PROFILE ZARAThe mother company of Spanish chain Zara has finally beaten rival clothing colossus Gap to become the world's biggest fashion retailer, thanks to its unique approach of zero advertising, nice shops and the introduction of catwalk trends almost before the models have wriggled out of them, writes Fiona McCann
JULIO IGLESIAS, Pedro Almodóvar, Rioja and Real Madrid - Spain has produced its fair share of successes over the years, but to its world domination in the realms of Casanova crooners and castanets, it can now add a whole new category: clothes. The country's ground-breaking clothing store, Zara, or at least, its parent company, Inditex, has become the world's biggest fashion retailer according to new figures. In doing so, it has beaten US retail giants at their own game and put Europe back on top of the clothing heap in spectacular fashion.
With net sales of €2.2 billion for the first quarter of the 2008 financial year, and a 9 per cent rise on the same period last year, Inditex has finally beaten its nearest rival, US clothing colossus Gap, which reported €2.18 billion in first-quarter net sales, a drop of close to 5 per cent on the previous year.
It might seem like a close contest, especially when the US economic tailspin and poor dollar exchange rate are taken into account - after all, when economies spiral downwards, clothing retailers are among the first to be pulled into the vortex. Yet fluctuating economies and exchange rates can't entirely explain the phenomenal success of the Spanish brand, which has weathered the vagaries of global economics in the past itself, and still come out ahead. The truth is that beyond the tale of a downturn in the fortunes of Gap is that of the rise and rise of a European clothing empire that many feel has changed forever the way the industry works.
Inditex itself might not be a household name just yet, although canny business folk will have watched its lucrative progress since its creation in 1985 as the head of the corporate group that was to steer the Zara brand through the massive growth predicted. As Zara grew, so too did Inditex, which now boasts Pull and Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home, Uterque and Kiddy's Class among its stable of interestingly named clothing and homewear brands. Zara, however, remains its brightest star, with a turnover of more than €6 billion last year alone.
Not bad, you might be thinking, for a relative newcomer to the fray, but, though the first shop in Ireland only opened in the revamped Roches Stores on Dublin's Henry street in 2003, it's worth remembering that by that time Zara was already a fully fledged thirtysomething. It began life in 1975 when the first store opened in the Galician city of La Coruña in northwest Spain. Over three decades on, there are now some 3,700 Zaras in 69 countries all over the world, seven of them in Ireland, with an eighth set to open south of the Liffey as part of the new shopping complex beside the Gaiety Theatre on South King Street.
EVEN BEFORE OVERTAKING Gap, things were clearly going pretty smoothly for the Spanish retailer, the brainchild of reclusive In 1963, Inditex chairman Amancio Ortega Gaona, the son of a railway worker, began a career in the clothing business which was to make him the richest man in Spain. He is also the 22nd richest in the world, according to the 2008 Forbes list, which places his net worth at $20.2 billion (€13.5 billion), while also labelling him a high-school dropout.
Ortega himself is always casually attired, and never wears a tie. Nor does he ever give interviews, keeping his public appearances to an absolute minimum.
Yet, while the man behind the Zara phenomenon keeps a low profile himself, the profile of his biggest brand continues to sky-rocket, despite a singular marketing campaign involving next to no advertising. This refusal to fight in the public battleground of billboards and magazine spreads is official company policy, as an Inditex spokesman confirms to The Irish Times. "Inditex has renounced advertising its brands," he says, adding that the company uses other marketing strategies to get the message out. "Inditex does not take advantage of its commercial position, but allows the customer to form his own perception about the brand through the store itself. That's the reason why the stores are always in prime locations and very carefully designed."
Eschewing more traditional tactics, Zara's shops are intended to do their own selling, with www.zara.com referring to its retail stores themselves as "the best publicity for the label". Which means, for the most part, some tastefully designed, aesthetically pleasing retail emporia that put their neon-lit high-street counterparts to shame. The Milan store alone spans almost 4,000sq m and boasts a double marble staircase and chandeliers. Not to be outdone, the Salamanca shop is situated in a restored convent under a 22m-high dome, while the Izmir Zara in Turkey occupies a minaret and the Zara in Mexico City is happily ensconced in a colonial-style mansion.
