I’m Alex Berman and you’re watching SELLING BREAKDOWNS.
Let’s kick off with a nice depressing statistic.
Your average American will throw away 77 pounds of clothing every single year.
And that’s true across the majority of the western world.
That is two suitcases of clothes, just dumped.
Today, we’re going to look at the history of Zara, its parent company Inditex, and the
fashion industry in general, to see how it became possible to create such a high churn
rate in the fashion industry.
Zara’s first store opened in 1975, in a city called A Coruna in northern Spain.
Owners Amancio Ortega and Rosalia Mera had wanted to name it after a favorite Greek film
called Zorba the Greek, but a bar on their street had already beat them to the punch,
so they settled for Zara, since they had already had the letters made for the sign.
Inditex was set up in 1985 as holding company for Zara and the manufacturing plants.
They went on to set up and take-over many other high-street brands that follow Zara’s
format; such as Pull and Bear, Bershka and Stradivarius.
They now have over 6000 stores globally.
Zara’s early business model was to create similar copies to high end lines but at an
affordable price.
As they expanded through Spain, Ortega pushed the idea of instant fashion, where Zara could
react incredibly quickly to new trends so they could put new lines on the shelves in
a fraction of the normal time.
Historically, fashion has moved at a glacial pace, with trends taking years to come in
and out of popularity.
Before tv and photography, a new style might come from the fashion houses of Paris and
it would spread when visitors to the city bought the clothes and then wore them in other
cities.
Or perhaps an apprentice would spend a few years learning the trade and then return to
their home country, bringing new ideas with them.
Even in the 20th century, there was a time delay.
Industry events, like textile conventions in Paris, would be only for those in the business,
so they would see what new materials and colour palettes were emerging.
This then influenced the design for the catwalk shows the next year.
The public would get glimpses of the fashion weeks in the press and this would lead to
the styles in commercial stores later in the year.
So, it was a two or three year process.
But this has changed completely now.
Thanks to Instagram, Snapchat, live streaming and so on, the public see a lot of pieces
before they even reach the catwalk.
This is why Zara’s business model is so successful; they are able to put out a new
collection that reflects what’s being shown at the major fashion weeks, almost as it's
happening.
Zara is incredibly fast.
It’s said that they can take an idea from a paper sketch to the shelves in just four
weeks.
For most other brands, we’re talking six months on average.
So how have they become so efficient?
In 1990, they upgraded their factory to adopt the famous Toyota production system called
Just-In-Time.
We’ll look into this in more detail in another video about Toyota but the basic idea rather
than making a product, storing it, taking it out of storage, and then delivering it;
you skip the storage all together, carefully organising your production so everything is
picked up fresh off the production line and delivered straight to stores.
That’s a bit of an over simplification but you get the general idea.
What is the benefit of this speed to Zara though?
Is it just to make them right on the cutting edge of trends?
It's a factor but there’s another motivation and this is really the key behind their success.
Zara have created urgency in their customers.
If you go into a luxury brand store, you can find a piece you like, think about it for
a month and then go back and get it.
In Zara, some lines are only in the store for a month total.
That coat you look so good in might be gone forever in the morning.
And it’s exciting for shoppers; they know there’s plenty of new treasures to discover
every time they come through the doors.
Your average Spanish high-street store expects loyal customers to shop there about 3 times
a year.
At Zara, it’s seventeen times!
Store managers get a good amount of autonomy over their space so each store doesn’t feel
like a carbon copy of the other.
In fact, there’s a lot working in the store managers favour.
They don’t need to discount old stock to free space, because they barely have any stock;
a new line is delivered every couple of weeks.
Also, Zara doesn’t advertise so individual stores don’t need to stick to a campaign.
The brand relies on word of mouth, including that generator by its celebrity fans, such
as Kate Middleton.
Zara’s marketing is very subtle and is almost a part of its business model.
They benefit from the mountains of free press that the fashion industry generates and with
their hyper-fast logistics, they are often first to spot a trend and provide it to the
general public.
Wanna learn more about business theory and history?
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