MADRID (Reuters) - Spanish-based retail chain Zara, whose "fast fashion" business model has helped make it one of the world's biggest clothing brands, plans to pioneer a new stock control system to make its supply chain even speedier.
The chain's parent company Inditex SA (ITX.MC) told its annual shareholders' meeting that Zara was implementing a microprocessor-based tagging system allowing items to be tracked from factory to point of sale.
Inditex, the world's largest clothing retailer, has long been admired for the speed with which it imitates catwalk designs and gets them into stores around the world.
Its new system entails embedding chips inside the plastic alarms attached to garments, allowing them to be tracked through its system until they are purchased, the company said.
It is designed to improve inventory management by showing the garments that need reordering. The tags will also improve customer service and security, Inditex said. The company has already put the chip system into 700 of its more than 6,300 stores, with its flagship brand Zara going first out of a stable that also includes Massimo Dutti and Bershka.
It will roll out the new technology at the rate of 500 additional stores a year, Chairman and Chief Executive Pablo Isla said in a presentation.
The Spanish retailer gave no figure for the total investment in the radio frequency identification (RFID) system.
Fast restocking of items and sizes that sell out is crucial to maximising retailers' profits. When a Zara dress is worn by a celebrity, for instance, shops can sell out of the item fast.
A particular size may also be in more demand in one store in a particular neighbourhood, and supplying it fast to a store nearby helps maximise sales.
Inditex pioneered fast fashion with Zara, where designer looks can be in shops at affordable prices within a fortnight of being conceived.
It operates a centralised distribution system in which suppliers from around the world send clothes to distribution centres in Spain before they are dispatched to stores in its 87 markets.
Editing by David Holmes and Jane Baird