In the world of fashion, business can be a risky game. Fashion is impermanent and styles go in and out of fashion on a daily basis. Thus, many retailers have ephemeral growth as their clothes go out of fashion. One retailer that has managed to show consistent growth however is Zara, a company that has grown on a massive scale in the past decade. Since 1989, the number of Zara stores in the U.S. has grown to 54, with the flagship in Manhattan. With every passing year, more stores are added. In fact, Business Insider reports that this year, the company plans to open 12 new stores in the U.S.
What has contributed to this tremendous rise of Zara?
Zara excels at a new concept called “fast fashion,” defined as the quick movement of designs from the catwalk to store shelves. It is able to do so because unlike its competitors, it maintains impressive control of its supply chain. H&M and many other competitors manufacture their clothes in Asian countries like China and India, making transit for goods longer and costlier. Zara on the other hand has the majority of its manufacturing centres in Europe, making transit far easier and enabling them greater control of their goods.
In fact, Crain’s New York reports that 63% of Zara’s goods are produced in Europe, 35% in Asia, and 2% in the rest of the world.
With strategic location of manufacturing centers, new items are placed into stores every three weeks. Thus, customers can always expect new styles. High turnover rate also adds a pressure to buy because of the risk that a particular item may no longer be in the store the next time the customer visits.
Zara’s competitors on the other hand normally maintain one collection per season because they don’t have the same flexibility to move clothes quickly from their manufacturing centers.
Zara also dares to sell clothes that are more fashionable, at attractive prices. Though H&M and other competitors sell clothes for lower prices, their collection is not as edgy and is usually more basic. Fashion can be a risky industry because it changes every day, but Zara benefits from the risk it takes. Consumers are willing to pay more for clothes that they deem to be more “stylish.”
Additionally, Zara’s marketing strategy is highly unique. Their parent company, Inditex, spends only a fraction of their revenue on advertising. Majority of the promotion is done from the Zara stores themselves. Each Zara store builds its brand by buying prime real estate in the best locations across the world, thus creating an illusion of luxury. This reduction of marketing expense has helped Zara maximise profit and beat out H&M to be the world’s largest retailer.
It also doesn’t hurt that one of Zara’s biggest customers is Duchess Kate Middleton, who helps to sell out nearly every piece of clothing that she wears. This celebrity power is significant because so many people seek to copy Kate’s look. Many pieces that she has been photographed in have flown off the shelves. Her celebrity effect, as well as others, has helped to make Zara’s owner Amancio Ortega the worlds’ third richest man, with a fortune of 30 billion euros, reports Fortune.
As the fashion industry keeps evolving, Zara has kept up with the changing times. What will we expect in 2016? Something great, for sure.
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