Quick question: Have you heard of Amancio Ortega? Chances are, you haven't. So, who is this mysterious entrepreneur whose fortune reaches over $65 billion and is one of the richest people in the world?
He's the founder of Zara, the international Spanish clothing brand that's shaken up the retail industry. One thing I love doing is looking at successful brands and seeing what lessons can be learned from them. As a clothing brand, Zara is like no other. People across the world from teenagers, to recent retirees love to shop there. At the mall, it's one of the busiest stores around.
So, what's Zara's secret? Does it operate like other popular clothing retailers, or is there something else happening behind the scenes? Turns out, Zara operates in a completely different way from other clothing companies.
How The Brand Creates Frenzied Buyers
The best way to describe how Zara operates is "fast." Normally, clothing brands release the same collections in one year: one for spring/summer and another for fall/winter. Traditional retailers try to predict fashion trends a year in advance.
It spends a large amount of time and resources designing, planning and launching its collections. Unfortunately, this presents a high risk for brands.
If the designs resonate with buyers, then sales go well. But if it misses the mark, it means markdowns and cutting into profits for the season. Zara eliminates this risk with its approach.
Zara designs, produces, distributes and sells its collection in only four weeks, as opposed to the several months its competitors take to do the same thing. This also means updating the stores with two new designs a week and keeping low stock levels. As a result, Zara's approach has a few benefits:
1. Less clothing in stock means lower storage costs and fewer markdowns.
2. Shoppers will frequently stop by Zara to see fresh and trending designs.
3. Since merchandise is limited, there's a frenzy to grab clothing before it's gone.
With a rapid production process and people clamoring to snatch up merchandise, how exactly does Zara gets its clothing design and inspiration? Hint: It's not from thin air.
Zara's Reverse Strategy
Most clothing brands operate using a top-down approach, where their designs are based on what they predict will become popular next season. In other words, it's a speculative method that may or not may pay off. Decisions are made at the top by the companies, and they flow down onto the consumers, who decide which merchandise they want.
Zara, on the other hand, takes the opposite approach. It constantly collects information about consumers right from the source. Scouts go onto the streets and in the malls of cities to see what people are wearing. Store managers take note on what customer tastes are like, which are then reported back to headquarters.
This bottom-up approach means designs are created based on instant feedback, and is tailored according to regional preferences. Its strategy has allowed the retailer to become popular worldwide and cater directly to what people want.
Zara's form of advertising is also part of its reverse strategy. Instead of dedicating budgets into commercials and billboards, the brand relies on consumers to advertise on its behalf through word of mouth. And that is the most powerful form of marketing.
The Zara Method In Our Lives
So, what can we learn from Zara's approach that we can apply to our own lives and work? Its growth strategy and success has a few lessons we can use:
1. Listen to feedback.
Zara collects a lot of consumer data from different places like streets, malls and customers. Not all of it will be useful, of course, but the data lets them know what people like, dislike and how Zara can cater to their needs.
Anything you will do will result in feedback. When you exercise, your body gives you feedback in terms of how you look and feel. When you deliver a service, people's responses and behaviors provide useful information for improvement. They let us know how we're doing and whether adjustment is needed.
2. Reduce uncertainty.
Uncertainty in any decision increases the risk that something will go wrong. Zara studies consumers continuously to decide what direction it should take its designs before starting the process. Getting merchandise as close as possible to current trends means sales will likely increase.
Whenever you need to make a decision, you have to consider the information at hand. Missing information can be critical to knowing whether to move towards a direction.
Before making big decisions, it's best to learn more from different sources to reduce uncertainty. For instance, talking to students and graduates of a program before dropping thousands of dollars on further education will potentially save you the risk of entering a program and realizing it's not right for you.
3. Be willing to change course and adapt.
Zara's success is based on its ability to adapt quickly. Unlike many clothing brands, whose designs are stagnant for the season, Zara is constantly assessing and reacting to the environment in a matter of weeks.
The brand designs new styles and pushes them into stores while the trend is still at its peak. As a result, other brands are feeling the pressure to release multiple collections each season and become more flexible in their operations to compete.
Sometimes our environment changes faster than our plans. Yes, plans are important so we know where we're heading. But it's also important to stay flexible and be willing to reassess the situation frequently.
Sometimes a golden opportunity comes by diverging from our original path. Here's a fun one: Levi Strauss originally moved to San Francisco to open a dry goods business during the Gold Rush.
Instead, he ended up selling pants made of denim and metal rivets to gold panners. The pants — known as jeans — were a massive success. Guess who struck gold on that one.
There will always be uncertainty and changes in anything, but the least we can do is find ways to manage and plan for them. By reducing uncertainty in our decisions and being open to possibilities, we can set ourselves up for large opportunities.