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Information Technology, the Internet and changing Strategies in the Fashion World Well-known fashion houses like Channel, Dior, Gucci and Armani charges thousands of dollars for the fashionable suits and dresses that they introduce twice yearly in the fall and spring. Since only the very rich and afford such differentiated and expensive clothing, to expand demand for its luxury products most luxury designers produce less expensive lines of clothing and accessories that are sold in upscale fashion retailers such as Neiman Marcus, Nordstrom, and Saks Fifth Avenue. Both fashion clothes designers and retailers have experiences enormous problems in the past decade. New kinds of competitors have taken advantage of the opportunities opened by the Internet and advance in Information Technology (IT) to enter the high fashion market segment and compete head-to-head with them by offering high-quality clothes at significantly lower prices. Essentially, all of these new competitors have developed capabilities in using IT that allow them to pursue a focused differentiation strategy but at a much lower cost than the luxury fashion houses. This has allowed them to circumvent barriers to entry into the high fashion segment and develop well-received brand names. First, upscale department stores and retails chains like Dillard’s and Macy’s, which target the middle of the fashion clothing market, have developed their own store-specific prestigious clothing labels. These well-made clothes are often sold at a significant price discount from luxury brands and thus attract customers away. Second, many small, agile fashion designers such as England’s Jaeger and Laura Ashley and Spain’s Zara now produce fashionable clothes at lower prices and sell them in their own chains of clothing stores. Zara, in particular, has achieved significant success, and its sales have soared. It has managed to position itself as the low-price cost leader in the fashion segment of the clothing market because it has created innovative information systems that lower costs and speed time to market Zara uses IT to manage the interface between its design and manufacturing operations efficiently. Major fashion houses like Dior and Gucci can take six or more months to design their collections and then three to six more before their moderately priced lines become available in upscale retailers. Zara’s designers closely watch the trends in the high fashion industry and the kinds of innovations that the major houses are introducing. Then, using their information systems, which are linked to their suppliers and the low-cost manufacturers the company uses abroad, they can create a new collection in only five weeks, and these clothes can then be made in a week and delivered to stores soon after. This short time to market gives Zara great flexibility and has allowed it to compete effectively in the rapidly changing fashion market, where customer tastes evolve quickly. IT also gives Zara instant feedback on which of its clothes are selling well and in which countries. This information enables Zara to engage in continual product development and remain at the cutting edge of fashion, a major source of differentiation advantage. For example, Zara can manufacture more of a particular kind of dress or suit to meet high customer demand, and it can keep up with fashion by constantly changing its mix of clothes in its rapidly expanding network of global stores. Moreover, since it is following a focused strategy, it can do this at relatively small output levels. Indeed, IT has allowed Zara to minimize the inventory it has to carry, which is the major costs of goods sold for a clothing maker/retaile
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