How Zara Grew Into the World’s Largest Fashion Retailer
nytimes.com
nytimes.com
I've been to a 'camp' myself in 2011 just before the scandal broke. This is how they did it: a coyote paid by Zara would go to Bolivia and give some money to Bolivians that wanted a 'better life' in Brazil. They paid travel expenses and brought them illegally to Brazil. After they were here they would work for no salary - just for the promise that Zara would 'give the papers' to work legally. It never happened.
To mask the operation they opened a number of ghost companies in Brazil and hired those companies to manufacture their products. When hell broke loose, they stated that those companies were guilty, not them.
I hope Zara burns in hell.
when it comes to fashion, there are the companies that you hear they use bogus companies to exploit the poor world to save 0.05c/item, and the ones you just haven't yet heard they use bogus companies to exploit the poor world to save 0.05c/item.
speed kills, and fashion is a speedy business. your customers see what fashion magazines show them, and they want it now. Zara has understood this. awesome, awesome application of clear thinking and strategy.
Zara is being taught over here in EU together with Red Bull as one of the key modern examples for smart business models.
mr mateschitz chose the narrow, tall can. every retailer told him to fuck off, he should comply with the standard coke/pepsi can. he did not comply. every retailer told him that red bull was too expensive. they wouldn't stock a dead product. he did not comply. the german authorities banned red bull over its formula - too much sugar and caffeine, a health risk. he did not comply.
red bull got noticed by the youth in austria and germany, because: - it was different, new. you could spot someone from afar drinking it. white earbuds anyone?
- it was expensive. it was special.
- it was dangerous, forbidden. bavarian youth was driving over the border into austria too fill their trunks with precious red bull and 'smuggled' it into germany.
pitch perfect branding strategy, way before their equally brilliant extreme sports sponsorship.
tidbit: france only just recently lifted the BAN on red bull...
Japan has plain cold coffee, it's harder to find that here, otherwise I'd be happy to drink it.
"The trendiest items are made closest to home, however, so that the production process, from start to finish, takes only two to three weeks. Inditex’s higher labor costs are offset by greater flexibility — no extra inventory lying around — and on faster turnaround speed."
In September I went into a Zara near me and spotted a cap that was pretty clearly a facsimile of the Prada piece. I was really impressed at how quickly they had put it together. I assume they started manufacturing it immediately after the runway show.
1. STORE OPENINGS
“When we open a market, everyone asks, ‘How many stores will you open?’ ” [Inditex communications director Jesus Echevarría] said. “Honestly, I didn’t know. It depends on the customer and how big the demand is. We must have the dialogue with the customers and learn from them. It’s not us saying you must have this. It’s you saying it.”
2. PRODUCT OFFERINGS
[Store managers] also monitor customers’ reactions, on the basis of what they buy and don’t buy, and what they say to a sales clerk: “I like this scooped collar” or “I hate zippers at the ankles.” Inditex says its sales staff is trained to draw out these sorts of comments from their customers. Every day, store managers report this information to headquarters, where it is then transmitted to a vast team of in-house designers, who quickly develop new designs and send them to factories to be turned into clothes.
The IT challenges are not always technically of the most interesting kind, and rarely bleeding edge, but that is made up by the scale of things, by a good atmosphere and people dedicated to doing a good job. It is an organization that is suited to grow professionally in.
So big data (and associated systems) is not always needed to detect patterns and trends.
I think the more interesting part of this article was this statement by Prof. Fraiman, "And what is the problem in America? They don’t fit in the clothes. So why do it? Having to make larger sizes makes production so much more complex.”
I've heard that SO many times from high end designers, but which fast fashion brand is making money hand over fist? Forever 21. And they're also the ones offering lots of options for plus-size women. Bigger women are begging for cute, trendy clothes and whoever delivers it will hit pay dirt.
This. So America gets completely different cuts of clothes. If you're not overweight, or huge, most clothes sold in America suck. I didn't realize this until I spent some time studying in Italy, where even the cheap t-shirts they give away at 5ks races fit so much better and look so much nicer on me. It wasn't until then that I realized the cut of the clothes, not just "size" or "style" make a huge HUGE difference in appearance. That, and when you would walk into a store, the employees will say "don't buy that, this here fits your body style soo much better" and they are right. In the states, I've noticed people just buying whatever is trendy, with zero understanding of what actually looks good on them, and what doesn't....
This is how Jessica Simpson is becoming a more successful "fashion designer" than she ever was as a singer.
