Leadership secrets of Europe’s biggest clothing retailer
Ideas on Europe's leading clothing retailer… Gap? H&M? No, the leader is a Inditex, the secretive Spanish company behind the Zara brand, with sales of €10.4 bn in 2008 and 4,530 stores in 73 countries. Unlike its competitors, the company invests little or nothing in advertising. So, how can it be so successful? The answer is in a distinctive and highly effective business model. A recent issue of Wired looked at some of the secrets of their unique approach.
1. Fast fashion
Zara are the ultimate fast company. Their key source of advantage is the speed at which they react to shopper demand. Each store manager feeds back data daily on sales. Not only which models are selling, but also which colours and sizes. The store managers also share qualitative learning on trends and customer comments. Replenishing items takes only 36 hours from factory to shop-floor. And even more impressively, an item can be designed, made and shipped to store in just two weeks.
2. Rarity creates urgency to buy, and frequency
Another killer feature of the Zara business model is the short runs on key items. Go to Gap and you risk seeing not one person but a crowd of people wearing the same t-shirt or jumper. At Zara this is much less likely. This rarity of items creates urgency to shop now. It also means people visit the London stores much more often: 17 times a year compared to an industry average of four times a year
3. Collaborative creativity
One of the keys to achieving the speed of turnaround is collaboration. Teams from marketing, design and production sit together, not in silos. Designers can come up with ideas and have production people quickly calculate a cost. This is a theme here covered in previous posts on innocent and method home.
4. Centralised European manufacturing
All the manufacturing takes place in Corunna, Northwest Spain. This may be more expensive than using Asia or Africa, but shipping costs to Europe are reduced. And there is much tighter control of quality.
In conclusion, Inditex is the perfect example of branding today being not about having better advertising, but rather about having a better business model.