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 roll-out 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 roll-out 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.
