Yet Zara remains a mystery to many. Nobody understands how the clothes can be so inexpensive, how the designs match a number of fashion classics, or how the stocks are continually replenished.
Ortega’s dream which he shared with the group of managers with which he worked, was to achieve nothing less than the best logistics system in the world; an unprecedented formula that would allow him to place a product in a store, regardless of its location, in under a fortnight. This was what he focused on with devotion.
Obviously, we are going to be inspired by what people accept and look for on the world market. Here we study the garments, take them apart, draw them, put them back together again, adapt them to our own style, make them up and launch them onto the market.
At the start of his career he once travelled to Paris, and together with sketches he himself made after each collection, gaining inspiration from what he had just seen, he bought some of the models from the collections in order to study them and make his own creations along the lines of the period’s top designer masterpieces.
His careful explanations of the smallest details showed that he knew the business inside out. He never stopped being fully involved in it, tirelessly playing his part in the work and monitoring the production chain, step by step. The things he told us were easy to observe; what was complicated was managing to conceive a formula that could successfully handle this perfectly organized system of distribution at such rapid rate.
That kid will never be a bullfighter. To go up against a bull, you have to know the meaning of hunger.
I could never see who was talking to my mother but I heard a man’s voice say something that despite the passage of time I have never forgotten, “Josefa, I’m very sorry, but I can’t let you have any more credit.” I was shocked. I was just 12.
This was the last time this would ever happen to my mother. I saw the situation very clearly and from that day on I would find work to earn money and help the household. I dropped out of school, gave up my studies and got myself a job as a sales assistant in a shirtmaker’s.
The underlying truth of this anecdote, like any other about the beginnings of his professional and life career, is that this conqueror of the international retail world, the man who provokes enormous curiosity and huge admiration most definitely threw himself unconditionally into the university of life. What is awe-inspiring about this is that after many decades of “attending class,” he still never miss a day. He has never taken a sabbatical year and he still wins top marks in all the international competitions.
In my case, from the very beginning, I’ve given everything to the job, however demanding it might be. I’ve never been satisfied with what I was doing and I’ve tried to inculcate that into the people I work with. Self-satisfaction is a terrible trap if you want to achieve anything important. In this company we’ve never rested on our laurels, not when we were taking our first steps nor now, when we have shops everywhere in the world. Blind optimism is a mistake. You must always want to do better and never lose the ability to criticize yourself. I always felt that if we were going to win, we had to be stretched every day. But I should tell you that this business is less complicated than it looks. It’s very easy to manage.
After opening shop number 3,000 worldwide, the Inditex boss told me that he always understood very clearly that you must never lose sight of the customer. He had been outstanding in the shirt business because of how he dealt with everybody who came into the shop. That very serious, hardworking boy who was always ready to lend a hand to anyone who needed help is the same person today, at the age of 75, ready to pay attention to anyone who needs his opinion about solving a problem or spotlighting an important area of the dizzying international expansion on which the company is bent.
My priority has always been the company, and I have done everything for it with utter dedication since day one. I can’t repeat too often that everything I have done has been thanks to the people who so often imitated my dedication — which I do not deny, because I am a very ambitious individual. Even when I was nobody and hardly had a thing, I was dreaming about growing.
Now we live in the era of the internet, new technologies, and McLuhan’s global village. An unmistakable characteristic of this new landscape is the way women are comfortable occupying every possible area of professional activity, happily certain that they can blend family life with an absorbing job. Time has become their most precious luxury. “I know that at Zara I shall always be able to find what I need, and I shan’t have to spend hours searching,” is something you will hear in every language under the sun.
Fashion involves the luxury of looking at ourselves in the mirror and choosing the self we want to be, deciding on our own image. It is not a question of what we want to represent in life, but what we want to be, a clear display of authenticity.
Being a businessman just to be rich is a waste of time.
“Growth is a survival mechanism,” Amancio once told me. That conviction is one of the engines that drive him.
When we started out with the famous quilted dressing gowns that everyone mentions, we used to sell to middlemen. In the end I was unsatisfied by that. We couldn’t sell a pretty dress, however pretty it was, if what the customer was ordering at that precise moment was something else. I was convinced that I had to be in control of the customer and that I had to be close to the customer at the same time, but I could only manage that if I could sell directly to the customer. I was also convinced of something else if I was to carry out everything I had in mind: nobody buys on price alone. The first thing people want is to like what they want to buy. The product has to be right. That’s the key.
Something that everybody was with him at the birth of this great company wonders about is that during the early years — the tough years when there was little money about — he never saw money as a problem. “If it’s true that I’ve made a lot of money, then it’s because making money was never my goal. I’ll go further; in my opinion someone just out to make money is not much of a businessman.”
