In 1975, Amancio Ortega started a garment factory called Zara with his wife in La Coruna, Spain. The city la coruna is a little more than 300 miles from madrid and 555 miles from barcelona. A very odd location for an aggressive, global company like Inditex. Imagine a Nigerian brand producing in Akure or Ekiti. In this city, Inditex has its HQ which houses its in-house designers, commercial team, seamsters, seamstresses and so on. They basically imitate the latest fashions and speed their cheaper versions into stores. Every one of Inditex’s brands — Zara, Zara Home, Bershka, Massimo Dutti, Oysho, Stradivarius, Pull & Bear and Uterqüe follow the Zara template: trendy and decently made but inexpensive products sold in beautiful, high-end-looking stores. The man today at 79yrs old is the second richest man in the world. Here are lessons i think any aspiring designer or fashion entrepreneur can learn from Zara - the fast-fashion clothing giant.
Operations & Business Model
A traditional ready-to-wear fashion company in the West sends the designs for its clothes to independent factories in countries like China and India, where the labor to make them is cheap. These clothes are then shipped back and stocked in stores in spring and fall, with smaller shipments throughout the year.
The business model of Zara is pretty unique. Zara stores around the world receive deliveries twice in a week, and products designed at the headquarters reach stores three weeks later. This is a staggering pace, helped by the fact that between 51% and 55% of clothing is manufactured in what the company describes as “proximity” markets, Spain, Portugal, Turkey and Morocco, instead of Asia. Twice a week, a store manager send an order to HQ.This is based on the sales data for the store and also anecdotal evidence of what the shoppers really like and don’t like.The commercial team at the HQ then liaise with the in-house designers whom they share the same office building with in the HQ to develop new products to meet the trend. New fashions are then produced in relatively small batches, so flops can be disregarded after their first appearance and hits can be followed quickly by similar incarnations. The commercial team will then compile the order, adding in new products and balancing out demand with other stores, before sending it to Inditex’s manufacturing hub. Within two days, the order has reached the store. The customer is always determining production — not the other way around. Every piece of clothing the company makes has, in a way, been requested. A business model that is so closely attuned to the customer does not share the cycle of a financial crisis. According to the chairman of the company, “If there is a secret to Inditex’s success it is the connection between stores, the in-house designers, and its factories” - Pablo Isla, chief executive and chairman.
Result
Right now there are around 4,400 stores in Europe, and almost 2,000 in Spain alone. Inditex’s main rivals are way behind. Arcadia Group, which owns Topshop, among others, has about 3,000 stores worldwide; H&M, based in Sweden, has 2,500 (when you include its smaller lines of stores); and Mango, based in Spain, 2,400.
This is encapsulated by Ortega himself, who still owns roughly 60%of Inditex. At 79 he has stepped into a non-executive position on the board, but has lunch in the staff cafeteria every day. This man singlehandedly broke up a century-old biannual cycle of fashion. Rather than relying on one product range per season – like Marks & Spencer will for autumn and winter – the retailer will enjoy four or five waves of new products after the initial seasonal launch. The company has been accused of copying designs several times from the real body of fashion. When Masoud Golsorkhi the founder and editor of Tank Magazine was asked about Zara’s production process he said - “I was of the same mind myself, but I have grown out of that because I realize that the fashion companies also copy each other. In the end, no one’s original. Nelson Fraiman, a professor at Columbia Business School who has studied the Inditex model. “They have done process innovation very well, “Product innovation”? No. But tell me one Chinese company that has done product innovation very well. They are brilliant at process. I think you should give a cheer for process innovation”.
Notes:
You can recreate designs
Create fast
Distribute fast
Listen to feedback
Factory Location doesn't really matter
Grind hard and be patient
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