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Spain's Inditex, the owner of the Zara chain of fashion stores, has bold but worrying expansion plans
WHEN Spain's Crown Prince Felipe and Letizia Ortiz Rocasolano announced their engagement in 2003, the bride-to-be wore a stylish white trouser suit--which raised some eyebrows among those concerned with royal protocol. But within a few weeks, hundreds of European women were wearing something similar. Welcome to the world of instant fashion, in which a Spanish company is defying conventional wisdom and building a global brand: Zara.
Instead of trying to create demand for new trends in the summer and winter seasons using the catwalks of fashion shows, Zara studies the demands of the customers in its stores and then tries to deliver an appropriate design at lightning speed. In the process, Zara has become the most profitable arm of Inditex, a holding company of eight retail brands, and one of the biggest success stories in Spanish business.
From its beginnings in 1963 when Amancio Ortega Gaona, its founder, began to trade garments, Inditex has emerged as one of the world's fastest-expanding makers of affordable fashion clothing. Since 2000 it has more than doubled its number of shops to 2,240 by the end of last year, with sales of more than euro5 billion ($7 billion). On June 13th, Inditex announced net profits up by 21% for the first quarter.
How can Inditex thrive when Europe's entire textile industry is supposed to be under threat from cheap imports from China? At Inditex's heart is a vertical integration of design, just-in-time production, delivery and sales. Some 300 designers work at the firm's head office in La Coruna in Galicia, a poor region in northern Spain. They are in daily contact with store managers to discover...