California Apparel News

Spanish retail giant Zara has become synonymous with fast fashion, but getting an understanding of how its fashion machine operates has been a futile task for outsiders.

Zara’s brass never has been forthcoming. After all, it took the media 35 years to get a picture of its founder, Amancio Ortega Gaona, who turned 70 in March.

Yet, about 100 retailers, manufacturers, technology executives and educators got a rare glimpse into Zara’s world— but not its patriarch—during a June 2 conference at the Fashion Institute of Design & Merchandising in Los Angeles. The event was hosted by Cary, N.C.–based TC2 and presented by Industry Forum Services, a London-based government- and retail industry–backed research group.

Zara has become one of the pioneers in fast fashion. Its parent company, Inditex, operates 2,044 retail stores and is projected to grow to 4,000 units by 2009. The company is known for its circular supply chain, introducing new fashions every week. The formula has helped the company grow its sales to 6.7 million euros last year—up 21 percent from the previous year. Profits grew 26 percent to 803 million euros in the same period.

Ken Watson, director of Industry Forum Services, has studied Zara like a book over the past several years, meeting with Inditex on numerous occasions, as well as with suppliers and other researchers.

Watson has learned that the Zara way sometimes means going against the grain of traditional business practices found in the apparel industry.

“It’s extreme sophistication versus extreme simplicity,” he said.

Zara will invest big in technology and visual merchandising but won’t spend a dollar on advertising. Even so, the retailer gets more column inches in publications than most of its competitors due to a well-oiled PR machine. The company does not like to invest in non-value-added processes and relies on such primitive methods as employing local truck drivers to ship goods instead of using overnight and shipping companies. And Zara still prefers mostly proprietary software.

“They don’t like the packaged systems,” Watson said. “Some of what they use is old, but it works.” Technology provides support and discipline, said Jim Lovejoy of TC2.

Insider’s view

In an exclusive video presentation of Zara’s production process produced by the Harvard Business School, Zara showed glimpses of its back-office operations, which features a 200-member design team. It operates on computer-aided design systems to draft patterns in a flash and utilizes markermaking software to minimize the waste of the approximately 34 million liters of fabric it uses each year.

The digitized markers are exported directly into Zara’s cutting room, where computerized cutting machines slice 40 to 120 layers of fabric. Then, the cut patterns are immediately dispersed to dozens of regional factories to be sewn. They quickly return to the cutting room, where they undergo a thorough quality-control process. Finally, they are packaged and assorted via an elaborate computer-integrateddistribution system before being sent to stores.

Zara doesn’t skimp on technology equipment— the emphasis is always on fashion, even if it means sacrificing some quality, Watson said.

While Zara’s creative team gleans information from runway and trade shows, and the general marketplace, some of the most important information comes from the store level. Unlike in the United States, where buyers and merchandise often rule the decisionmaking process, Zara’s retail store managers are empowered to provide much of the key input.

“If a customer leaves the store without purchasing anything, they will approach them and find out why,” Watson said. Store managers carry PDAs and electronically transmit customer feedback twice a week to Zara headquarters.

The retailer takes a similarly unconventional approach when it comes to trends, Watson said.

“They don’t want to be first in fashion— they follow,” he said. “They let someone else make the mistakes.”

In fact, more than 61 percent of styles are determined in season at Zara compared to about 20 percent for traditional retailers.

Another part of the company’s success is getting its fashions right the first time. The company keeps inventories lean with smallbatch production runs. Even with hot styles, it practices the “WIGIG” rule: “When it’s gone, it’s gone,” Watson said. “The short supply chain allows them to react and get in and get out fast,” he added. “Here [in the United States], you hear ’We missed the peasant look’ or ’We got into the Russian look but with the wrong product.’”

Zara brings three to four times more product to the market than traditional retailers and has four to five more weeks of lead time. It also has two to three times more repeat business. The average Zara customer will make 17 visits a year, according to Watson’s research.

Despite its success, Zara has stumbled a few times. In 2001, it launched lingerie, which was not as successful as it had hoped. And its U.S. business of 16 clothing stores and counting also is fledgling: Picking the right fashions in the United States has been more difficult and the company’s infrastructure here is not as solid as it is overseas.

“[The U.S. market has] so many levels of retail here, so it’s been tougher,” said Bruce Berton, an international business consultant for Santa Monica, Calif.–based Stonefield Josephson, which has introduced Inditex to Mexico and China. “However, they’re smart enough and good enough to change and adapt. They certainly know how to pick their real estate, and that will work for them.”

Watson said Zara faced similar challenges when it entered Paris in 1990 but is now among the top choices for shoppers there, according to surveys.

“They adopt the Japanese philosophy of improving things by making little changes at a time, not huge changes,” he said. “Their stores are their eyes and ears.quot;