Zara offers competitive advantages over its competition by:
• Offering new styles throughout the year rather than just the standard times of spring/summer and winter/fall. Zara introduces roughly 11,000 new styles throughout the year compared to the competitors who average 2,000 – 4,000 items.
• Creating customer demand for product by ever changing store inventory and having fast turnovers, this creates a sense of urgency for the customer. If they do not buy it now they may not have another chance. Zara stores turnover 75% every three to four weeks.
• Empowering store managers who are the ones most suitable to react to changing trends. The corporate structure gives great power to the managers in allowing them to choose which items go on sale, and when as well as specifically ordering items that they determine to be large movers.
• La Caruno store operates as a trial store to trends. The commercials are able to unroll new designs and trends and test them as a form of live, real time market research. From these findings they are able to adjust production rates, quantities and control the flow of goods throughout Zara’s distribution channels.
The increase in profitability from the proposed action item will resolve in recording positive margins by Year two of the rollout and record net income profits, before additional IT expenses by Year four at €12 MN
As the manager I would implement a trial Windows POS system in three Zara stores. I would focus on three stores that have large traffic and are in alignment with executive objectives. These stores would be: Spain – Madrid, France, and Italy. The rollout would be strategically done in these stores because it will give management a good feel of how each market will react to the change. Also, it is stated that executives want to focus on the Italy expansion, believing that there is the potential to have similar Zara store density to Spain. After the trial basis, the next step will be all new Zara stores that open will have the new POS system. Aligning with executive focus, the trail store in Italy will help with gaining an insight into the Italian market and help create the template for future growth. After the trial bases and the new store implementation, all stores will be gradually and periodically switched with a focus on higher volume, larger traffic stores. This gradual implementation will help save Zara from any environmental shocks to the company, such as change in customer
La Coruna will monitor the live stream of inventory levels from each store as a feature of the new POS and will be able to react faster to customer demands; this should help increase the efficiency and reduce the shrink waste that currently exists from a theoretical inventory system, increasing profitability.
If there is a catastrophic issue that arises in one of the three trial stores, it can be focused on and resolved/extinguished before moving forward with any other POS upgrades. The implementation team will be able to hone in on the one store that is having the problems and react quickly to it. This will create a wealth of knowledge and creativity around the new system. With every step the implantation team will develop the skill set to troubleshoot and problem solve more effectively.
La Coruna will constantly monitor and evaluate these stores in real time such as sales tracking and order placing to increase demand and supply forecasting by the commercials.
The initial trial will be done by a devoted IT team led by Sanchez and myself. We will dedicate 10 of the 50 person IT team to rolling out the new POS system in the trail stores. Since the current DOS POS system requires little upkeep and support the IT team should be able to work together in helping fill the void left by taking the additional team. There will be additional IT costs incurred but the rollout plan but the rollout should help mitigate this cost by identifying and addressing problems on a small scale.
There will be a need to hire additional IT personnel to support the new upgrades. No IT will be hired to support the existing DOS system, if needed we will take personnel that have already been trained and experienced from within. This method will reduce the knowledge transfer effect and any issues that may result from having an outside DOS professional working with specific, internally created applications.