Fast Fashion: The Zara Experience

With more than 6,000 stores worldwide at the end of 2012, fashion giant Inditex, owner of the well-known Zara brand, is a leader in clothing sales. The New York Times recently profiled Inditex as a revolutionary force in the fashion industry. Inditex has about 4,400 stores in Europe, but as of the beginning of 2013, has opened fewer than 50 in the US, begging the question of whether the hallmarks of its success thus far – a rapid-pace production process, a spending emphasis on storefront location instead of advertising, and manufacturing locations close to design centers – are a recipe for success in the US or a hindrance to the brand’s expansion here.

First, Inditex’s emphasis on responding to customer desires as quickly as possible in its design and production has pushed other clothing manufacturers away from historical biannual production cycles (though most competitors still lag far behind Inditex’s idea-to-store time line of as short as two weeks). Inditex’s model relies heavily on customer feedback in stores as expressed to store employees, and not just records of what has been purchased. This means that customers must be forthright in their evaluations of clothing to store employees, who in turn need to solicit feedback. This approach requires sensitivity to cultural norms of feedback as well as to changes of heart that may occur during the time that it takes Inditex to transform the ideas its sales representatives hear into actual products offered at stores. Inditex may need to adjust its tactics depending on how Americans respond to such an approach.

Second, Inditex makes no secret about spending little on advertising and much on locations for its Zara stores. One of Zara’s main strategies is to have locations as close as possible to famous expensive brands such as Gucci, Cartier, Chanel, and others of the same caliber. However, these same brands are motivated to stay far away from Zara, which offers many of the same or similar styles at great discounts. So far, Zara seems to have been successful in procuring desired real estate, albeit by paying top dollar for certain locations such as its Fifth Avenue store. Problems may arise as Zara seeks to expand into more conventional American shopping centers. There, where one landlord is responsible for the entire property, luxury retailers may exercise more leverage in dictating who their neighbors are. Unlike Asian shopping areas—where you might find a discounter next to Prada or Gucci—high end tenants at American malls tend to huddle together for strength and support-- and insist that landlords honor their wishes.

Third, Inditex emphasizes that many of its manufacturing locations are centralized – either owned by the company or located very close to its Spanish headquarters. Many American companies have been successful in reducing costs by outsourcing their production to cheaper production locations and Inditex will have to compete with this reality in the US.

In many ways, Inditex has had a profound impact on the way that fashion is produced and sold all over the world. Whether it is able to sustain its current model as it continues to expand in the United States, or whether it is forced to make adjustments to succeed in the American market remains to be seen.

Related topics: Real Estate, Retail, Retail Sales