9/24/2013 Content 1. Company background & Latest development 2. Fashion retail information systems (FRISs) used 3. Topics selected a) Social network marketing & Recommendations b) Inventory management & Recommendations 4. Conclusion ITC 4863 FASHION RETAIL INFORMATION SYSTEM 1. Company background & Latest development A) Background and History • Belongs to the Spanish fashion group INDITEX • First Zara store is opened in La Coruna, northern Spain in 1975 • Enters the fast fashion business in 1985 1. Company background & Latest development • 1763 stores in 69 countries (Europe, America, Africa and Asia) • Offers quality trendy products at the female, teen, men and kids. housewares brand (Zara Home) • Three logistics centers, located in the main Arteixo, province of La Coruna (Spain), and two in Zaragoza and Madrid 1. Company background & Latest development B) Mission The original business idea was very simple. Link customer demand to manufacturing, and link manufacturing to distribution. That is the idea we still live by. - Jose Maria Castellano Rios, Inditex CEO • Give customers an exclusive choice of fashion • Innovate its products to enhance shopping experience • Provide new designs at affordable costs • Made from quality materials which follow latest trends 1. Company background & Latest development C) Business Strategies Speed • Quickly respond to the demands of target customers • JIT manufacturing  to meet fast changing fashion market demand and trends Decentralized Decision Making • Commercials, product managers, and store managers are given autonomy to make many decisions Commercials: Design and pricing decisions Store managers: Inventory replenishment orders and store sales promotions  Allows Zara to quickly respond to the fast changing demand of the fashion consumer industry No Advertising Marketing Strategy • Low marketing expenditures of 0.3% on average • Zara spent relatively heavily on its stores to drive business  Located in a city’s prime retail district, often on the best-known street  Store layouts/ VM 1 9/24/2013 1. Company background & Latest development D) Organization Structure A lean organizational structure • Use of information technology  Reduces managerial hierarchy levels  Decentralize decision-making  Less redundant administrative procedures  Front line staffs can report to and communicate directly with the production center and designers in Spain  Shortens the product life cycle, allows for greater success in meeting consumer needs (From design to delivery it takes the company only two weeks) 2. Fashion retail information systems (FRISs) used • vertical integration  Has more control over several or all of the production and distribution steps involved in the creation of their product 2. Fashion retail information systems (FRISs) used Strategy • Use simple, minimal cost equipment that does not require a substantial amount of information systems support IT department • 50 employees • No Chief Technology Officer, a technology steering committee met occasionally to discuss new initiatives and IT changes Majority of software programs • Internally developed • Customized for Zara’s unique business needs 2. Fashion retail information systems (FRISs) used Inventory distribution manage • Personal digital assistants (PDA) were used at retail stores  Submit order forms  Process item returns to distribution centers • PDA’s are manually connected to a modem, once-daily to send and receive information from headquarters Point of sale (POS) systems used in the retail stores Hardware: PDA, Barcode scanner, POS terminal • Transmit comprehensive sales information and data to headquarter at the end of business day • Increase process efficiency and effectiveness • Has NOT been unchanged for many years • Operate on the MS-DOS system, which is no longer supported by the manufacturer, Microsoft 2. Fashion retail information systems (FRISs) used IT Category Definition Example Function IT (FIT) IT that assists execution of discrete function or task - Simulators - Spreadsheets - CAD/CAM software - Statistical software Enterprise IT (EIT) - Enterprise Resource Planning IT that integrates multiple functions by imposing new work (ERP) systems - Supply chain management structure (SCM) systems - Customer Relationship Management (CRM) systems - Sourcing/procurement software Network IT (NIT) 3. Topics selected a) Social network marketing b) Inventory management - E-mail IT that integrates multiple