Fashion Forward

When Inditex, the parent company of Spanish retailer Zara, overtook the Gap in sales earlier this year, it won the title of world’s largest clothing retailer. It’s an improbable achievement for Inditex, which has utterly defied retail orthodoxy since the first Zara store opened its doors in northwest Spain in 1975. Its unique business model ...

When Inditex, the parent company of Spanish retailer Zara, overtook the Gap in sales earlier this year, it won the title of world's largest clothing retailer. It's an improbable achievement for Inditex, which has utterly defied retail orthodoxy since the first Zara store opened its doors in northwest Spain in 1975. Its unique business model -- which uses little to no advertising, sends clothes from the drawing board to the store rack in mere days, and introduces an astounding 22,000 product lines each year (most retail giants don’t break the low thousands) -- has made Zara the envy of the high street.

When Inditex, the parent company of Spanish retailer Zara, overtook the Gap in sales earlier this year, it won the title of world’s largest clothing retailer. It’s an improbable achievement for Inditex, which has utterly defied retail orthodoxy since the first Zara store opened its doors in northwest Spain in 1975. Its unique business model — which uses little to no advertising, sends clothes from the drawing board to the store rack in mere days, and introduces an astounding 22,000 product lines each year (most retail giants don’t break the low thousands) — has made Zara the envy of the high street.

Last year, Inditex sold $13.9 billion in clothing — 15 percent more than in 2006 — in nearly 4,000 stores in 70 countries. Zara, which is responsible for two thirds of the company’s revenue, attributes its success largely to its revolution of the retail timeline. Typically, stores like the Gap and J. Crew order most of their styles six months in advance. By contrast, Zara creates more than half its stock in season, when the company can react to current fashion whims. It’s known as fast fashion. "Seeing an item in a disco in Tokyo to putting it in a [Zara] window in Milan takes 15 to 30 days," says José Luis Nueno, professor of marketing at the IESE Business School in Barcelona. At its fastest, the company can send its designers to a Madonna concert one night, says Nueno, and have the singer’s styles "in the windows earlier than the next concert." With that kind of turnaround time, Zara won’t make any money, but "it’s a psychological war with the competition," says Nueno. "It hurts the [competition’s] morale."

The ability to deliver high fashion at lightning speed stems from the company’s distinctive local supply chain. Whereas most global retailers outsource the bulk of their production to Asia, Zara produces most of its styles close to home — in Morocco, Portugal, Spain, and Turkey — allowing its biggest European stores to receive shipments practically overnight. The company has been able to "adapt the product to market… and [to] the unpredictability of demand," says Tony Shiret, a retail analyst at Credit Suisse. "They’ve changed the way people buy in Europe." And with the company setting its sights on expanding its footprint in Asia and the United States, there may be little reason to mind the Gap.

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