Many students and practitioners of supply chain management are likely very familiar with Spain based fashion clothing retailer Zara and its corporate parent Inditex.

Many supply chain management case study curriculums include the notions of how this chain initially pioneered “fast fashion” and extraordinary sales and inventory turnover through the practice of fast design coupled with localized production sourcing able to design and produce products in a matter of days.  Zara’s supply chain is likely accepted as the innovator in the practice of supply chain agility in retail supply chain management.

This week, the retailer has set about with a revised business strategy, a pivot that The Wall Street Journal described as: “the post pandemic future of retailing.”

While the retailer entered the pandemic on a strong footing, it views the future as being a more concentrated push towards online selling, supported by the highly responsive supply network capabilities that have been established for many years. The strategy positions high-performing stores as a part of the strategy for driving online sales, providing shoppers the ability to view merchandise and order directly online. The supply network would focus on quick delivery response, while the larger stores will reportedly be positioned as distribution hubs in a fulfillment from store form of delivery.

The retailer plans to shutter upwards of between 1000 to 1200 mostly lower performing stores and invest upwards of $1.1 billion in digital merchandising and selling capabilities over the next three years. The company currently has over 7400 stores globally, and in addition to the Zara brand, further include Bershka, Pull & Bear and Massimo Dutti branding. Reports indicated that most of the closings are expected to be in Europe and Asia.

The plan calls for growing revenue through a network of fewer, high-performing stores, supplemented by an increased online presence in geographic regions with previously smaller brick and mortar presence. The goal is to have online sales account for 25 percent of total revenues by 2022, up from the 14 percent that occurred in 2019.

In the retailer’s most recent quarter, revenues declined by 44 percent with an operating loss of €409 million.  The loss included a €308 million charge attributed to store closings and refurbishing. None the less, this retailer’s online sales rose by 50 percent as consumers turned to online while stores were shuttered by the pandemic.

Zara expects all of its global stores to be once again operating by the end of June.

We are highlighting this development because it immediately caught our eye.  Indeed, the headline of the future of retailing and supporting supply network response holds true. Students and observers of supply chain management now have the opportunity to observe the next chapter of the ongoing case study.

 

Bob Ferrari

© Copyright 2020, The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.