Zara Case
Spanish retailer, Zara, has crafted a sweet success story riding on its image as a low-cost, high fashion store. Nirmalya Kumar and Sophie Linguri take to the High Street to look at Zara’s route from rags to riches.
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n 1975, the first Zara store was opened in La Coruña, in Northwest Spain. By 2005, Zara’s 723 stores had a selling area of 811,100 square metres in 56 countries. With sales of e3.8 billion in the financial year 2004, Zara had become Spain’s best-known fashion brand and the flagship brand of e5.7 billion holding group Inditex. Inditex’s stock market listing in 2001 turned Amancio Ortega, its founder and a self-made man, into the world’s twenty-third richest man, with a personal fortune
that Forbes magazine estimated at $12.6 billion. Among the keys to Zara’s success is its approach to the supply chain. Zara sources around half its garments from third parties in low-cost manufacturing locations like Asia. These are basic collection items or wardrobe “staples,” with minimal fashion content, such as T-shirts, lingerie and woollens, and where there is a clear cost advantage. Externally manufactured items are shipped to Zara’s distribution centre. The other
→ half of Zara’s garments, those that are more fashion-dependent, is manufactured in-house, in nearby Zara factories. A team of 200 young, talented largely unknown designers create designs, based on the latest fashions from the catwalk and other fashion hotspots, which are easily adaptable to the mass market. In this way, Zara is adept at picking up the latest trends and churning them out to stores around the world in a matter of weeks. After Madonna’s first concert date in Spain during a recent tour, her outfit was copied by Zara designers. By the time she performed her last concert in Spain, some members of the audience were wearing the same outfit. In 2003, when the
The Global Leadership Summit Issue
on the type of garment. As a result Zara can be responsive to fashion items that
I
n 1975, the first Zara store was opened in La Coruña, in Northwest Spain. By 2005, Zara’s 723 stores had a selling area of 811,100 square metres in 56 countries. With sales of e3.8 billion in the financial year 2004, Zara had become Spain’s best-known fashion brand and the flagship brand of e5.7 billion holding group Inditex. Inditex’s stock market listing in 2001 turned Amancio Ortega, its founder and a self-made man, into the world’s twenty-third richest man, with a personal fortune
that Forbes magazine estimated at $12.6 billion. Among the keys to Zara’s success is its approach to the supply chain. Zara sources around half its garments from third parties in low-cost manufacturing locations like Asia. These are basic collection items or wardrobe “staples,” with minimal fashion content, such as T-shirts, lingerie and woollens, and where there is a clear cost advantage. Externally manufactured items are shipped to Zara’s distribution centre. The other
→ half of Zara’s garments, those that are more fashion-dependent, is manufactured in-house, in nearby Zara factories. A team of 200 young, talented largely unknown designers create designs, based on the latest fashions from the catwalk and other fashion hotspots, which are easily adaptable to the mass market. In this way, Zara is adept at picking up the latest trends and churning them out to stores around the world in a matter of weeks. After Madonna’s first concert date in Spain during a recent tour, her outfit was copied by Zara designers. By the time she performed her last concert in Spain, some members of the audience were wearing the same outfit. In 2003, when the
The Global Leadership Summit Issue
on the type of garment. As a result Zara can be responsive to fashion items that