I bought a blazer from them which looked amazing, but a week after wearing it, it was "frizzy"---some of the finer fibers were starting to unravel on the outside.
I purchased a set of boots last year. They lasted a single season before the soles cracked.
I will give you an example. There used to be a fantastic store called "Marshall Field's" in Chicago. Their own Field's brand clothing, say simple white T-Shirts, were fantastic. Well priced and would last forever. They have since then been bought out (by Macy's???). Now, I would have never thought that it would be very difficult to bring thick-white-cotton T-shirts to market at $25. I would pay for these and so would many others. But that option is just not there any more.
Why is it that when big chains come in, quality goes down? I am sure they would make plenty of profits on good quality stuff, no? And, you can't blame the outsourcing of production to China or Bangladesh -- they would be happy to produce for you whatever quality you want, shoddy or good, as you desire.
So why the decline in quality on so, so many things that we buy? Has there been a general decline in people willing to pay 20% more for something that will last twice as long?
The common answer is information asymmetries. The seminal paper is Akerlof's "The Market for Lemons: Quality Uncertainty and the Market Mechanism". [1]
Simply speaking, consumers can't determine quality before buying which makes buying low price the better decision, economically speaking. Suppliers can use branding or guarantees to counter this. Unfortunately, the first is also open to deterioration; and the second has high transaction costs for consumers.
In fashion, however, there are other causes as well. Clothes are not just bought for protection and comfort, but for communication as well, ie. advertising. In my opinion, this is why clothes signaling status work well for older men, clothes signaling aggression work well for younger man, while clothes signaling youth work well for women. Especially the latter drives the fashion market, and thus the need to cheap, disposable clothes.
Constant demand feedback from random, irrational and finicky customers who want cheap liquidity (the latest fashion) now is used to front run the competition with supply side flexibility and incredible production speed, allowing them to capitalize upon short term market dynamics (fashion fads) and grab easy alpha (cash money).
> “Prada wants to be next to Gucci, Gucci wants to be next to Prada. The retail strategy for luxury brands is to try to keep as far away from the likes of Zara. Zara’s strategy is to get as close to them as possible.”
-- http://en.m.wikipedia.org/wiki/Hotellings_law
Game theory FTW! Zara is using other people's clout, clothing designs, advertising and foot traffic to free ride and not pay the advertising or branding taxes most brands need to pay to stay competitive. They are commoditizing high fashion with volume, speed and ruthless efficiency.
> Echevarría said that is because the customer is always determining production — not the other way around. Every piece of clothing the company makes has, in a way, been requested. A business model that is so closely attuned to the customer does not share the cycle of a financial crisis
...
The managers field calls from China or Chile to learn what’s selling, then they meet with the designers and decide whether there’s a trend. In this way, Inditex takes the fashion pulse of the world. “The manager will say, ‘My customers are asking for red trousers,’ and if it’s the same demand in Istanbul, New York and Tokyo, that means it’s a global trend, so they know to produce more red pants,” the P.R. person said.
Just like traders at a desk. Or computers watching lines move. Supply is now meeting demand when it exists, thus reducing inventory, waste and maximising both consumer happiness and Zara's profits. This is an example of big data + lean manufacturing running at scale to meet random and short term thundering herds that really, really want the latest in whatever is hot. It's a little like Akamai and popular videos - find the probabilistic trends of content demand (aka Cat videos :), cache the files at edge nodes - reduce backbone bandwidth waste via local file streaming - profit.
> “To the luxury brands, they are copycats, they are like mushrooms feeding off the main body of fashion,” Golsorkhi says. “I was of the same mind myself, but I have grown out of that because I realize that the fashion companies also copy each other. In the end, no one’s original.”
Why isn't this obvious :D. Everything is a remix - and anyone who denies it doesn't pay enough attention to how things are made. Zara, like Samsung, is bringing things that people want, at the prices they can afford, when the people want them. Supply is matching demand and that's a good thing. It's good for the consumer - and funnily enough - it's good for the brands they copy.
If people want Gucci they'll get Gucci - not Zara. For everybody else - they just want to social signal to others that they are fashionable, good looking and wealthy - let them for pete's sake! Each knock-off Gucci just adds to Gucci's brand recognition as THE brand other brands copy.
> “The reality is: a T-shirt is a T-shirt is a T-shirt,” Golsorkhi says. “It costs the planet the same thing whether you have paid £200 for it or £1 for it. It does the same amount of damage. A T-shirt is equivalent to 700 gallons of water, gallons of chemical waste, so much human labor. But it used to be that we could do with three T-shirts a year. Now we need 30. Sometimes it’s actually cheaper to throw away clothes than to wash them. That has got to be wrong.”