With his help Ortega managed to run a stable of 99 companies with which complete vertical integration was assured, covering not just textiles and fabrication, but also logistics, marketing, construction, real estate, finance and power generation.
Inditex is the only one of the great companies in the clothing sector with a completely vertical organization.
Flexibility of supply, instant absorption of market demand, response speed and technological innovation. Inditex overwhelmed the development models where 6-9 months are needed to make a collection. “In 9 months a lot can happen.”
We have the ability to completely undo any production line if it isn’t selling; we can dye the collections with new colors and we can create styles in just a few days.
The marketing strategy included innovations such as “re-educating” the customer. Traditionally the vendor made sure of high margins at the start of the season, but then tolerated several months of reductions to get rid of stock. The customer knows that in the end she can buy the same garments at lower prices. The Ortega business renews its garments in its shop worldwide every week and twice a week in its European stores. Customers know that they will always find new items, but also that they will definitely not find whatever it was they tried on 7 days ago. This means that if customers see something they like, they must buy it straightaway, because in a few days it will be nowhere to be found in the store.
Staying close to the customer was a great advantage over those who failed to notice change. At that time, fashion focused on presenting 2 very established traditional collections per year. Nobody was interested in the street. Designers had no idea what customers thought about their collections, and it was this approach to focusing fashion that Inditex turned upside down. Of course, there’s no doubt that you can do this for a single shop. The problem arises when you want to grow and repeat this business model. The result is an organizational problem; the problem of moving from ideology to technology. It was a real challenge to seek out and build up teams who could implement not just the idea, the philosophy, but who could handle the organization and control it at the worldwide level while the business model kept growing.
There’s no financial team giving orders to a commercial team; the people who get preference in decision-making are the people who are in contact with the customers. This is a large part of the secret of the company and it explains a lot of what has happened in the company. Ortega starts from there, from a shop, and never claims to tell the customers what they must buy.
As far as the president of Inditex is concerned, the best advertising comes from efficient service — a service able to provide a flexible supply meeting all requirements. The company does not advertise through the standard channels.
The future of fashion will come down to the style itself, not the dictates of a designer. It’s my job to offer women freedom and the basic tools so that each one can blend them in a specific way on the basis of simple, timeless items of good quality, flexible enough to be worn from morning ’til night. This is what I think of current fashion — it’s an affirmation of individual style.
There is even a section of the women’s collection, for example, where very expensive Italian fabrics are used. These garments never make a profit but they earn valuable prestige for the company.
The optimum is for a complete change of stock every 28 days. The aim is that for every point of sale they put new stock on the shelves and transfer stock that doesn’t move to other stores.
For me the key is that he has the mentality of a shop assistant. He has developed an extraordinary sensitivity for what people want. And the only person who can do that is someone who cut their teeth working in a shop. Obviously, the personality of the owner is very different from that of the person who does the selling, because the owner has the things that he, the owner, likes. This is an important shade of difference when it comes to grasping the character of this genius. And the shop assistant, who has had no part in the process of choosing what he likes, has just one goal: to sell. He had nothing to say about what was purchased or what the shop stocked; the only task he had was to work out what people liked. That was his school: observing and learning by noticing the changes in the tastes and preferences of the public; what women liked best, what pleased girls or young boys or indeed anybody who came in. In this sense, Inditex is a company based on reality.
No matter where you are, what matters are the people.
And now we’ve jumped to eastern Europe and Russia, parts of the world where women like clothes more than anything else. It’s a question of mentality. Slavic women like to show off.
International expansion in recent years continues to amaze Amancio himself. “I could never have imagined such an explosion when we started. But you keep traveling forward day by day and you see how at every step the road opens up before you.” It should not be forgotten that Ortega was already 40 when he started as a businessman in 1975.
Another key factor in the Inditex success story is the sure and certain knowledge on Ortega’s part that you sell much more if the price is low. Customers are really delighted if they can find silk and cashmere items for $30 that cost $100 elsewhere.
Last but by no means least, a basic factor is stock turnover twice a week. If to all this you add limited supply, the excellent location of the shops and extremely careful merchandising that takes place, you’re looking at the reasons for Inditex’s success.
When you’re at peace with yourself, you get home or arrive at the office in a positive state of mind and you transmit that optimism to everybody. Life is much easier than we make it out to be. But you also have to ask yourself to come up with something creative, something different. Nothing is more satisfying than putting your heart and soul into something that you believe you should be doing.
One of the things that most helped us on the road to success in sales is that we receive information on a daily basis about what’s happening in all the shops worldwide. The consumer is the one in command, and more so every day, and we’ve learned that you refuse to listen to her at your own peril.