functions without imposing new - Instant messaging - Wikis work structure - Social Media 2 9/24/2013 SOCIAL NETWORK MARKETING SOCIAL NETWORK MARKETING - OFFICIAL WEBSITE - OFFICIAL WEBSITE - E-MAIL SENDING SOCIAL NETWORKING WEBSITE - E-MAIL SENDING SOCIAL NETWORKING WEBSITE - FACEBOOK - FACEBOOK - INSTAGRAM - INSTAGRAM - MOBILE APPS - MOBILE APPS - VIDEO PROMOTION - VIDEO PROMOTION Advantage • Overview: • Provide a trustworthy way for audience • Announce latest news efficiently • Develop brand identity through Look book and virtual layout in website • Zara’s website: • Customize their favor way of receiving message • Easily reach product information that consumer most concern • Encourage purchasing by mix and match of total look • Available to show in mobile device 3 9/24/2013 Quantity for display Official website Classify their items Filter Function • Available to show in mobile device Price and Name of item Quantity for display Mix and Match of its clothing Problems Unreadable code • Inefficient in communication • Lack of interactive between audience • Insufficient information shown 4 9/24/2013 Recommendation • Introduce real time customer service systems • Add “FAQs” (Frequently asked questions)section • Add “share” button Source:http://hk.burberry.com/store/ Source:http://www.topshop.com/ Source:http://www.topshop.com/ 2. Email Sending (not available in HK) SOCIAL NETWORK MARKETING - OFFICIAL WEBSITE - E-MAIL SENDING SOCIAL NETWORKING WEBSITE - FACEBOOK - INSTAGRAM - MOBILE APPS - VIDEO PROMOTION Subscribe for newsletter in Spain Zara 5 9/24/2013 Email Sending Advantage (not available in HK) • Connect to Customers • Promote latest news to customers Newsletters provide latest products , lookbook , events / Easily Cancel Problems Recommendation • Restrict to some regions only • Encourage more people to subscribe the news letter • Extend the services to more region as the technology already set up SOCIAL NETWORK MARKETING - OFFICIAL WEBSITE - E-MAIL SENDING SOCIAL NETWORKING WEBSITE - FACEBOOK - INSTAGRAM - MOBILE APPS - VIDEO PROMOTION 6 9/24/2013 3.1 Facebook Advantage • • • • Make use of information from social media Release latest news and information Effective to reach potential customer As a tools to improve by reading comments and performance of “like” and “share" • Building up brand awareness • Quick response • Market expansion Problems • Negative compliant will be shown to public and spread easily • Zara never response to the negative comments it shown not respect to the customer Recommendation • Response to the comment quickly • Preset standard answer for frequently asked questions Fans complaint Source: Zara official Facebook fan page 7 9/24/2013 SOCIAL NETWORK MARKETING - OFFICIAL WEBSITE - E-MAIL SENDING SOCIAL NETWORKING WEBSITE - FACEBOOK - INSTAGRAM - MOBILE APPS - VIDEO PROMOTION Source: Jack Wills official Facebook fan page 3.2 Instagram Instagram (Website & Mobile apps) A lot of followers (Website & Mobile apps) Consumer was complaining the slow update of Zara Instagram Last update : May of 2013 Advantage • Extend the fashion news to smart phone users • Users can get the information without place restriction Problems • Slow update of the instagram • Real or not? 8 9/24/2013 Recommendation SOCIAL NETWORK MARKETING • Fast update on instagram • Promote the official instagram on Facebook • Declare the official instagram on Facebook 3.3 Mobile apps - OFFICIAL WEBSITE - E-MAIL SENDING SOCIAL NETWORKING WEBSITE - FACEBOOK - INSTAGRAM - MOBILE APPS - VIDEO PROMOTION Advantage • Nice layout for mobile apps • QR code and barcode technology are extended to apps • Convenient for mobile users for checking news and shopping • Most of the essential information had been shown • Suggestions of product for total look useful for encourage consumer to purchases more Mobile shopping not available in HK Mobile apps Smart phone for scanning the barcode or QR code 9 9/24/2013 Problems Recommendation • Restricted in some region only • Inaccurate information provide, stock out should be shown rather than telling customer at the last moment before payment • Promote on Facebook and make it more popular • Extend the services to more region as the technology already set up 4. Video Promotion Youtube Channel SOCIAL NETWORK MARKETING - OFFICIAL WEBSITE - E-MAIL SENDING SOCIAL NETWORKING WEBSITE - FACEBOOK - INSTAGRAM - MOBILE APPS - VIDEO PROMOTION Link: http://www.youtube.com/user/zara Advantage • Good to