A recent article by Boston Consulting Group suggests you try this experiment: “In your next internal meeting, divide a piece of paper in two. On the left side, record each mention of an internal topic, such as financial or operational performance, plans, metrics, organisation, employees, or culture. On the right side, record each discussion of an external topic, such as competition, technology, innovation, purpose, testing, social media conversations, or customers’ behaviors, needs, and wants. If you’re focusing more on the internal than the external, you are risking losing competitive advantage.”
“Despite their best intentions to focus on customers’ needs, most companies spend more time looking inward,” the article says.
One company that looks determinedly outwards is Zara and it performs incredibly well as a result. Sales at the UK subsidiary of the Spanish firm Inditex rose 8% to £535m in the year to 31 January. It made a pre-tax profit of £58.3m, up from £49.2m in 2015. Much of the brand’s success is down to its merchandising and retail footprint, as we discover in our exclusive interview with a former commercial director at the brand.
At Zara, merchandising is an artform with the entire business operating a feedback loop between customer preferences (in the form of sales data) and in-store experiences in almost real time, globally. “We have mock-ups of real stores where all of the merchandise is displayed and manipulated by a team of merchandisers before it hits stores,” says our interviewee. “Customers want to understand the store, they need to get a feel for it so we create that sense of familiarity.”
In fact, shoppers want two apparently conflicting experiences – newness and predictability – and these conflicting demands are balanced daily by a team of merchandisers working in reproduction ‘pilot stores’ in the brand’s head offices.
“New collections are displayed at the front of the store to immediately grab the customer’s attention and keep the offering fresh. Everything you can see in the immediate vicinity of that item will be matched to it. Head office merchandisers will arrange products as they think best and reorganize to try to stimulate sales. They’ll then take photos, which will be distributed to most stores across the world plus the commercial and merchandising teams that very same day. Shops will then re-merchandise overnight or early in the morning before the store opens.”
“If sales perform badly the stock will be re-merchandised by head office, photos disseminated and turned around in store the following morning. If poor performance continues for an extended period, a team from head office will come into the store to help turn performance around.”
Merchandising is such a business-critical element of Zara’s operation that employees are hired through that lens – they are looking for employees who have ‘an eye’ and can pull together a look. “Having employees that really like clothes and are interested in fashion, helps with customer experience. They want to share their interest with customers, so they have a valid opinion when customers ask their fashion advice.”
Zara is a growing business and a top performer in Customer Quotient. It’s this ability to leverage customer insight in close to real time that sets it apart from its competitors. As Boston Consulting Group puts it: “The effort to tap [customer insight], this overlooked source of competitive advantage, must begin at the highest levels of the organisation, with executives setting the tone for the process. By measuring, interpreting, and applying knowledge from customer experiences, and using this information to fuel decisions, companies can elevate their CI function – and their own position in the marketplace.”