Is smaller better?
Small boutiques are the way to go...
As Maclean’s article “Shopping goes XXS” reports, many chains in the United States are shrinking the size of their sales floor as well as their inventory so as to maximize profits. Fewer clothing options are seemingly popular – increasing revenue. And the second key to profit maximization (thanks to ECON 101), cost minimization! Stores are minimizing rent and eliminating the need to put excess inventory on sale.
This is consistent with Zara’s strategy. In our class readings “retail @ the speed of fashion” by Devangshu Dutta, Zara’s key to success includes and I quote:
“1) Short Lead Time = More fashionable clothes
2) Lower quantities = Scarce supply
3) More styles = More choice, and more chances of hitting it right”
Zara definitely applies the “lower quantities” formula, but not necessarily less choice as suggested by Maclean’s. Shrinking inventory amounts also leads to a high turnover in supply chain management, also decreasing costs for Zara.
Should Zara minimize sales floor space?
Simple answer: No, because it’s not consistent with its strategy. I remember Urban Behaviour opening a significantly smaller store in Richmond Centre compared to its location at Metrotown. Within a year, the store closed down because there just wasn’t as much choice at the Richmond Centre location. This big contrast between the stores was not beneficial for Urban Behaviour. Zara is known for its big stores with lots of choice, but also limited availability in each choice. Skeptical of the decreased floor space strategy that Maclean’s suggests, Zara should not follow this model.