post video on YouTube to promote the latest collection • Save advertising costs • Advertise globally • People now switch to watch YouTube more than television • Product details and total look can be show clearly 10 9/24/2013 Problems • Insufficient of information e.g. description of the video • Only YouTube channel Recommendation • Some essential information can be added into description e.g. Product appeared in the video, website link • Make use of subscribers habits data provided in YouTube to understand the habits of viewers • Disclose video on other popular video channel e.g. vimeo b) Inventory management • Three cyclical processes: ordering, fulfillment and delivery 3. Topics selected a) Social network marketing • Goal: - Quickly and accurately responding to shifting consumer demands - Improve efficiency of inventory ordering and handling processes Zara inventory management system b) Inventory management 11 9/24/2013 b) Inventory Ordering • Place order twice a week (replenishment of existing items and initial orders for newly launched clothing items) • Use handhelds computer linked with headquarter to finish ordering Procedures: • Digital order form (the offer) was transmitted to all stores’ handhelds computer (less than 24 hours before order deadline) • Include descriptions and pictures of the newly available items, replenishment items • Offers were developed by a team of commercials based on product availability, regional sales patterns, trend forecast of each location • Manager send the completed form (the order) back to headquarter b) Inventory Delivery • One or two days after order placement • Clothes did not stay long in distribution center flowed quickly and without stopping from factories to distribution centers to stores • European stores receive their orders within 24 hours • Asia and the Americas receive theirs within 40 hours • High flexibility: store manager has authority to make replenishment order decisions b) Inventory Fulfillment • Aim: match up the supply of finished clothes in distribution center with customers demand • Information required: 1)aggregated orders from all stores 2)total supply of inventory in distribution center  At the end of each business day, each store transmitted daily sales back to headquarter via POS terminals • Supply and demand lined up closely for a particular SKU Commercial team simply allowed the inventory to be divided to the number of stores that wanted the product • Demand of an SKU was greater than supply Commercial team had to review the sales performance of each store Determine which stores would get the available inventory b) Inventory Delivery • Automation and computerization in distribution center information systems tracked where each SKU was stored as it entered the distribution center  Controlled the conveyor belts to pick them up and drop them off at the appropriate places Benefits, Problems and Recommendations Benefits, Problems and Recommendations The benefits of their current strategies and implemented technology in inventory management include • Low operational costs • Low computer expenses • Small IT workforce • Zara’s POS terminals use a basic MS-DOS application that  Requires no special IT intervention to set up a new store’s operations  Their simplified process for opening new stores, is very effective, and requires little to no extra resources outside of the store managers at the new store location  A large cost-saver for the company 12 9/24/2013 Benefits, Problems and Recommendations Benefits, Problems and Recommendations The problems of Zara’s inventory management information system are as followers: Primary/ Secondary Activity POS Terminals to record sales transaction Already Has Problems/Needs Internally developed 1. POS Software, Installed on floppy disc 2. 3. Ordering Digital Order Form, PDA, Fax Machines 1. 2. IT Infrastructure Operating System and Internally developed software 1. 