It would be easy for retailers to underestimate the significance of the announcement this week that Zara is rolling-out augmented reality technology across its stores.
At face value it could be seen as a costly piece of cosmetic 'theatre'. However, the true reality is that this appears to form part of a grander plan to revolutionise fast fashion retail and develop a more sustainable and profitable digital model. It also provides a vital weapon for store retailers to fight back against the likes of Asos and Boohoo, who have so clearly changed the rules of the fast fashion game in recent times.
Zara's crown jewel has long been its flexible production, being able to get new designs from concept into stores in as little as 15 days, but until this point they lacked the digital model to be able to profitably harness this online. Hamstrung by the higher costs of production, combined with modest baskets, high delivery costs and high return rates.
By combining augmented reality with enhanced analytics they are now able to encourage shoppers to build bigger baskets, reduce the rate of returns and shop more often; all driving online customer lifetime profitability.
Shifting more of the browse, review and order process to digital devices they are also able to move to a more efficient store model; reducing stock, cutting store labour and shrinking store footprint. All whilst focusing stores where they add the most value; providing theatre around new fashion lines and acting as convenient pick-up locations for the essentials. They gave us a glimpse of this future with their 200m2 click and collect store in London's Westfield.
I'd urge other retailers to view this as an important precedent about how to engage in new technologies. Don't think about your "AI Strategy", think about your broader channel ecosystem and how technology drives customer economics and delivers sustainable profits.
But the challenge for Inditex — and rivals — is not just expanding online sales when internet-only companies are snapping at their heels. It is doing so while maintaining margins amid pricing pressures