Zara’s Post-Pandemic DX Strategy
November 2 , 2021
Following the breakout of the COVID-19 pandemic and major blows to the offline shopping industry, Zara announced its 2020-2022 plan, under which it aimed to engage in a digital transformation strategy. They planned to invest more than 1 billion euros to boost online shopping and almost double that amount to integrate their store platforms, for a total of nearly 3 million euros of investment. Specifically, they created their own digital platform with specially-made IT architecture based on big data analysis.
Zara says that their strategy is a culmination of steady projects and investments since 2012 and that this digital transformation will significantly change its profile. Ultimately, Zara hopes to use their digital platform to created “integrated stores” through which customers can enjoy uninterrupted service any time or anywhere from a digital device.
Beginning with an e-commerce platform, Zara corporate parent Inditex’s Open Platform (IOP) project has layered in all processes associated with the retail chain, including inventories, purchasing, distribution, and orders, greatly increasing flexibility and scalability. The developer claims this platform is “one of the most technologically advanced platforms in its field”. If scalability can be managed correctly, it will be able to handle peak traffic, especially during sales seasons. The platform is expected to be fully functional by 2022, according to announcements made by the company in 2020. Furthermore, Inditex expects that online sales through their platform will account for over 25% of total sales by 2022, and that higher profitability will help generate 4-6% of annual growth.
In addition to enabling an improved integrated store-online shopping model, the new RFID system also enables garment tracking and integrated inventory management across all its brands. This helps Zara track demand with no time lags, efficiently manage their stocks, and fine-tune their production. It will also help customers check stocks in real time for online purchase and then collect their purchases at offline stores.
Zara has been praised for their supply chain innovation in retail. Creating and sustaining these capabilities takes careful planning and persistence, which Zara has demonstrated through their long-term planning and investment. They have also received praise for their new digital move, as it contributes to their desired image as a sustainable brand. This is especially important when other competitors are making moves to becoming more sustainable companies with online retail models. Zara took things one step further with their specially designed platform.
Zara is an innovative fashion company that has disrupted the distribution structure. With constant digital transformation since 2005, Zara has been able to readily face challenges, even despite the COVID-19 crisis. Thus, investors and retail industry followers are anticipating Zara’s digital transformation.
