Vertical Retailers - Mass or Fast

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En provenance du cours de Università Bocconi

Management of Fashion and Luxury Companies

1867 notes

Università Bocconi

Management of Fashion and Luxury Companies

1867 notes

Learn how fashion and luxury companies work and understand their brands, products, retail, and communication strategies. Travel through business models, international development, and product categories with industry influent experts. Adopting a case-study approach, the course presents strategic brand management in luxury and fashion companies as a balancing act: tradition vs. innovation, expertise vs. experimentation, casual vs. stylish; in order to increase the brand value by nurturing the brand heritage and at the same time staying fresh, relevant, and contemporary in the global marketplace. Topics such as the impact of new retail channels, new media channels, and new business declinations for the brand and emerging markets will be discussed in the course.

À partir de la leçon

The Evolution of Business Models: From Designers to Fast Fashion Retailers

This second week will be significantly denser and more time consuming than the first one. The topic is that of Business Models in Fashion and Luxury, and will give you a lot of important insights on this industry.

Luxury Brands6:27

Luxury Conglomerates4:09

Premium Brands5:45

Designer Brands6:22

Vertical Retailers - Mass or Fast8:20

Rencontrer les enseignants

Erica Corbellini
Director
MAFED - Master in Fashion, Experience and Design Management
Stefania Saviolo
Director
Luxury & Fashion Knowledge Center - SDA Bocconi

We talk now about vertical retailers.

A business model that grew a lot in the last decade let's say.

All over Europe but even globally.

Thanks to the very fast, the booming growth of brands Such as Zara,

H&M Uniqlo, Mango, and Promode.

The vertical retailer is a called vertical because

actually they are not limited to the distribution and retailing activities.

But, actually in order to better manage the interaction with the customer,

the brand into the retail place.

They go backward,

integrating also the design process and the communication process.

So verticalization is a key issue of this business model.

There are two kinds of players among vertical retailers.

The one that are less responsive to seasonality and

fashionability that we call as a mass basic retailer.

And those that are more responsive to fashionability that we

would call fast fashion retailers.

Mass fashion retailers, think about the GAP or

Uniqlo, are usually brands and companies offering a very

wide range of products where the value proposition is about

an iconic style a very large and wide

availability of product categories and an iconic style.

Of course being in

the mass market the price is always very convenient.

In the case of fast fashion retailers.

The value proposition is about fashionability.

The innovation that was brought by them in terms of value proposition was to offer

a flow delivery of fashion products, even every two weeks in the case of Zara.

So products that are fresh, products that are bringing the point of sales.

No there are not any more related to the a long

seasonal cycle that might last six months, but really, we are talking about weeks.

Again, the store is wide the atmosphere in the store is engaging,

and the pricing is usually very, very convenient.

Let's talk about the how.

So how these vertical retailers are designing their value chain and

supply chain.

Here there are, again, differences.

Because we move from brands and companies such as Zara.

With a vertical integration, that is 100%.

So from design to manufacturing to distribution to retail.

To companies are controlling

only some of these activities, for instance, H&M and the Gap.

They do not own factories, but actually they have sourcing and

production offices close to the network of suppliers in low cost countries,

and the manufacturing is made 100% outside of the company.

And there are also other ways to manage the chain.

For instance a company such as Benetton or Mango among the vertical

retailers are not owning the retailer or

the distribution but actually they rather go through franchising and agreements.

And they don't own the stock in this store but actually,

they allow merchandising returns.

So you see that there are different ways in

interpreting the design of a value chain among vertical retailers.

When we talk about specific cases that are very successful

such as the fast fashion retailers you cannot mention a company such as Zara.

Zara is part of the Inditex group a Spanish company.

Actually that brought a great innovation.

That is an innovation 100% in terms of business models.

So you can’t understand, really,

this innovation if you don't take into consideration all the four elements.

First of all, at the center of the Zara model you have the customer.

You don't have the product,

you don't have the designer, you don't have the store, but you have the customer.

And the other element that you have to take into consideration is that

the product might be brought into the store every, up to two weeks.

So, the product’s life cycle lasts two weeks.

The three key elements of the success behind

the Zara business model are customer centricity first, as I already said,

the efficient logistics and the flexibility of this model.

The customer centricity means that actually, the design starts as for

any other company with the interpretation into the product of the seasonal trends.

The product arrives in store, but thanks to the fact that the stores are owned

by the company, they can have a daily feedback about what is sold,

in which styles, in which colors, in which sizes.

And therefore, the company is able to update the collection,

being very much related to what the customer wants.

Because the capability to interpret this feedback give

Zara the possibility to work on the product and

send back products that are more aligned with the needs of the market.

The manufacturing, of course, works on short runs.

So small productions, more orders with a fast, and frequent delivery.

And so the system is able to be really very responsive not only to

market trends, but what is more important now to customer needs and preferences.

talking about Zara's capability to manage

the logistics and the flexibility of its logistics system, and we can say that.

And the fact of being close to the market in terms of manufacturing. Zara’s

manufacturing is located in Europe, in Spain, in markets that are very close

to the stores, actually ensure our rapid response to the change in the demand.

Second, a high investment in logistics and logistic platforms. There are four,

five logistic platforms in the the Spain, in the Spanish market.

Actually allows to update constantly the product.

Last but not least the fact as I said, the store is managed in house.

Gives the possibility to read effectively the feedback

from the retail place.

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