Business

Retail

How the high street was conquered— London

Preface

It’s not only the Japanese (see Thursday’s Monocolumn on Uniqlo) that have a retail model that’s fit for these straightened times.

Inditex, Fashion, High street fashion

3 September 2009

It’s not only the Japanese (see Thursday’s Monocolumn on Uniqlo) that have a retail model that’s fit for these straightened times. Take a look at the graph for the number of stores now run by Spain’s Inditex – owner of Zara, Massimo Dutti, Bershka, Pull and Bear among others – and you see a line of progress that left the retail lowlands many years ago and is now in the Alpine peaks of commerce – with no valley hit during the tough past months.

In the first half of this year alone, the company has opened 166 shops in 35 countries with a wise focus on still healthy Asia. There are now 50 shops in China, for example, allowing the people of Qingdao and Changhun to slip into the same outfits as shoppers in Bilbao or Boston. Indeed, the company’s global store count stood at 4,430 (some 500 are franchises) on 1 July. Oh, and its net sales rose to €4,861 over the same period, a 7 per cent increase.

Much has been written about the Spanish company that was founded by Amancio Ortega Gaona (who is still the chairman) as a textile manufacturer in A Coruña, but the spread of the company in the past year alone continues to astonish (it owns 100 different companies and is present in 73 countries). And also the speed of that growth: in 2004 it had “just” 2,000 stores. And it’s no longer just Zara (which has 200 designers at any one time) setting the pace. Just look at the stealth with which Massimo Dutti has snuck up on us – there are 488 of them alone of which 98 have opened since 2008.

Another fascinating element of the Inditex story is that the company carries such good will. If this was a coffee chain growing at the same pace, there would be demonstrations in the street. But Zara? Well it’s seen as egalitarian without being trashy, it somehow appeals to both teenagers and their parents and it has a better record on sourcing its products than many rivals. Its Spanish heritage – even if it’s based in the rugged north, not sunny south – is also used to its advantage.

Jez Frampton is the global chief executive of Interbrand, the world’s largest branding consultancy. Every year his company ranks the value of the world’s top 100 brands and in the 2009 survey he has seen Zara rise from 62nd to 50th position (big rival H&M is at 21). What is the company getting so right?

“Zara has perfected fast fashion. In an economy where retailers can’t afford for products to stay in stores longer than necessary, Zara moves fashion from the catwalk to the high street better than any other,” he says. “It’s lauded for its innovative use of technology and logistics and unlike some competitors, Zara does not have issues with its product life cycles. As such, it’s fared better than most through the downturn. The brand is gaining a leadership position and will be a strong competitor for the likes of H&M and Gap.”

Sagra Maceira de Rosen, managing director of Reig Capital Luxury and Retail and Monocle’s guest luxury goods analyst, is an admirer of what Inditex has achieved – especially as it never advertises. “They invented the fast retailing model – ‘you want pink? We’ll get you pink’ – and they are still the best at it.”

She also points out that unlike say H&M, Inditex is a multiple-concept retailer and one that has shied away from developing its labels – apart from Massimo Dutti – as brands. “They are not brands, but brand channels. You would never want to wear a T-shirt that said ‘Zara’. And whereas Gap ads might shout ‘Wear Jeans!’, Zara never tells its customers what to do.”

And the 89,122 employees of Inditex are probably not too worried about their rivals. The company has a new accessories chain, Uterqüe and is developing the Zara online store. And with about a third of all sales in Spain still, there is a lot of global expansion set to come.

Monocle 24

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