Its funny you ask. Below is the answer, nicely spelled out, thank-you-very-much.
I am currently trying to understand, as part of a larger research project, how a company that does little to no advertising (from what I can establish they spend .3% of sales versus 3-4% spent by their competitors), is ranked as one of the fastest growing brands. Oh yes, and they recently surpassed Gap (after passing H&M 3 years ago) to become the worlds largest clothing retailer.
Back to the image. Inditex, Zara’s parent, published this in their 2007 annual report. Its actually part of a more complex machine, highlighted in the upper left of the image. But we wont worry about that. What is interesting to me, is where they are focusing to enable them to build an industry-beating brand.
Customer at the center
As the picture shows. But everyone says this. According to Inditex, they focus on taking customer requests from the store and move it through the process of design and manufacture as quickly as possible.So each time they interact with customers there is potential for new inspiration. Its not clear exactly how this happens, but it is clear that new products hit the store twice per week, enabling them to respond quickly to new trends and ideas.
Zara only distribute in their own stores, as they want to control the entire experience with the customers. This too is highlighted in the image. From site selection and window displays to store architecture and service, the store is where Zara invests most, according to its 2007 annual report.
The store is the company’s main image vehicle
Zara has been expanding with openings in the world’s largest cities. Zara is very comfortable adapting prize locations and buildings to their needs, as you can see from these examples.
Projects are designed individually to take maximum visual and functional advantage for the store, by turning each establishment into a special place.
Approach to design and manufacturing
While competitors such as H&M outsource their production, Zara situates its 200+ designers alongside the manufacturing process – by collocating design and manufacturing, they are able to speed time to market. Zara is unmatched in the speed with which they take product to market (Harvard Business Review).
This is something Intitex is proud of, going to lengths to explain various ways in which it interacts with society at large and enables clear visibility into its activities.
At a tangible level this means it tracks on site visits and measures interaction with the media in a variety of ways. Metrics may be the key to understanding that Zara’s success is not just about one thing – it perhaps best reflected in the enormous number of metrics used to understand how the company performance in areas ranging from human rights in countries in which is does business to levels of waste produced for each garment created.
These types of measures are laid out in the annual report. And increasingly, these measures are not from Inditex themselves. In the same way that their financial are audited they have a range of 3rd party audits to help them better understand everything from how they are implementing their “code of conduct” to how they rank on a variety of sustainability indices.
All the details matter. In 2007 the company switched all store shopping bags to d2w which will result in plastics degrading (to water, CO2 and biomass) within 1-2 years versus 400.
Back to the question of how the company manages without advertising. Certainly the store experience has garnered them great “word of mouth” (I’ll need to come back to this and see if I can put some numbers against this claim, but Google clearly shows the trend in interest, which has ultimately been reflected in sales, too). And their first to market capability has to help too. But its clear that the magic of the machine, is the result of lots of moving parts and a focus on controlling the complexity which results from making these parts work together. In some ways this seems to follow the Apple script – control more of the key pieces that need to work well together, for example hardware and software or the in store retail and customer support experience.