10.1 Corporate VMS

Value fulfilment across the globe

Retailing is all about position. It certainly must be when we find that stores are willing to pay over $6000 per square metre per year to locate in Sydney's Pitt Street Mall or a bit less - some $4500 - to locate in Melbourne's Bourke Street. When we look at the global retail scene, we see that New York's Fifth Avenue is the most expensive retail position, followed by Hong Kong's Causeway Bay and then Paris's Avenue des Champs-lyses (which has overtaken London's New Bond Street), followed by Milan's Via Montenapoleone, Zurich's Bahnhofstrasse, Tokyo's The Ginza, Seoul's Myeongdong, Vienna's Kohlmarket and Munich's Kaufinger/Neuhauser. In each of these locations, we find two ingredients that explain the astronomical rentals that retailers pay: high-end brands and tourists.

The Spanish fashion retailer, Zara, has spread around the globe, including to Australia. Its Melbourne store, located on Bourke Street in the CBD, is adjacent to rival department stores and close to the many boutiques tucked away in shopping arcades and lanes. Zara has attracted a near cult-like clientele of shoppers swarming to buy its 'cheap chic' - stylish designs that resemble those of bigname fashion houses but at moderate prices. However, Zara's amazing success comes not just from what it sells, but from how fast its cutting-edge distribution system delivers what it sells. Zara delivers fast fashion - really fast fashion. Thanks to vertical integration, Zara can take a new fashion concept through design, manufacturing and store-shelf placement in as little as two weeks, whereas competitors, such as Gap, Benetton or H&M, often take six months or more. And the resulting low costs let Zara offer the very latest mid-market chic at downmarket prices.

Speedy design and distribution allow Zara to introduce a copious supply of new fashions - at three times the rate of competitor introductions. Then, Zara's distribution system supplies its stores with small shipments of new merchandise two to three times each week, compared with competing chains' outlets, which get large shipments seasonally, usually just four to six times per year. The combination of a large number of timely new fashions delivered in frequent small batches gives Zara stores a continually updated merchandise mix that brings customers back more often. Fast turnover also results in less outdated and discounted merchandise.390

Q1. How do retailers like Zara add value to the marketing system?

Q.2Using the types of retail organisations described in this chapter, classify each of the following retailers: David Jones, Myer, Benetton, H&M and Zara. How would you classify a nearby Apple Store and Apple Store Online?