sustain their physical stores. I think your blog post shows the perfect example of such strategy where a company captures value from offline activities, while also focusing on their digital channel. Thank you for this post!
Great Post! I definitely agree with you that the way that Zara uses and collects consumer data is its core strength defining the company’s competitive advantage. Like no other large player in fashion, Zara has an incredibly efficient supply chain and acts very quick to shifting consumer demands. However, I do not think this advantage can be acquired that easily. Company’s would have to heavily invest in technological innovations such as RFID, IoT and AI to collect and thoroughly analyze consumer data. This can of course be very costly. But most importantly, it requires good data analyzation, data management and supply chain efficiency. I think specially understanding consumer preferences from data patterns is very tricky and requires a supply chain that can adapt to changes easily. I wonder if many company’s have this required flexibility in the supply chain to have such a successful model as Zara. For instance, to recover fast from failed clothing lines, and act quick to the fast changing fashion trends. But again, maybe that is exactly what makes the company one of the leaders in fast fashion industry.
Hi there Floris,
Interesting piece on ZARA. I definitely think offline interaction contains valuable information that cannot be retrieved from online activities. I think companies think the same, although a lot of e-commerce seem to struggle with the idea. We saw a real world example today during the presentation of Coolblue. When the then the head of online marketing was asked by Coolblue CEO Pieter Zwart to take control of the whole marketing division within the company, it caused him sleepless nights (his own words). How could real value be gained from the limited quantities of data, compared to the data received from e-commerce activities. Maybe it was you who gave the ZARA example, but you saw how interested he was in hearing this. I believe he commented: “I guess I am going to have a chat with ZARA soon”. So although I believe there is definitely value to be gained from offline shopping (ZARA being the perfect example), we do see a lot of companies struggle with this.
Maybe AI could be an outcome here. Online, AI already is used to monitor and predict shopping behaviour. One could imagine, that in the near future AI might be present in the store in the form of a camera. That way an AI system is able to analyse customer behaviour before making a purchase. Sort of similar as online. Of course this raises privacy concerns, but simply blurring out customer faces till the point of them no longer being recognisable, could be a step in the right direction. After all, most of us don’t mind being monitored online either, even though this is to a much larger extend.
Another interesting thing about Zara is how they track inventory with RFID. As the world’s biggest fast fashion retailer, this is very impressive. The RFID tags allow the brand to track all items across different countries at all time. The primary advantage is that tagging enables agile operation. Zara is not the only retailer adopting RFID – JC Penney tried to do the same. However, JC Penney failed because the tags would interfere with the theft sensors. JC Penney decided to get rid of the theft sensors, but this, in turn, led to a surge in shoplifting. Zara solved this problem by putting the tags inside the anti-theft sensors.
Besides a smooth supply chain system, RFID technology also saved a lot of manpower. Before the adoption of RFID, Zara employees had to manually scan barcodes to check inventory every six months in all Zara stores.