The marketing strategy all hinges on the basics of a nice shop. Or, as Inditex puts it, "the key element in the organisation is the store, a carefully designed space conceived to make customers comfortable as they discover fashion concepts". The shops are also where the canny clothing retailer gets its customer feedback, with staff primed to tune into client commentary and send word back to the Spanish mothership. "We try to always be attentive in stores to what our customers are demanding," explains the Inditex spokesman. "The information comes from the stores to the creation teams so that we can react and adapt our designs, our new models to what the customers are demanding."
THE COMPANY DOES this with an alacrity that is the envy of retailers worldwide, with new designs entering shops twice a week, and catwalk trends turning up in Zara retail outlets almost before the models have wriggled out of them backstage. The company puts this quick turnaround down to a business model characterised by the term "vertical integration", which means it incorporates all stages of production, distribution and sales into the business. In other words, unlike many of its retail rivals, a significant percentage of the clothes that find their way so quickly to the rails of Zara stores are produced at Inditex-owned factories.
"We do have some textile factories that are located in Spain," says the Inditex spokesman. "In fact they are located in the northwest of Spain, where the headquarters are located." Sourcing things nearby rather than in distant, if notably cheaper, locations is a big part of the company ethos. "What we claim is that for us what is very important is to have around 50 per cent of our total sourcing come under the concept of proximity sourcing." The proximity in this case refers to Spain, other European Union countries and Morocco. The idea is that the nearby factories will produce the kind of trend-based fashion items that require the quickest turnaround. "The proximity sourcing is in charge mainly of those products which are more trendy fashionable. Those are the clothes that you really need to get into the stores fast," said the spokesperson. "With the basics you don't need to worry about that."
Last year, some 49 per cent of clothes were sourced in these nearby factories, with a further 14 per cent coming from the rest of Europe, 35 per cent from Asia and 2 per cent from "the rest of the world." Vertical integration, proximal sourcing and other obscure business terminology might be part of the official explanation for Zara's market dominance, but none of it would work without a product that has held its appeal after decades in the business, and kept itself apart from its competitors. "There is a certain Zara style," says Irish Times Fashion Editor Deirdre McQuillan. "You can tell a Zara look. It's quite Spanish."
IT IS A LOOK that remains distinct from that emerging from its British counterparts. "It's not funky, it's not English, it's not quirky," says McQuillan. "That would be more the Topshop style of British irreverence. The Spanish would be a stricter look, safer perhaps."
It might not have the quirky cachet of some of its high-street rivals, but most are agreed that whatever Zara does, it does well, and with the kind of understatement so beloved of its chairman. In the process, the store has become the thinking woman's choice for wardrobe staples. "They do colours very well," says McQuillan. "But they also come up with the Zara basics, which is their version of the trench coat or the little black dress."
These are the items on which all good wardrobes are founded, a concept that was true 30 years ago, when Zara started out, and remains true today. Considering its longevity, some might have expected it to drift into a more matronly middle-age, yet Zara has managed to keep its look young without being teenage, ensuring a new generation is also turning to the brand. As well as bringing new designs to stores at the heady rate of twice a week, Zara also makes sure that whatever hasn't been snapped up speedily by the fashionistas gets moved aside to make way for clothes that will.
And all this at affordable prices, meaning Zara's current reign is unlikely to be shortlived. With tight company control in place while expansion continues, it looks like the buenos días are here to stay.
CV ZARA
What is it?Zara, a Spanish chain of clothing shops.
Why is it in the news?It recently outstripped Gap to become the biggest clothing retailer in the world.
Most appealing characteristic:Trendy designs in quality cuts.
Least appealing characteristic:A noted reticence to engage with the media.
Most likely to say:"Vamos para arriba!"
Least likely to say: "Mind the Gap."