Posted: April 1, 2017 |  AUTHOR: KEN FOX | CONTACT ME

 

This post updates one of my first blogs from November 1, 2011 entitled: Zara: A Global Success Story. It seems worthwhile in this time of retailer doom and gloom to update readers on the continued success of parent company Inditex SA, based in Spain, and its other seven global retail platforms besides Zara. Inditex is a company with a vision and unique business model, using centralized communication, design and distribution from its headquarters in Arteixo, Spain.

The most amazing thing about Zara is their vertical integration and ability to design and launch a new fashion item quickly. They use their store staffs to identify fashion trends and styles that sell well. In turn, Zara designs, produces and ships new fashions to its stores in limited quantities. They typically dispatch new styles to their stores twice a week. (From Nov. 11, 2011 blog)

At Zara headquarters in Spain

The parent company strives to innovate and instill pride and teamwork among its employees. All clothing is made or outsourced locally or in nearby countries (such as Portugal). Designs, new ideas and orders are based on weekly phone call reports from store managers on what their corresponding local markets need. This includes styles, materials and types of clothing. Uniquely designed clothes, especially at Zara, are shipped in limited quantities directly to the stores. Inventory changes often and newly designed clothing appears regularly.

Inditex, F’ 2016 results include global net sales of €23.3 billion or approximately $25.0 billion, up 12% from a year ago. Gross profit in F’2016 was €13.3 billion, 10% higher than in F’2015, resulting in a Gross Margin of 57%.

Inditex has 7 retail divisions, with Zara being the largest:

1. Zara clothing and accesories: women’s (60%), men’s (20%) and children’s (20%). The most successful Zara markets: New York City, Milan and Shanghai.

2. Bershka-clothing for a young target market

3. Bull & Bear-casual, laid back clothing & accessories, a mix of elegance with sport leisure wear

4. Massimo Dutti-originally a stylish, European men’s clothing store chain, acquired in 1991, and expanded to women’s and children’s clothing.

5. Stradivarius-lower priced fashions than Zara, target 20-35 year old women’s clothing, described as “cheap chic;” (no stores in the U.S.).

6. Oysho-women’s home wear and undergarments (no stores in the U.S.).

7. Uterqüe– women’s clothing and fashion accessories, including scarves, sunglasses and handbags.

Pull & Bear Skirts for Women

Massimo Dutti in New York City

 

Inditex continues to open new and remodeled stores globally as well as expand their on-line presence. The following is illustrative of their activity:

-Opened a total of 279 new stores in F’2016 in 56 markets

-Completed on-line presence in the European Union and added: Turkey, Singapore, and Malaysia in March 2017. Plans to add India in 2017.

-Entered five new markets: New Zealand, Vietnam, Paraguay, Aruba and Nicaragua.

-Zara added 51 new stores.

In contrast, look at the recently announced select list of competitive retail store closings.

Inditex constantly expands its product lines. Some recent examples:

Zara Home

1. Its Stadivarius division launched its first men’s fashion line available in 32 stores in 17 different countries.
2. Zara introduced an exclusive collection of clothing in conjunction with the  market release of a Rolling Stones new album, Blue & Lonesome.
3. Zara Home Stores launched a line of men’s and women’s fragrances, body creams, soaps, beachwear and accessories.

  Inditex also operates a separate division, Tempe Grupo, which makes shoes for all of its store chains.

  

Inditex is dedicated to sustainability, conserving energy, promoting good health and protecting the environment. Some examples:

-The  parent company introduced a “Green to Back Project” to reuse the many cardboard boxes used to ship merchandise. Stores may find they reuse boxes up to five times and then they are recycled. They claim this can save 27,000 trees and emissions of 1,680 tons of carbon emissions every year.

-Zara offers a sustainable fabric in their Join Life Collection, Refibra©Lyocell, which is created from recycled cotton and fiber from sustainably managed forests.

-They offered humanitarian assistance to Syrian refugees in Kills, Turkey and supported earthquake victims in Ecuador and Italy

Commentary

A lot has changed since the Zara blog post of 2011. At that time Zara had 1,500 stores and now has 2,162. Additionally, Zara Home did not exist and now has over 500 stores. But what has not changed is the way Zara (and parent Inditex) does business. Their vertical integration model gives them complete control over what they offer and translates into a sustainable competitive advantage. Their merchandise is unique and stores generate an inviting shopping experience. Their success has allowed them to scale these retail businesses to facilitate efficiencies in production and expansion.

Other retailers should take notice why shoppers have not tired of Zara and their partner retail stores. Zara’s strength has allowed it to extend its business to home stores in 53 markets. An additional strength of Inditex is its breadth of divisions to reach across target audiences, from children, young adults and fashion conscious men and women. In turn this generates repeat business, a key to success.   

Resources:

1. Intidex SA Annual Reports, 2015 and 2016
2. Update 2 Zara Owner Inditex Profit Up 10 percent Despite Negative Currency Effects, Sonya Dowsett, CNBC, March 15, 2017.
3. Store Closings, Mike Timmerman, Clark, April 16, 2017.
4. Retail is Not As Much Trouble As People Think, Fears about the Sector are Overblown, Seeking Alpha, April 19, 2017.
5. Zara Secrets the Press-Shy Brand Hasn’t Made Public, Refinery 29, Refinery.com, February 2, 2016.
6. Zara: A Global Success Story, Global Galaxy Blog, November 1, 2011.
7. Store Closings Accelerate, Suzanne Kapner, Wall Street Journal, April 22,  2017.

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©2017, The Global Galaxy blog is produced by The Soundings Group, LLC, Charleston, South Carolina, USA, www.thesoundingsgroup.com. The company is an international business consulting firm, specializing in new market assessments, market entry strategies and marketing guidance. The scope of Global Galaxy is to cover timely international trends, issues and business building ideas. Its purpose is to educate, inform and stimulate thinking for business opportunity analyses.

 

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