If we had had a clue about what the day-to-day work involved in this adventure was going to be, we wouldn’t have had the strength to go on. I don’t think I’d it again. The sum total of the sheer weight of the work we’ve done over all these years is simply frightful.
I try not to lose sight of all those details, because it’s the details that make the company. In this business people are cheering you one day and booing you the next, and you know it. The company works well because we’re all completely clear about what we have to do. If we do that, everything carries on OK, or even better, day after day.
It’s not so easy, because nowadays you can’t find so many people happy to operate a sewing machine for a living like in the old days. I have workshops in Galicia, and if the girls leave us, we have no way of replacing them.
My success is the success of everybody who works and has worked alongside me. No human being can be so intelligent, so powerful or so arrogant as to think they can build a company like this singlehandedly. There have been many, many people who devoted their lives to this company. Many people have helped built this wonderful reality, from the beginning until now.
Finding professionals of this calibre is a gift from God as much as anything. Picking people is always a gamble. When you manage to keep the company on course, thanks to them, it gives you huge peace of mind about the future. This is real luck, and it has never let me down.
What matters to me above all is the quality of the person who is coming tow work for the company. I try to find out what their values are. I’m interested in their family life, their personal and human integrity that will be expressed in their professional capacity for the job they’re going to do. But their personality is paramount. And I’m seldom wrong.
If a company doesn’t grow, it dies. A company has to be alive. I was 72 on March 28 and I feel that we can’t stop growing. Nobody could ever destroy this company because the people we have working here are excellent and they are completely committed.
Amancio laughed, and said that, knowing the company as I did, I should have already realized that a fundamental part of the strategy was to never repeat a product, precisely so that uniforms could be avoided. “If there’s a Zara garment that you like, you’re more or less forced to buy it there and then or you’ll lose it. The lines are universal and our customers have the same tastes, as we see more and more. To be successful, we just have to get the product right.”
Until quite recently the rich countries were the Arab countries and Japan. Now it is Russia and China. In those parts of the world there’s a definite percentage of the population with a great deal of money, and they spend it all, because it’s a matter of easy come, easy go.
You have to love beauty; it’s one of the essentials of life. They know that very well in Italy, and you breathe it in the air.
When a person has achieved success such as his and established this kind of situation in life, is there anything that can hurt him? “I don’t think anybody can do me any harm, now. The past is the past. It’s as though you’re wearing a suit of armor. And anyway, I don’t bear grudges against anybody.”
You can’t let yourself be scared by a crisis like this, you can’t let it get the best of you, because it’s fear that paralyzes you. Fear cripples you. You always have to take risks.
None of us is in this world by accident.
From then on, every effort is concentrated on working out which aspects can be improved, which features didn’t turn out the way they had hoped and so on.
He’s fixated on observing the way women dress and then working out what would be modern and successful, just to keep us up to date.
Since Ortega is a very practical man, he applies logic, not some special feeling. If he notices that a woman is comfortable with a suit and a black sweater, and if she suddenly wants a grey flannel skirt with wide pleats and he thinks it will sell, then he makes it. His secret is to “use logic to decide and to manage. There’s no need to complicate things.”
What a battle it was in the early years! When it came to work in those days, I was just merciless — I worked like a slave and I made everybody else do so, too, and it really wasn’t fun. I have to accept that. They were hard times, but the long and the short of it is that the phenomenon that is today’s company was born from that.
The Chinese are all businessmen. In actual fact, it’s the Chinese who are boosting the economy in Cambodia and Bangladesh, where they’re building workshops and factories. The future, and we’re watching it happen, is in Asia.
One day, for instance, I was in the car stopped at a light, and a scooter pulled up alongside me that was ridden by a young man wearing a denim jacket covered in badges. I liked it; I could see that this was a new, genuine, trendy. I called my design chief from the car and told him what I was looking at. In 2 weeks, the jackets were in the shops and selling like hot cakes. That sort of thing happens to me a lot.
The best advice I can offer to anyone who wants to break new ground is to watch the street. That’s the great catwalk. I’m not so interested in the other catwalks. If you were to lock up my friend Armani or any of the other geniuses in a room where they couldn’t see out, in 2 days they’d stop being creative.
From the beginning, Ortega’s one obsession was to give the customers what they wanted, and to do it fast enough to meet their demand and at a price attractive enough to increase their purchasing frequency. Until he appeared on the scene, the textile business had taken a completely different course: collections were planned and designed more than a year in advance; products were manufactured during a 3-month period and then handed over to the distributors whose job was to deliver them to the shops once or twice during a season. This process involved 3 crucial risks: an accumulation of large quantities of stock, investment in collections that might have no success in the market and uncompetitive prices due to the margins that burdened every steop in the chain.
