ATEC LLC
Question
Asked 17 April 2015
Which fashion luxury firm's business model is the most innovative? Why? What role does its network contribute to its market power?
I am interested in gaining a better understanding of how fashion and luxury firms leverage their extended network (e.g., strategic alliance partners) to build and sustain a competitive advantage in the market.
Most recent answer
Dear Nabila,
Thank you for sharing your research on Yellow with me. I very much look forward to reading it in the next few days. I am particularly interested in learning about Yellow's approach in creating their own proprietary business ecosystem and its contribution to Yellow's success in the market. Hopefully, the article touches on this point or perhaps you have some notes from your research that do - that you could share with me.
Cheers,
Rich
Popular answers (1)
Georgetown University
Zara is one of the more studied fashion retailers. It is expanding while other specialty retailers struggle to get customers in stores. Traditional firms (such as Abercrombie & Fitch, Ann Taylor, American Eagle, and Gap) have design teams creating products they think will be trending next year. But, a fashion miss will mean markdowns and lower profits. Zara's business model eliminates this risk: the company stocks very little and updates collections frequently, meaning, twice a week instead of once a year. The secret of Zara's success lies in the connection between stores, in-house designers, and factories. Twice a week, a store manager sends an order to Zara's headquarters: this draws from the sales data for the store but also from anecdotal evidence from shoppers (the larger network) about what they like or do not like. The commercial team will then compile the order—adding new products and balancing out demand with other stores—before sending that to the manufacturing hub. Within two days, the order will reach the requesting store. At the same time, the commercial team liaises with the in-house designers to identify sales trends and develop products that meet them. Business Model Innovation, available at http://www.adb.org/publications/business-model-innovation, covers most aspects of business models.
3 Recommendations
All Answers (10)
Georgetown University
Zara is one of the more studied fashion retailers. It is expanding while other specialty retailers struggle to get customers in stores. Traditional firms (such as Abercrombie & Fitch, Ann Taylor, American Eagle, and Gap) have design teams creating products they think will be trending next year. But, a fashion miss will mean markdowns and lower profits. Zara's business model eliminates this risk: the company stocks very little and updates collections frequently, meaning, twice a week instead of once a year. The secret of Zara's success lies in the connection between stores, in-house designers, and factories. Twice a week, a store manager sends an order to Zara's headquarters: this draws from the sales data for the store but also from anecdotal evidence from shoppers (the larger network) about what they like or do not like. The commercial team will then compile the order—adding new products and balancing out demand with other stores—before sending that to the manufacturing hub. Within two days, the order will reach the requesting store. At the same time, the commercial team liaises with the in-house designers to identify sales trends and develop products that meet them. Business Model Innovation, available at http://www.adb.org/publications/business-model-innovation, covers most aspects of business models.
3 Recommendations
National Institute of Fashion Technology
You can also read some case studies related to Sport Obermeyer available online. Their core competency lies in their strategic alliances with production vendors, fashion forecasters, etc.
1 Recommendation
I agree with the two first comments that Zara and Sport Obermeyer are two great examples. You might also want to read the HBS Gucci turnaround case study by Yoffie & Kwak. This shows how a luxury firm in trouble managed to reinvent itself: https://cb.hbsp.harvard.edu/cbmp/product/701037-PDF-ENG
Cynthia Montgomery also describes the turnaround in her book The Strategist. I have written a short summary of the book on my blog (below) and of course you can get it from Amazon.
Good luck with your research. Mark
2 Recommendations
ATEC LLC
Dear Olivier, Lipsa, and Mark,
I greatly appreciate the kind replies - I found all of your comments and suggestions to be very helpful. Given your feedback, I was curious if you wouldn't mind taking a few minutes to critique the attached Competitive Analysis tool I prepared to quickly compare and communicate the competitive positions of the players involved in Fast Fashion.
While I recognize Sport Obermeyer isn't in the same line of business as ZARA. I included them here because their business model and its network ( or innovation ecosystem); I use the term Network here to signify external relationships, partnerships, consortia, and affiliations to gain a competitive advantage. Feel free to replace Sport Obermeyer with another direct competitor to ZARA should you know one.
@ Olivier.... I thought your article Business Model Innovation was excellent. I especially liked Table 1: Possible Innovation Targets, and Table 2: Key Elements of a Business Model. As well as your comment, "To be able to perform at a higher level than others in the same industry (or market), organizations must make choices that optimize their business ecosystem."
@ Lipsa.... If you can share any more information with me about Sport Obermeyer and their strategic alliance, it would be greatly appreciated.
@ Mark....I will be sure to purchase a copy of the Gucci case study, along with Cynthia's book.
Thanking you in advance for your comments and any feedback you might care to share with me regarding my Competitor Comparison. I can be reached at < richmcdon129@gmail.com > or at Richard.mcdonnell@parker.com
Cheers,
Rich
National Institute of Fashion Technology
Dear Rich,
Sport Obermeyer is not a fast fashion brand but its vendor management strategies are very strong. You can study about H&M which also follows the fast fashion theory but it is not as successful as Zara. You can also read their failure story to analyse what went wrong. I am sending two case studies on Sport Obermeyer and Zara. UCB also follows a fast fashion theory. You may go through the following articles. Hope it will help you in some way.
Best wishes
Lipsa
Georgetown University
The Competitor Comparison Matrix singles out four sources of competitive advantage: (i) cost-based, (ii) technology-based, (iii) relationship-based, and (iv) business scope. From a business model perspective, a second look at the article posted at http://www.adb.org/publications/business-model-innovation, for one, would suggest that such sources might relate to (i) business structure, (ii) organization, (iii) supply chain, (iv) products and services, (v) customer service, (vi) customer experience, and (vii) administration. With hindsight, prompted by the reference the Competitor Comparison Matrix makes to relationships, I would add intellectual capital as an eighth source (comprising human capital and relational capital but excluding structural capital since that is already covered by elements within (i) to (vii). A Primer on Intellectual Capital, available at http://www.adb.org/publications/primer-intellectual-capital, elaborates. This said, Deng Xiaoping noted that it does not matter whether a cat is white or black as long as it catches mice.
1 Recommendation
ATEC LLC
Mark - for some reason your comment didn't completely post.
Please retry - I am looking forward to reading your comment.
Rich
ATEC LLC
Dear Nabila,
Thank you for sharing your research on Yellow with me. I very much look forward to reading it in the next few days. I am particularly interested in learning about Yellow's approach in creating their own proprietary business ecosystem and its contribution to Yellow's success in the market. Hopefully, the article touches on this point or perhaps you have some notes from your research that do - that you could share with me.
Cheers,
Rich
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