FMCG [fast moving consumer goods] usually refers to things like the bread and milk you might add to a weekly shopping list. Fashion label Zara have used the same model to grow from a single retail clothing outlet in Galacia, Spain, to over 5,000 stores in 73 countries and this week having opened their first in Sydney, Australia.
To Zara, FMCG really means ‘fast, meme, cheap and good’. The strategy has position the company at the retail peak with $7 billion in turnover yet in an industry that is flat in response to the GFC.
Zara owner, Amancio Ortega, created what he calls ‘instant fashion’. Taking trends straight from the cat walk through an accelerated design, manufacturing and distribution process to retail shelves within only three weeks. The industry average in this case is six months easily promoting Zara to pole position for fashion savvy consumers seeking to be ahead of the fashion curve. In Zara’s fast retail environment, stock may remain on shelves as little as 4 weeks encouraging customers to return regularly. A high-street retail store might expect customers to visit 3 or 4 times per year, but Zara customers visit on average 17 times a year.
Fast production and distribution in the past would have only increased cost. Today a phenomenal shift has meant that fast can also mean cheap. Zara has lead a trend amongst retail stores including Primark, H&M and online store ASOS, in providing cheap chic on a mass scale. In this formula, it is the law of numbers that rule and Zara produces more than 11,000 distinct items each year compared to only about 3,000 by its competitors.
Zara controls most of the steps in it’s supply chain. In a system called JIT (Just In Time) developed by Toyota Motor Corp. Immaculate finesse allows self-containment in the stages of materials, manufacture, completion and distribution. It has allowed Zara to maintain the highest levels of product quality products not only fast and cheap, but really good.
The final element to Zara’s success story is it’s leverage of meme. This is a relatively new term used to identify ideas, behaviours or styles that spreads from person to person within a culture. In providing high end fashion at an affordable price and creating an environment of anticipation around launches, Zara cleverly owns a meme in the fashion retail space.
Discounting prices alone is not the answer to growing a business, but neither is high quality production or speed of deliver at the cost of inflated price. Zara proves that a model where fast, cheap and good rotating around a meme is not only possible, but profitable.
Do you dare to consider whether you business will follow Zara’s FMCG model? I know I will.