Inditex prioritises insights

24 May 2011

MADRID: Inditex, the owner of retail chains including Zara and Bershka, is focusing on consumer insights rather than advertising as a means of fuelling growth around the world.

The company currently boasts 5,000 stores under eight separate banners, including Massimo Dutti, Oysho and Pull & Bear.

One characteristic of the organisation's strategy is rapidly responding to the latest trends and driving word of mouth, as well as eschewing traditional advertising.

The Spanish-based operator also makes 49% of products in its home market or the "proximate" nations of Portugal and Morocco, measured against 35% in Asia and 14% for Italy and Turkey.

By contrast, fellow fast fashion specialist H&M now generates an estimated 75% of stock from Asia, yielding cost benefits, but potentially acting as a restriction.

"Proximity sourcing is extremely relevant to us, to be able to react during the season and to maintain flexibility," Pablo Isla, chief executive of Inditex, told the Financial Times.

More broadly, the high-speed turnaround in the firm's output and its capacity to quickly meet evolving preferences allows it to command a premium, offsetting inflation on the input side.

"In the last nine months, with raw materials price increases, with cost increases in different Asian countries, it's clear that in our case it has had much more of a limited impact because of our sourcing and structure," said Isla.

Having started life as a clothing manufacturer, and not a retailer, Isla suggested Inditex also possesses a unique understanding of supply chain management and logistics.

"It has been possible for us because it has been a step-by-step process," he said.

"If you try to copy someone else's business model and it is not part of the culture of the company then it is very difficult to be successful."

Another recent initiative pursued by Inditex is creating ranges designed for customers in key Southern hemisphere geographies.

"We need a specific collection because of the seasons," said Isla.

"They don't want last year's stock because they follow fashion trends as much as everyone else. If you try to sell them things from the previous season, that never works."

Zara currently runs 30 Brazilian stores, and expects to open outlets in South Africa and Australia in 2011, indicating Inditex's future priorities.

Alongside unveiling roughly 120 branches in China this year across its various brands, Inditex purchased a site on Fifth Avenue, New York, for $324m last month.

Each of its shops holds employee meetings on a daily basis to keep track of which offerings are proving popular, or where demand is seemingly unmet.

In a wider example of such an approach, the manager of a Zara store in the UK notified Inditex's head office in Spain upon noticing Kate Middleton trying a £49.99 blue dress a week before April's royal wedding.

As a result, the chain was ready for a surge in interest among buyers when Middleton wore the item concerned the day after the ceremony.

The product ultimately sold out, with Inditex ensuring a fresh batch could be shipped just two weeks later, considerably ahead of typical lead times, normally stretching into months.

Data sourced from Financial Times; additional content by Warc staff