C&B Notes

A Spanish Retail Empire

Under-the-radar Spanish company Inditex, who owns Zara among many other brands, has quietly assembled one of the world’s largest fashion franchises.  The company has reached this status by marrying a relentless focus on the desires of its customers with process innovation, quick design-and-production turnarounds, and limited run quantities.  This strategy presents enormous challenges to companies competing with Inditex for budget-conscious fashion consumers.

But a brand at Inditex will make a fall collection, for example, and then ship only three or four dresses or shirts or jackets in each style to a store.  There’s very little leftover stock, few extra-smalls or mediums hiding in the back.  But store managers can request more if there’s demand.  They also monitor customers’ reactions, on the basis of what they buy and don’t buy, and what they say to a sales clerk: “I like this scooped collar” or “I hate zippers at the ankles.”  Inditex says its sales staff is trained to draw out these sorts of comments from their customers.  Every day, store managers report this information to headquarters, where it is then transmitted to a vast team of in-house designers, who quickly develop new designs and send them to factories to be turned into clothes.

More than half of Inditex’s manufacturing takes place either in the factories it owns or within proximity to company headquarters, which is to say in Europe or Northern Africa.  Inditex owns factories in Spain and outsources production to factories in Portugal, Morocco and Turkey — considered costly labor markets, typically.  The rest of its clothes are produced in China, Bangladesh, Vietnam and Brazil, among other countries.  The trendiest items are made closest to home, however, so that the production process, from start to finish, takes only two to three weeks.  Inditex’s higher labor costs are offset by greater flexibility — no extra inventory lying around — and on faster turnaround speed.

That means that if Inditex stores in London, Tokyo and São Paulo all have customers responding enthusiastically to, let’s say, sequined cranberry-colored hot pants, Inditex can deliver more of these, or a variation on hot pants, sequins or that cranberry color, to stores within three weeks.  The company tries to keep the stock fresh; one promise its stores make is that you will always be buying something nearly unique.  Merchandise moves incredibly quickly, even by fast-fashion standards. BAll those thousands of Inditex stores receive deliveries of new clothes twice a week.

In this way, says Masoud Golsorkhi, the editor of Tank, a London magazine about culture and fashion, Inditex has completely changed consumer behavior.  “When you went to Gucci or Chanel in October, you knew the chances were good that clothes would still be there in February,” he says. B“With Zara, you know that if you don’t buy it, right then and there, within 11 days the entire stock will change. VYou buy it now or never. And because the prices are so low, you buy it now.”

This particular assertion about global trends bucks conventional thinking:

The Zara headquarters is a huge airplane-hangar-size open space, with regional sales managers sitting at a line of desks running down the middle, designers on either side of them. The managers field calls from China or Chile to learn what’s selling, then they meet with the designers and decide whether there’s a trend.  In this way, Inditex takes the fashion pulse of the world.  “The manager will say, ‘My customers are asking for red trousers,’ and if it’s the same demand in Istanbul, New York and Tokyo, that means it’s a global trend, so they know to produce more red pants,” the P.R. person said.

I remarked that it must be interesting to see what is fashionable in Turkey but not in New York and vice versa.  I imagined that different nationalities still had different tastes, at least in terms of fashion.  But I was wrong. “Actually, the customer is more or less the same in New York and Istanbul,” she said.  “There are differences, like Brazilian girls like more brilliant colors, whereas in Paris they use more black.  But in general when you find a fashion trend, it’s global.”

Earlier, Echevarría told me that neighborhoods share trends more than countries do.  For example, the store on Fifth Avenue in Midtown New York “is more similar to the store in Ginza, Tokyo, which is an elegant area that’s also touristic,” he said.