Amancio Ortega is no household name, but he was briefly the richest man in the world (he’s now #4).  He’s the low-profile founder of Inditex, whose largest brand, ZARA, has taken the world by storm.
In fickle world of fashion, it is increasingly important to be “on trend.” But trendiness is elusive to most retailers, who hire teams of designers to predict styles a year or more in advance, when they lack real information (e.g. fashion shows, media buzz).  Compounding this is the fleeting nature of trends – often lasting only a few weeks before they become passé and leave retailers with a mountain of inventory to clear at rock-bottom prices. In this environment, the retailer with the fastest supply-chain wins.
ZARA is a leader in the emerging “fast fashion” space. They aim to consistently provide quality, fashion-forward apparel at reasonable prices. ZARA achieves this consistency through carefully optimized merchant-centric operations, encompassing the entire production cycle from design to manufacturing to sales.  While an average specialty apparel retailer might take 6 months (often much more) to get products designed and in stores (and might be able to rush a small selection in 6-8 weeks at a high cost), ZARA takes as little as two weeks to achieve the same thing.  
ZARA stores are “the axis around which the entire business pivots.” They also serve as the brand’s advertising (ZARA spends next to nothing on traditional advertising – you will never see a TV ad for ZARA). Stores are on “only the best locations on the most outstanding shopping streets.”  Store managers place orders twice per week; these are reviewed and edited by HQ to include new products and ensure balance across the chain and within two days, the store has received the order.  The stores also provide crucial data to headquarters, providing tens of thousands of unfiltered customer reactions to product for design teams to leverage when creating new product.  
Videos from ZARA web site describing store selection process, architecture, design, and customer service 
As a result of this customer-insight driven buying, quick turnaround, and fresh product, markdowns are rare. With very rare exception, the company does not use full-store promotions unlike many apparel retailers such as Gap or LOFT where it can be hard not to buy any given item at 40% off or more.  Instead, it orders only what it believes it can sell at full-price and focuses on displaying the product instead of using margin-eroding sales to move product.
So how do they do it?
ZARA is a merchant-centric organization. They do not win through more inspired design, rather they win because they can produce products quickly, allowing them to replicate the best designs in the market at any given time.
Design: Designers are constantly working on next season’s product and are reviewing current trends to develop a huge library of in-house design ideas. In parallel, they are “pulling” vendor-made designs for current/future use (giving Inditex exclusive rights to the design). ZARA’s scale grants them “first dibs.” Each year, over 30,000 designs are made for the Inditex brands (18,000 at ZARA alone). With this huge database of styles “ready to go,” it is easy for ZARA to quickly develop something that matches a trend.  
Fabric/Production: “Greige goods” (undyed fabrics/partially constructed base styles) are made in advance and sent to finishing mills once selected for production. This just-in-time production provides an edge versus traditional retailers who often do not buy yarns/fabrics until they have chosen the design. Fabric knitting/weaving is the longest process within the supply chain so pre-selecting fabrics is critical to ZARA’s fast turn-around times. Additionally, ZARA uses near-shore production for both fabrics and finishing, cutting out time in transportation to and from factories.
Logistics/Shipping: By owning its warehouses, ZARA maintains logistics flexibility based on demand. Furthermore, ZARA air-mails products to stores (versus sending ships), which does add cost but also takes several weeks out of the supply chain. 
Videos from Inditex site describing design, merchandising, manufacturing, and logistics 
The implications of this efficiency are real. Compared to a traditional player, ZARA will spend more to produce a similar garment AND sell it more cheaply (at regular price). But fast turnover and lack of markdowns drive much higher productivity (gross margin dollars / square foot).
As ZARA expands, it will face new challenges (e.g. shipping product from Asia to Spain and then back adds a level of cost/inefficiency). Furthermore, traditional retailers with scale (e.g. Gap) are starting to catch up. How will ZARA stay ahead of the pack? Perhaps it will be with virtual dressing rooms and self-checkout or perhaps they’ll continue to innovate on the supply chain.  Time will tell.
 Forbes 2015 Billionaires list. Retrieved 12/07/2015. http://www.forbes.com/billionaires/
 Capital IQ. Share price data. Retrieved 12/09/2015.
 booz&co. “Keeping Inventory – And Profits – Off the Discount Rack.”
 New York Magazine. “Blink and you missed it.” Retrieved 12/05/2015. http://nymag.com/arts/all/aughts/62499/
 Inditex. Business Model description. Retrieved 12/03/2015. www.inditex.com/our_group/business_model
 Interview with former ZARA Buyer (employed by Inditex 2009-2012; interviewed 2015)
 The Telegraph. “How Inditex Became the World’s Biggest Fashion Retailer.” http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11172562/How-Inditex-became-the-worlds-biggest-fashion-retailer.html
 The Financial Times. “Fashion: A Better Business Model.” http://www.ft.com/intl/cms/s/2/a7008958-f2f3-11e3-a3f8-00144feabdc0.html#slide0
 Pull from http://www.milled.com a promotional email aggregator
Other Sources Referenced:
Harvard Business Review. “Rapid Fire Fulfillment.” https://hbr.org/2004/11/rapid-fire-fulfillment
The Atlantic. “The Legend of ZARA – What the World’s Top Fashion Retailer Tells Us About Innovation.” http://www.theatlantic.com/business/archive/2012/11/the-legend-of-zara-what-the-worlds-top-fashion-retailer-tells-us-about-innovation/265126/
Quora. “How does ZARA’s Business Model Work?”https://www.quora.com/How-does-Zaras-business-model-work
The New York Times. “How ZARA Grew Into the World’s Largest Fashion Retailer.” http://www.nytimes.com/2012/11/11/magazine/how-zara-grew-into-the-worlds-largest-fashion-retailer.html?_r=0
Forbes. “The Future of Fashion Retailing Revisited.” http://www.forbes.com/sites/gregpetro/2015/07/23/the-future-of-fashion-retailing-revisited-part-2-zara/
Forbes. “The Future of Fashion Retailing – The ZARA Approach.” http://www.forbes.com/sites/gregpetro/2012/10/25/the-future-of-fashion-retailing-the-zara-approach-part-2-of-3/
Business Insider. “ZARA’s Genius Business Model and Retail.” http://www.businessinsider.com/zaras-genius-business-model-and-retail-2013-11