Retail Banking Strategies

How would it impact your bottom line if you could assess trends and bring products to market more quickly? Here’s a model — and some implications for retail banks.

You’ve probably never heard of Zara , the Spanish retailer. But a few months ago its parent company Inditex overtook the Gap to become the world’s largest clothing retailer. The key to its success — a totally different supply chain model that is revolutionizing retailing. Could this represent a potential model for Retail Banking?

Most retailers, in fact most companies, have a lengthy product development cycle. The typical retail chain works 6 months in advance. Fall styles are designed and committed in the 1 st quarter; spring styles are finalized at the end of the summer. The supply chain dictates long lead times: materials have to be ordered, factory capacity committed, financing arranged, etc.By contrast, Zara creates more than half its stock in-season and can deliver concept-to-store in less than 30 days. In fact, they do it in less than two weeks when they want to. And they do this for a distribution network of over 4,000 stores in 70 countries including 40 stores in the US.Think about market responsiveness. A new idea or trend is identified and the company can react almost instantly to test the concept, then rush inventory to market while the opportunity is hot. On the other hand, the ability to rapidly respond means they aren’t stuck with overstock from inaccurate forecasting or unpredictable market dynamics. Zara can do this because they built their supply chain with this strategy in mind.

What can banks learn from this? Think about the length of your product development cycle, how long it takes to create product modifications, arrange IT resources, etc. What would it mean to your bank if you were able to identify new opportunities and respond more quickly than your competitors.

Granted, banking has different challenges than traditional product retailing, but we also face many similar issues. Most banks succeed not on the basis of true innovation, but on superior execution. That means constantly taking the pulse of the market, having dynamic dashboards that provide leading indicators of opportunity (and problems), and responding rapidly.

All of this requires metrics, market testing, systems responsiveness and sales management process to react quickly to the situation at hand. It also requires an architecture that bridges strong central management controls with local market focus.

Zara built its success on being able to recognize a potential new trend in Tokyo and respond with lightening speed to have the product on the shelves in Madrid (or New York, or Berlin). The rest of the retailing industry thought it couldn’t be done
- at least not on a large scale – but they’ve been proven wrong.

Will it work in banking? We believe it does, and we’re already seeing signs of more flexible, outside the box Zara-like thinking for product innovation and supply chain management emerging at several banks we follow.