Drilling for Diamonds

Hot fashion retailer Zara has one plaudits for the way it taps into fashion trends and converts them into hot clothes that are affordable - amazingly fast.

A Zara design can go from concept to store within 30 days. Zara employs over 200 staff in its Spanish design and development team. The team churns out an amazing 1000 styles a month.

The mantra in Zara is react rather than predict. Zara’s designers don’t attempt to predict or share the market like most of their competitors. Zara reacts to what they in the night clubs, on the streets and on the catwalks and tests them in their shops. What sells is replaced quickly. The sale dogs are cut.

Its a magic formula. Customers love it. They get the latest fashions, fast and cheap.

Zara’s short lead times means it continues to deliver more fashionable clothes. Thats why customers return to the store - on average an amazing 17 times a year (most competitors average 3). The lower quantities mean the fashion items are often in short supply. Low surplus stock means Zara doesn’t have to regularly purge its stock with massive end of season sales - so margins remain high.

The huge range of styles gives the customer more choice and improves the odds of Zara getting it right. Because Zara customers know Zara is always updating its stock, Zara spends very little on advertising. Zara’s hot fashion creates massive word-of-mouth among it’s target customer base.

When Ortago Gaona, the founder of Inditex, the owners of Zara, is asked what Zara does, he replies “Zara provides freshly baked clothes.” For the staff this translates into: react rather than predict.

The Zara formula also suggests that before long we will find that a lot more fashion brands will have to own and run their own retail outlets. Zara’s “fast fashion” is built on getting daily feedback from its own stores and using it’s sales associates and store managers as “trendspotters.”

Popularity: 43% [?]

Every industry I work with is relentlessly under attack from commoditizers.

When Bronco Wine Company, now the fourth largest wine producer in the U.S. produced an under $2 bottle of wine, industry insiders treated the offering with contempt.

The quality had to be CRAP, and I don’t mean CReative Accounting Practice.

Critics and fans have named the product “Two-Buck Chuck.” So imagine the surprise, at the 2004 Eastern Wine Competition, Bronco’s 202 Shiraz won the coveted double gold medal from a field of 2,300 entries.

It will be interesting to watch the reaction to the high-end $3.99 Merlots and Chardonnays, nick-named “Four-Buck Fred.”

You may hate the Two-Buck Chucks of this world, but unless you come with a superior value proposition that sets you apart your business is history.

Popularity: 17% [?]

I am often asked how long it takes a customer to fix on their impression of a sales person.

I used to answer, “4 minutes.”

This reply was based on research on the time it took job interviewers to make up their mind on the suitability of a job applicant.

However, I now answer “10 seconds.”

In their remarkable studies, social psychologists Nalini Ambady and Robert Rosenthal, have shown that we often form positive or negative impressions of people in a mere “blink” or “think slice” of time.

After subjects watched three two-second video clips of professors teaching, their teaching ratings predicted the actual end-of-the-term rating by the professors own students.

To get a feel on someones energy and warmth, the researchers concluded just six seconds is usually enough.

Popularity: 10% [?]