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Retail Industry

Retail Industry. T he sale of merchandise from a fixed location Ex. departmen t stores and boutique s . Extremely competitive. Fast Fashion. Strategy by retailers : H&M, Topshop, and Zara B ring trendy affordable clothing to the masses High Inventory Turnover . Fast Fashion.

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Retail Industry

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  1. RetailIndustry • The sale of merchandise from a fixed location • Ex. department stores and boutiques. • Extremely competitive

  2. FastFashion • Strategy by retailers: H&M, Topshop, and Zara • Bring trendy affordableclothing to the masses • High Inventory Turnover

  3. FastFashion TraditionalRetailers FastFashionLeaders Retailers respond to shifts in the market and consumer environment Shell life= days Averagemarkdownratio 15% on sale Profit margin 16 % • Designer-push/pull model • Average 6 months • Shelf life = months • Averagemarkdownratio 50% on sale • Profit margin 7%

  4. Fast Fashion Retailer Traditional Retailer Designer Push/Pull Model Designer Retail Store Retailer Observes and collects environmental and consumer data Designer Consumers Consumers Retail Store

  5. Fast Fashion Retailer Traditional Retailer Average markdown ratio 50% on sale Average markdown ratio 15% on sale

  6. A little history • 1963 byAmancio Ortega Gaona • Lowpricelook-a-likehighfashionclothing • 1975, firstretailoutlet • Experiencedrapidgrowth(500-3000)

  7. Competitors Price + • H&M • Topshop • Benetton Benetton Top Shop GAP Fashion - Fashion + Zara Pull & Bean H&M Price -

  8. Strategic Decisions to develop a Competitive Advantage Overview: • Production • Supply Chain management • Operations • Marketing • Human Resources • Finance

  9. Strategic Decisions - Production • Heavy capital investment • computer guided cutting • Outsourcing labour intensive operations to local subcontractors • In-house prototype production

  10. Strategic Decisions – Supply Chain

  11. Strategic Decisions – Supply Chain • 15 Days of Lead time Day 1: Designers design the product Day 3: Fabric cutting Day 11: Subcontractors manufactures the clothes Day 13: Delivery of products by trucks in Europe and by aircraft in Asia and the USA Day 15: Sale of the product

  12. Strategic Decisions – Operations Marketing • No extravagant advertisements • point-of-sales promotions to convey the brand image Human Resources • Retains 90% ownership • Emphasis on teamwork Finance • Low cost structure

  13. Competitive Advantages Results: • Easily respond to fast-changing trends – • lead time of 15 days and flexibility • 50% of thenew products introduced on an ongoing basis • Ability to spot opportunities and anticipate likely trends • Ability to create and maintain shared situation awareness

  14. Strategy: Situation Awareness

  15. Step 1: Raw Data • Absorb Real time Data • Hand held devices • Store Managers • Incentives provided for accurate sales forecasts and growth • Regional/Country managers • Get on the floor • Closing time: Unsold Merchandise data • Patterns?

  16. Step 2: Hypothesis • Find Patterns in the data • Identify Present Opportunities and Threats • Face to Face discussions • Break the corporate structure • Avoid group think • Design Blueprints

  17. Step 3: Testing Hypotheses • The final step • Place the items on with the rest of the collection • Observe consumer behaviour • To cull or not cull? That is the question • About 25,000 mock ups are made but 60% are culled before production

  18. Zara’s Success • A company that can respond quickly to changing demands • Developed a competitive advantage through • Operations Management • Human Resources • Financial Structure • Marketing • Situation Awareness • Strategic key to success

  19. Caroline Lee Corentin Adam Melis Kesgin Rosa Castells Sala Warren Tetz THANK YOU

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