The success of Zara is based on giving customers what they want in a sector where it is very difficult to stand out from the competition. What this means in real terms is fashion, continually renewed and at a reasonable price, with a first-rate image in prime locations. In Zara’s attractive environment you can touch everything, listen to pleasant music and be attended by young and fashionable assistants. This is very much the opposite of what had been the norm in traditional chains and stores.
In the early years, on a number of occasions he mad the rather slow train trip to Barcelona to convince the manufacturers about the project he was developing. The tables have now completely turned, and the Inditex head office receives daily offers by dozens of suppliers prepared to do whatever it takes to work with the textile giant.
The stock is held for 1 month, or 2 weeks in high season. It is estimated that of each 10 people who come into a shop, 3 will make a purchase. Inditex has impressed upon the customers the suspicion that what they see on one day will not be there the next, and what his not there today may arrive tomorrow.
Inditex leaves nothing to chance. Everything is established, from the music and the arrangement of the furnishings to the sweets on the counter. Everything is measured according to the shop, the section, the floor, etc. with the aim of maximizing the number of assistants available to the customer, since this is the major cost on the profit and loss statement.
Any shopping center opened anywhere in the world, regardless of country, provides the best premises for shops in the Inditex group because sales are better. This considerably reduces the costs, thanks to their great negotiating power. They are able to occupy the best shops and even insist on centers being improved.
Zara needs only 1 week to develop a new product and get it to stores, compared to the 6-month industry average, and makes roughly 40K designs of which around 12K new designs are carefully selected and produced each year. Zara has a policy of zero advertising; the company preferred to invest a percentage of revenues in opening new stores instead.
While some competitors outsource all production to Asia, Zara manufactures its most fashionable items — half of all its merchandise — at a dozen company-owned factories in Spain, Portugal and Turkey. Clothes with a longer shelf life, such as basic T-shirts, are outsourced to low-cost suppliers, mainly in Asia.
If a design does not sell well within a week, it is withdrawn from shops, further orders are cancelled and a new design is pursued.
Zara hardly invests in TV or press promotional campaigns and instead relies on store windows to convey the brand image, spread of word-of-mouth and locating their shops strategically in areas with high consumer traffic.
Zara built a supply chain and production network that resembled Benetton’s, while adding some fresh enhancements of its own. Zara maintained in-house only the capital-intensive, yet complicated, operations (like computer-guided fabric cutting); meanwhile, it outsourced the labor-intensive operations (such as garment sewing) to a network of local subcontractors, many of which were organized as seamstress cooperatives in Galicia. By shifting more production to subcontractors, the company was able to respond quickly when items sold better than expected and also to cut off production when demand for particular item fell.
Despite their similar origins, Benetton pulled well ahead of Zara in their first few decades. Benetton appeared to have all the pieces in place for sustained growth, while Zara looked like a solid, but regional, player.
Benetton and Zara both integrated clothing production with retailing in order to respond more quickly to shifting consumer preferences.
While rococo creations were still on couturiers’ desks — and the movie still on thousands of screens — a collection of puffy ball gowns and velvet jackets with cropped collars and gold buttons was already available at Zara stores.
At first glance, making sense of a rapidly changing environment under pressure seems impossibly complex. And yet people do it every day. They do so by developing and maintaining shared situation awareness, a team’s ability to recognize a pattern in a fluid situation and use it to anticipate what might happen next.
How do people develop situation awareness? Three steps: observe the raw data, spot patterns to form hypotheses about how the situation might unfold, and test these hypotheses.
Store managers are the first link in the chain. But Zara deliberately leaves them without computerized data on in-store stock. Rather, store manager receive on a hand-held device a detailed sales and replenishment report every hour. As a result, they cannot sit in an office and read spreadsheets but must speak with sales clerks and check the racks and the stockroom frequently to keep abreast of the current situation. Store managers also have higher incentives to collect the right data; they are responsible for deciding what to offer in their store, rather than simply hanging up the items sent from headquarters, and their compensation is based in part on the accuracy of their sales forecasts and sales growth.
To ensure that information is collected in a capillary yet systematic way, store managers and shop assistants turn into a recovery team each night when the store closes its doors. They scan through and collect the mountains of unsold items customers tried on without buying. Is any item, color or style prevalent? How can this be explained? Is there any pattern to be shared with the designers?
The company creates mock-ups of approximately 25K items per year but culls about 60% of them before committing to production.
The responsible design team prepares a number of variations (typically 3 or 4) to be kept as backups. Should the item sell quickly, proof of customer appreciation, they are ready to produce more while maintaining an aura of exclusivity.
ASOS originally stood for AsSeenOnScreen with the tagline “Buy what you see on film and TV” because it exclusively sold imitations of clothing from those medium.