Supply chains still have a long way to go when it comes to fulfilling the need for speed.
And chasing Zara always seems to be the go-to solution, but what many haven’t yet figured out is that Zara can’t be caught.
Speaking at the Cowen Future of the Consumer conference last week, John Thorbeck, chairman of Chainge Capital, which provides speed-to-market analytics for the retail supply chain, said fast fashion has really wide disparity and Zara is the outlier that’s way ahead of the game.
In his Zara Gap model, Thorbeck explains that Zara’s lead over the rest in the sector has a lot to do with the fact that the fast fashion master has nailed the style and speed equation.
The question retailers trying to at least catch up with Zara should ask themselves is: “How do these two [style and speed] come together in an industry of high risk and high volatility and right now, a tremendous amount of transformation?” Continuing, Thorbeck said, “I think there are a handful of retailers that are beginning to define this problem not as a supply chain problem, but as a merchandising issue.”
A company’s core values have to be challenged at the merchandising level if there’s ever to be any hope of speeding up their supply chain model—it’s an entire cultural shift, really.
If a company takes the position of “our culture is going to change and we perceive this as a business model and not just speeding up what we do, then you’re going in the right direction,” Thorbeck said.
Of the glut of retailers still in the game—though many are hanging by that last thread to break before bankruptcy—Thorbeck said there are only five that have separated themselves from the rest of the struggling industry: Zara, H&M, Uniqlo, Primark and Amazon.
“It’s not so much what they’re doing in terms of channel growth, it really has a lot to do with how they manage risk,” Thorbeck said. “Largely what that takes is engaging your supplier community and not just treating them as your low-priced source of goods.”
Ever eager to ruffle retail’s feathers and get the sector to realize the error of its ways, Sourcing Journal founder and publisher Edward Hertzman, who also spoke on the panel, said simply, “I think this industry is ripe for implosion.”
The problem in retail today, he said, is that traditional retailers think they can fix a broken model, but that line of thinking is flawed.
“There’s two things that need to happen: One, you need to have a great brand, a great story and a great experience, and experience doesn’t mean there’s a merry-go-round in Macy’s,” Hertzman said. “And then it’s all going to be about supply chain, and supply chain doesn’t mean I source 5 cents cheaper out of Dhaka than Vietnam. It’s the logistics and the ability to fulfill orders and reduce inventory that’s going to be key.”
Things like proximity to the customer, customization and advancements in technology that allow for increasingly instant gratification are some of the key things fueling the need for speed, and no matter the amount of conferences and seminars geared at driving these points home, too many retailers are still at a loss for how to get out of their own way and chart a successful path forward in retail’s new landscape.
“What’s happening is we are going through an unprecedented cycle of change,” Xcel Brands chairman and CEO Robert D’Loren said. But, he added, “There is hope. And what we need in the industry now is to innovate our way out, and we will.”
The reason there’s such disparity between where Zara falls on the retail success spectrum and where everyone else stacks up is because Zara has figured out how to design on the fly, empower the right people to go further into things that are working and get quickly out of things that aren’t.
“The challenge is Zara is turning six to seven times and the average department store is turning three,” D’Loren said.
And that’s Zara’s major claim. As Hertzman pointed out, “Zara is not the best advertiser, they’re not innovative in technology, their stores aren’t this amazing build-out, the 5th Avenue store return line is an hour long.”
So what is it that Zara’s doing?
“The essence of it is speed of decision making, and to replicate that is true collaboration,” D’Loren said. “We can design for the consumer what they want because we have data and we can put it in the store fast.”
To get there, retail will need a near-complete overhaul and the industry will have to look beyond the walls of retail for answers.
“The innovations won’t come from the retail community,” D’Loren said. “The innovations need to come from the vendor community working with the retailer.”
Chiming in with equal parts realization and warning, Hertzman said to the room of investors and analysts, “One of the things I think has destroyed this business is a lot of you guys in this room, Wall Street, the VCs. You can’t survive on never-ending growth.”
Companies sourcing in Mexico will very soon be facing labor costs that are 10 percent higher.Read more
The North American Free Trade Negotiations have turned into a blame game about which party is doing the most to damage the deal. Needless to say, little progress seems to have been made at the fifth round of negotiations that wrapped in Mexico City Tuesday.Read more
These retail technology startups are enabling retailers to boost operational efficiency and improve consumer purchasing journeys on multiple channels.Read more
Neiman Marcus revenue up on e-commerce initiatives and women's, Burlington income surges on strong assortment and off-price model, Madewell boosts J Crew's top line and Free People leads Urban Outfitters.Read more
FDRA data revealed that footwear consumers may be shopping more in stores for the holidays.Read more
Price may be king but convenience governs much of the way traditional retailers are thinking about their customers today.Read more