How Zara’s competitive advantage became apparent during the Covid-19 pandemic.
Global supply chains were hit hard in the past year as factories came to a halt and stores were shut for weeks. The pandemic caused retailers to adjust their supply-chain strategies. Whereas Zara’s inventory has dropped by 9%, the inventories of many other retailers, such as H&M, have seen an increase (Orihuela, 2021). Zara’s flexible business model has proven to be a key strength during the lockdown. Additionally, its business model relies profoundly on technological innovation and user experience (IE Insights, 2019).
Despite being one of the latest to take on e-commerce, Zara has achieved an omni-channel experience that embraces a seamless online and in-store experience. The company is now benefiting even more from the early adoption of RFID technology. RFID technology makes it possible to identify each individual product by a chip inside the security alarm, which allows for more efficient and accurate distribution (Inditex, 2014). Because they can accurately track their inventories, they could deal with a 77% rise in online sales. Letting each of its almost 7,000 stores function as a local distribution centre to serve their online orders (Orihuela, 2021).
In my opinion, this example shows how vital inventory data and supply systems are for retailers nowadays. Technologies, such as RFID technology, make it possible to keep track of inventories accurately and automatically. In combination with demand forecasting, they know which items are trending. This data can be funneled back to Zara’s product development team to adjust its collection and product lines. Altogether, this makes Zara a pioneer in the retail industry, and I am highly convinced that this will not be their innovational finish line.
References:
IE Insights. (2019, February 6). Zara: Technology and User Experience as Drivers of Business. Retrieved from https://www.ie.edu/insights/articles/zara-technology-and-user-experience-as-drivers-of-business/
Inditex. (2014, July 17). Inditex deploys RFID technology in its stores. Retrieved from https://www.inditex.com/article?articleId=150174&title=Inditex+deploys+RFID+technology+in+its+stores
Orihuela, R. (2021, March 16). Zara Owner’s Lesson for Others Is Keep Supplies Close to Home. Retrieved from https://www.bloomberg.com/news/newsletters/2021-03-16/supply-chain-latest-zara-owner-succeeds-with-regional-networks
Hi Beau,
Very interesting blog post! Remarkable to observe that Zara uses such a different strategy than the other clothing retailers and that it has been beneficial in the corona days actually. I am very curious if other clothing retailers like H&M and C&A will also start a similar supply chain in the future because it could have so many advantages.
Hi Beau,
This is a fascinating blog post! Zara is one of my favourite shops and it does not surprise me that they are ahead in using technology for their strategy. I am wondering if their are more strategies (and how they look like) as such which can improve inventory and sales in the fashion industry and which companies are already making use of it!
Hi Beau,
This is a fascinating blog post! Zara is actually one of my favourite shops and it does not surprise me that they are ahead of using technology to increase their strategic competitive advantage. I am wondering what other kinds of technology is used in the fashion industry to increase sales and inventory management.
Hey Beau,
I really enjoyed reading your blog. I was aware that Zara had adopted RFID in its early stages, but I did not know that it would have such an impact on their supply chain during the pandemic. An inventory drop of 9% during times where consumers cannot access stores, is really impressive. The company focusses so heavily on improving their RFID technology and warehouse tracking, but is this enough to address other issues regarding labor practices and environmental issues?