Innovation in Zara
Zara innovates on various fronts and its innovation can be categorised into various categories. The two most important innovation categories of Zara are speed and presentation.
Zara is in the fast fashion industry, in which product life is short and differentiation is crucial to build a strong image of the brand. The most important contribution of Zara is process innovation, fast fashion, and not a new product. Zara’s production locations and shipping methods are both rather expensive in order to be able to be fast at reacting to trends. This part of Zara’s business model has been put into use, when the founder of Zara, Amancia Ortega, figured out that a big part of the key of dominance consisted of speed and responsiveness. Furthermore, Zara innovates on the production speed as well. The design team of Zara has the job of generating 18,000 new product designs a year, which is equal to more than 70 every working day. The design team has 350 people available for this task. Loreto Garcia, a designer explains, ‘We get our ideas from books, magazines, twitter and blogs but above all from feedback from our shops. Our customers tell us what they like and don’t like. We attend shows and talks about fashion to get ideas. It is a continuous process.’ The communication isn’t limited between customers and the company, staff of the stores are making use of wireless communications with the headquarters to send data about sales and inventories. This fast way of communication enables Zara to work with the buying patterns of the customers on a short term, therefore Zara has the ability of supplying the most wanted designs everywhere needed.
Another innovation of Zara regarding speed is related to a new idea to minimize the risk of oversupply. Zara starts off with a relatively low pre-season inventory commitment, which consequences in a higher competence of reacting quickly to new trends and orders. The entire process of a new product, from the initial idea till the moment on the shelf, takes only four weeks and Zara keeps most items for less than two weeks in stores as Zara has to innovate. Process innovation appears to be a very good innovation for Zara as product innovation can be imitated in a very short period of time, while the process innovation model continues to be profitable.
Zara had an idea to better present the outfits and encourage customers to buy combined outfits: displaying the garments together instead of on the regular way, everything sorted by category. Next to that, Zara owns 25 full-size shop windows with differing displays and lighting to display the image of the stores under different circumstances to the designers. This method innovates by enabling designers to test designs and ideas quickly and thoroughly, resulting in good image of the stores and thereby Zara.
Zara had learned from other global retailers that had often failed when expanding to foreign countries. As a result, Zara became extra cautious and started with joint ventures when expanding to foreign countries to gain access to prime real-estate and local expertise and to reduce investment risks. The next step in their strategy is buying partners out within multiple years as Mr. Jose M. Alvarez says: “We don’t mind investing in joint ventures to learn, but prefer to go alone”.
Perform an analysis of how Zara innovates.
Explain what constitutes ‘innovation’ in the context of Zara.
In the book ‘Exploring Strategy’ by Johnson et al. (2017) 4 innovation dilemmas are described. Explain how Zara deals with two of the innovation dilemmas: (i) The dilemma of Open or Closed innovation, and (ii) The dilemma of Product or Process innovation.
Entrepreneurs innovate by identifying and exploiting new ideas and inventions that result in innovations.
Innovation involves the conversion of new knowledge into a new product, process or service and putting of this new product, process or service into actual commercial use.