If it hasn’t yet been made clear, the C-suite is ready to reiterate: No company, besides Zara, will likely ever be like Zara.
The refrain for years has been “be more like Zara,” as companies look to copycat the Spanish fast fashion purveyor’s best practices for speed to market and supply chain efficiency. And while many acknowledge that Zara doesn’t have decades of tradition to undo in order to get out of its own way, apparel companies that can’t get there have often failed to factor in the bigger picture of how Zara does what it does.
Referring to Zara’s envy-inducing supply chain model, Robert Sinclair, president of supply chain solutions at Li & Fung, reminded the audience at the Sourcing Journal Summit in Hong Kong, that while the Zara copycat craze has ramped up in the last five years, nothing is brand new about what it’s doing.
“It’s not a new model, it’s been around for 40 years and they’ve done an amazing job positioning themselves in the market,” Sinclair said, adding that there’s not a similar-sized player he knows of that’s been able to mimic Zara. “It’s not an easy model to have duplicated or replicated, but at the end of the day, they’re not about being the cheapest—they’re actually about supplying relevant product at fair pricing in a relatively short period of time.”
That approach has meant Zara has been able to avoid inventory, and the retailer has also trained its shopper to buy on the spot, so it also means the inventory it does have is largely being sold through at the original retail price marked on the ticket.
Americans have been crippled by the vicious markdown cycle they’ve found themselves in, which means many are desperate to make up margins, but may never achieve it if they can’t first get consumers to care about their product.
“There’s lots to learn,” Sinclair said. “How do we mitigate that overwhelming need to always get another 15 cents from a buyer?”
One way, he suggested, will be to upend incentives for buyers so they’re not solely rewarded for every cent they save. It’s a thought process too many in the industry still can’t rally around.
“I don’t think this has been addressed adequately at the brand or retail level with respect to getting the lowest possible FOB price to get a margin on a piece of paper,” Sinclair said. “How does that really play out at the end of the season if you’ve got quality concerns or late deliveries that need to be factored back into that incentive?”
Without that shift, more increasingly irrelevant brands will start to see bankruptcy before them.
And more than just rethinking cost, it’s about rethinking production.
“I recently saw a picture of how apparel was made 100 years ago in Industry 1.0, and to my surprise actually, the way how we make apparel is very similar to how we made it 100 years ago,” offered Raymond Tan, CEO of consumer goods supply chain group Luen Thai Holdings, which is based in Hong Kong. Now we’ve reached Industry 4.0 with little to show for it when it comes to innovation in apparel manufacturing.
It’s a matter of the turtle (traditional brands and retailers) that will never outrun the rabbit (newfangled players and consumers).
Tan said brands and retailers insistent on saving every penny have their part to play in keeping suppliers from innovating, as paying more is rarely ever an offer and the traditional model still wins out. It’s those that are willing to step outside of what they’ve known and look to do things differently that will be able to stick around.
“It’s not about looking after the last penny,” Tan said. “I think those brands that keep their business going after the last penny won’t make it.”
Setting the unattainable target of being more like Zara aside for now, bigger apparel players—Luen Thai included—are seeking startups to partner with to generate new draw from the smaller players that seem to have something figured out.
“We are looking at partnering with some startups, and at the same time we’re wondering how we’ll bring this model to our customers, and hopefully we could support them to transform their supply chain as well,” Tan said.
The idea clearly coming down from the C-suite, is that the status quo is increasingly becoming a recipe for bankruptcy.
“You’ve got to position yourself to deal with the traditional ways, and at the same time try to educate and work with customers to deal with old things in new ways,” Sinclair said. “There’s a huge challenge we’re facing in the industry in shifting from the traditional to what becomes the more contemporary, 21st century way of working.”