BrainTrust Query: Expecting Zarafication?
By Devangshu Dutta, Chief Executive, Third Eyesight
Through a special arrangement, presented here for discussion
is a summary of a current article from the Third Eyesight blog.
What does the
Zara’s launch in India mean for the nation’s fashion and retail sector? Is
this the beginning of a new era? Should we expect Zarafication of the market,
where the customer is driven by fashion, and the supply chain will turn and
churn products faster than ever before? Should other international brands and
Indian fashion brands be worried?
A peek at history is useful here. It is said
that when Spanish conquistadors landed on the shores of the Americas they managed
to conquer the land and the people through a combination of guns, germs and
steel. [Credits to Jared Diamond for that evocative phrase.] That is, the Spanish
carried guns and fine steel swords but, most importantly, they also carried
diseases that were alien to the local population. In many places, the weakened
and leaderless indigenous people were simply too battered psychologically and
physically by disease to fight with the colonizers.
But it’s not doom
and gloom for brands and businesses that have a competitive spark of life.
Zara’s
business model in its home market was built on getting up-to-date fashion into
the market before anyone else, and at lower costs. Its prices encouraged fashion-conscious
consumers to buy more frequently, and though its limited production quantities
were a way of reducing risk, it added to the allure of the brand. In most overseas
markets, however, Zara is a somewhat more premium brand. The “value-for-money” for
the brand rests on fashionability rather than product quality.
The Indian consumer
base, on the other hand, is less fashion-sensitive than the European consumer.
This is not equivalent to being less sensitive aesthetically — Indian
consumers can tell good design from bad; allowing, of course, for varying taste.
However, value consciousness drives many consumers to buy during discount sales
with a delay of 2-3 months, rather than buying current fashions at full price.
This can be a problem for a brand that thrives on change.
Zara will initially
have a limited physical footprint. It is targeted at the premium to luxury
end of the market, fitting a certain physical profile of customer. Its products
that are imported are disadvantaged by a hefty import duty and shipping costs,
as well as the shipment lead-time. So, there is time available to Indian businesses
that want to adapt their business model, and learn from this new competitor.
With
the product development strengths and the agility that Indian apparel companies
have displayed in the past, there is no reason why Indian brands cannot compete
effectively with Zara on their home turf. When it comes down to it, I think
Indian businesses (the small ones, with less “organization” and “process” orientation)
are fast on their feet in identifying design trends and are able to respond
to the trends with products being available in the market very quickly. I would
call them the Indian “baby Zaras.”
So the real question is this: can
these Indian “baby Zaras” learn
to be disciplined and structured, and learn to scale up their businesses?
Discussion Questions: How have fast fashion retailers such as Zara recast
the competitive landscape in apparel? How should independent fashion shops
and national brands respond? Do you think Zara’s entry in India will have a
different outcome than here in the U.S.?
A big part of Zara’s success is that they have moved beyond what is largely a logistics-focused strategy of bulking out standard, “safe” assortments in large quantities and then competing on price promotion. Zara 1) spends a lot of energy focusing on emerging trends and then 2) delivers them extremely quickly in quantities related to the life of a trend, all in a continuing, high-speed loop.
Can other retailers adopt this approach? Of course. My bets are on the smaller, more nimble retailers. Larger companies, like larger boats, take a much longer time to change their course.
Zara is a rule breaker, breaking out of the traditional model. It could be that they will play a significant part in changing the way luxury and trendy apparel goes to market. The agile will survive and prosper.
Zara’s approach in India will likely look far different than anywhere else, primarily because India itself is unlike anywhere else they are doing business.
India’s percent of “modern retail” is in the mid single digits. Most all of India’s retail is conducted in small mom and pop store fronts and despite the huge population and increasing amounts of disposable income there remain a number of barriers to entry in India.
Amongst them are restrictions on foreign owned operations and how they will be allowed to expand. There is a proclivity to domestic operations which will provide a few more years of protection to enable them to counter chains like Zara and Walmart. Secondly, India’s infrastructure is pretty dismal and will be a significant hurdle for chains looking to speed to shelves.
This will be an interesting entry and certainly one to watch.
Zara’s always thinks outside the box of the traditional rules of retail merchandising and marketing. At the least they stretch the limits of the box. India will be an interesting market for U.S. Retailers to watch as Zara’s moves forward.
The U.S. market can use a maverick merchandiser. It could be the right timing for a shake up in the traditional ways of both how we merchandise and how we sell.
Fashion in much of the world revolves around four distinct seasons while India has only two seasons, i.e., hot and hotter. I assume Zara has done homework, otherwise, this would be a good learning exercise! Very small segment of the female population in India wear western clothing on a daily basis. Therefore, Zara’s market (volume) will be quite limited.
Zara in India is a fashion success story waiting to happen!
Zara’s foray in India is just going to be yet another success story in its kitty! The yuppie crowd with high disposable income will lap up Zara’s offerings!
In addition to negotiating the legal maze, the infrastuctural challenges, the viability of its vertically integrated manufacturing, and the wide range of competitors, Zara will need to carefully assess what the addressable market really is–in terms of numbers and the share of wardrobe they can really hope to compete in considering the multiple dressing ‘options’ the Indian consumer has–resulting in wardrobe fragmentation. Do the numbers really add up to make economic sense and match their ambitions???