Sophisticated and tightly run operations have been the key behind Inditex’s success and supported its business model: to quickly respond to fashion trends and consumer demand, offering new collections continuously at a relatively affordable price.
In the United States, the Group is most widely known through its brands Zara and Massimo Dutti. Its turnover for 2014 was over 18 billion euros and as of January 2015 it had 137,054 employees and more 6,600 stores around the world.1
Inditex business is centered around one simple premise, to be quick at responding to the market. Whereas it would take almost a year for a traditional fashion company to get its products out, from conception to runway to stores, to Inditex this process takes less than two months.
Speed is a priority, because merchandise needs to be adapted as fast as possible to fashion trends and demand. Scarcity around products and its life cycle is an additional element; the majority of garments in a store will be available in small amounts per size, to allow the renovation of the stock.
Stores are located in prime retail locations. For instance, both Zara and Massimo Dutti can be found in NY’s Fifth Avenue, Paris’s Champs Elysées and London’s Regent & Oxford Streets. Stores are differentiated by concept to segment market demand and target specific niches. Each concept’s management team makes decisions and administers its resources independently. However, they are all grounded on the same business and operating models. The Group provides support services to the brands such as administration, technology, logistics, general HR, legal and financial advisory.
- Zara is the largest brand and most often associated with the fast-fashion model.
- Massimo Dutti has a more sophisticated and upmarket image.
- Pull&Bear, Bershka and Stradivarius are focused on a younger audience, with more casual personalities.
- Uterqüe offers accessories such as leather goods, footwear, eyewear and jewelry.
- Oysho offers women’s lingerie and intimate wear.
- Zara Home is centered in home furnishings with the same accessible approach.
Inditex is highly centralized and vertically integrated: its designs, manufactures and distributes its products, which are ultimately sold at its own retail stores. By controlling all four stages in the fashion process, it is able to ensure that collections are quickly adapted to customers’ tastes.1
Under this model, the company has to identify and respond to changing trends in fashion by continuously designing new models. Traditional fashion companies like The Gap and luxury firms such as Burberry and Gucci would usually produce up to 4 collections per year: the ever popular Autumn/Winter and Spring/Summer, and Resort/Cruise and Pre-Fall, also known as inter-seasonal collections. Inditex uses its flexible model to produce more collections per year, reacting rapidly to demand and delivering products promptly to stores.
Each season’s merchandising is designed by Inditex’s more than 600 designers, which take inspiration on haute-couture fashion shows, fashion editorials and the feedback they receive from customers at each brand’s retail outlets. Data management plays an important role at gathering and transmitting feedback from stores.
In accordance with its vertical integration approach, most garments are manufactured at the Group’s own factories. Only some production stages, such as garment-making, are subcontracted to specialist firms. Inditex has direct control over the fabric supply, the marking and cutting and finishing stages of production. The group handles directly the logistics associated with production, primarily through a subsidiary called Tempe.
Logistics & data management
Each brand or concept has its own distribution hub in Spain, where all the merchandise is delivered from the production centers and suppliers and later distributed to the retail outlets around the world. Furthermore, merchandise is adapted to the store’s customers profile, minimizing the risk of doing sales or not selling the garments. Shipments are frequent and continuous, with merchandise arriving to stores twice a week and containing new items to continuously refresh the collections on display.
Highly automated systems and a centralized organization allow a continuously updated offering. The company designed its own logistics software to support the high demands of its business model for speed. On average, merchandise is delivered from distribution center to store in less than two days for America and Asia and half of that time for Europe.
The company thinks of its stores as a vehicle for collecting information about consumer tastes and receiving feedback about market demand, this information feeds the design teams and allows them to adapt future merchandising.
Stores also serve as a primary channel for marketing, since they represent the brand personality and storytelling. Exterior design and shop windows act as advertisements for each concept’s most fashion-forward garments. To guarantee a standard image and store management, design, logistics and staff training are performed by the Group, regardless of the store’s ownership. Franchises are limited to smaller or specific markets, with only 13% of its more than 6,600 stores franchised by January 2015.
Inditex’s business and operating models are deeply integrated and allow the company to exert control over the fashion process, to be the king of fast. Benefits of this model, such as keeping low inventory levels and limiting the risk of fashion trends, outweigh additional necessary costs in production, data management and logistics. Hence, Index relies more in volume than margin compared to traditional fashion.
- Inditex – Press Dossier, https://www.inditex.com/documents/10279/156946/inditex_eng.pdf/72744164-500e-4df6-adaf-e685d1b139c5, accessed November 2015.
- Inditex . Logistics – Youtube, https://www.youtube.com/watch?v=iKUmOsmh-Gs, accessed December 2015.
- Conversation with James McArthur, ex-CEO of Balenciaga, Harrods and Anya Hindmarch.
All images taken from Inditex website.