2. Theoretical inventory not accurate due to theft, damage, or other losses, etc. Dial up Modem prevents real time processing Floppy Discs outdated Decision Making Level Store Managers PDA devices were not connected to other stores to check inventory levels Fax Machines unreliable due to malfunction, paper shortage Store Managers MS-DOS System no longer supported by current IT providers No formal process to evaluate IT projects Technology Steering Committee Benefits, Problems and Recommendations • Main strategy: link customer demand with manufacturing and distribution • Current IT infrastructure is no longer sufficient to deal with current modern technology and will not be sustainable in the future as the company continues to grow and expand internationally  Upgrading their current hardware and software applications will increase the value of those processes impacted and in turn create competitive advantages for Zara Benefits, Problems and Recommendations Upgrade the DOS based Point-of-Sale (POS) system • Upgrade systems to a modernized, supported operating system  Choose a current operations system such as Windows 7 to run their programs on • The IT department: conduct a detailed review of all of Zara’s current hardware, software, and automated processes • Boutique IT firms that specialize in writing software programs to meet the unique needs of Zara • Zara has historically developed the majority of their software internally  Continue to have a major role in the development of their software programs  Outsource more complex programming to a boutique firm Benefits, Problems and Recommendations • Zara should consider upgrading its DOS based Point-of-Sale (POS) system to Intuit-HP Retail Solution  More sophisticated than a cash register and more durable than a PC  track customers, manage inventory, and get business insights • Store managers are increasing requesting the ability to look up inventory balances in their stores and other stores  All POS terminals should be able to communicate with corporate or other stores at any time  POS system should be upgraded, each with a wireless card and the ability to track, create, and submit orders Benefits, Problems and Recommendations Use Radio frequency identification (RFID) 3. Reduce inventory levels and lower distribution and handling costs 1. Labor and time Reduction • Automate the inventory management process  Labor and time reduction • sales person can register the RFID transponders by simply walking by the merchandise to gather the data; they no longer needed to scan each individual barcode. When customers are requesting a product, staffs can also locate individual items.  allowing management systems to log the incoming and outgoing data in real-time 2. Reliability • In general, the RFID technology is of good reliability compared with the previous Barcode technology  It provides stable assistance for the inventory management at different levels • Data is automatically entered into a central database  Chance of human error is lowered  More accurate data and information can be generated in the later process • Get the right products to the right place at the right time  With the use of RFID, ZARA can solve this problem with the accurate and real-time information on inventory quantities and movement to reduce the inventory levels and lower the distribution and handling costs • RFID’s non-line-of-sight property and the Smart-shelves  Effective inventory management E.g. The ability of forecasting product demand is expected to improved by 10-20% when compared to traditional systems E.g. Inventory levels could be lowered by 10- 30% E.g. Sales would be increased by 1-2% by reducing the chance of out-of-stock 13 9/24/2013 4. Conclusion 4. Conclusion • Unique software and automated processing provides value to their business • Zara’s social network platform should be more interactive • Customer relationship will be enhanced • Upgrade the DOS based Point-of-Sale (POS) system • Use RFID Reference • Mcafee, A., Dessain, V. & Sjoman, A. (2007). Zara: IT for Fast Fashion • Ghemawat, P. & Nueno, J. L. (2006). Zara: Fast Fashion • http://www.slideshare.net/koffman/zara-case-study2780928?src=related_normal&rel=7739040 • http://opimweb.wharton.upenn.edu/documents/seminars/InvMgtRetailNetworkv24final.p df • https://domino.fov.unimb.si/proceedings.nsf/0/d77580916d41b8f0c1257180002f9a7c/$FILE/03_Loebbecke.pdf • http://www.decisioncraft.com/dmdirect/pdf/rfidapplications.pdf • http://www.encyclopedia.com/topic/personal_digital_assistant.aspx • http://www.123helpme.com/view.asp?id=97642 • http://www.gallaugher.com/Zara%20Case.pdf • http://www.carlospitta.com/Courses/Negocios%20Internacionales%20y%20EBusiness/Readings%20and%20Papers/Parte%209/Zara%20(Harvard%20Case).pdf • http://fashion2011marketing.wordpress.com/tag/pos/ • http://www.oppapers.com/essays/Zara-Fast-Fashion/154495 • http://www.topshop.com/ • http://hk.burberry.com/store/ • http://www2.uhv.edu/luj/MGT6352/Samples/Student%20Sample%202.pdf 14