Perhaps. But that assumes that everything that went into the T-shirt just flat out disappeared from the Earth. That water went back into the rivers. Those chemicals were recycled (they're expensive). That human labor needs something to do - or they'd starve to death on subsistence farming. The T-shirt ends up being used for years, donated to charity, or recycled.
Globalisation, crass consumerism and funny T-shirts have saved the world and brought billions out of poverty. It's the pointless things that keep things running. Cat videos have done more for the internet than Wikipedia (I'm not messing around). Indeed Wikipedia's dominance is directly helped by Cat videos (reducing cost of bandwidth, getting more eyes online, reducing cost of information access).
Non-cyclic thinking is really - well - short-sighted.
We need MORE consumption not less - our entire world economy is based on 75% personal consumption - that means CONSUME.
Without it we're all fucked.
Discouraging consumption is ridiculous - how will people in poor countries get out of poverty-subsistence cycle if Americans won't buy their shit. As much as people hate to admit it - consumerist, debt laden Americans make the world better off than thin, hard working, non-consuming Germans.
The Germans only live because the Americans consume. People only buy expensive German cars to move their lazy asses around.
This is a good thing because, without lazy consuming people doing pointlessly complex commuting and travelling - people wouldn't buy cars - period. And if people don't need what you produce (starving artists anybody) - you don't exist - no Germans. See what happened to Japan's economy - they killed consumptions - and once you kill consumption, supply never comes back easily - because no one is going to work for free or invest in an economy, unless they know that in the end - they'll get paid by consumers.
Next time you watch Jersey Shore, really, really shallow consumerist people, reality television, QVC or any of the other crass consumerism crap you see everyday - don't denounce them, don't say the world has "jumped the shark".
Instead you must thank them for keeping your ass employed, and the world economy running with their wasteful, arbitrary and pointless consumer habits.
Buying a cheap shirt from Zara hardly does much more than buy someone's lunch in a Chinese factory.
All the crap that was produced post WWII paid for your cutting edge shuttle program. That shuttle program subsequently helped the research of all the crap that was subsequently produced.
It's a crap cycle. Embrace it. The cookie monster should be the cheerleader of capitalism - he eats, and eats and eats, but none of it ever goes down because he lacks the stomach to actually ingest any food - it all goes to waste - but he enjoys it anyway.
We need more cookie monsters.
If people want cookies - it's cookies we'll make - because the markets one and sole purpose is to provide goods that people want, at prices they can afford, at the times they want it.
The sole purpose of governments is to tax the negative externalities of said cookies (obesity/health etc.) and invest those market surpluses into the future safety and prosperity of said obese consumers through negative ROI R&D and scientific research that will allow us to make cookies taste like whatever we want on Mars.
Both governments and markets exist to serve consumer demand.
Everyone in the world is somebody's bitch.
Ignore consumer demand at your own peril. The world runs on french fries - tax it for the health concerns, invest it into rockets that'll let people eat those self-same fries on Mars.
The cookie monster as a capitalistic symbol of consumption, I love it! I'm pretty sure this is not what the late Jim Henson had in mind, though.
All these cheap lunches together, one for the plantage worker, the transporter, the designer, the real estate holder, the taxman, etc. etc. is the clockwork of the (global) economy.
But first, I agree that consumption is one of the factors that has helped raised the standard of living worldwide.
The first problem is the broken windows fallacy. Just because buying cheap t-shirts to throw out generates a lot of beneficial economic traffic doesn't mean that its not very wasteful. The 27 extra t-shirts being thrown out each year require a substantial amount of resources to produce: if redirected elsewhere that might be another space shuttle, or something else slightly grander than a bin full of discarded linen. (Of course some of it gets trickled down to other countries to provide more clothes).
But the bigger problem is the idea that the rest of the world only lives because America consumes. This is like a fable of an island with 50 people. A dozen fished each day, a bunch grew crops, etc, etc.. and from the hard work of all of these 20% was gathered and the final person consumed it. Without that final person, the demand for all those goods would go and the entire economy would suffer. Everyone else would have much less work to do.
Why would any group of people happily put up with one of them 'doing their share' by consuming, consuming, consuming while all the others work to provide? In the short term its due to stability emerging from the historical processes that led us to this point. And also the hard and soft power of the US. But its not an endearing quality.
Secondly, your making a false comparison between islands and countries. That's a closed system. America exports IP and brings back it's surplus through the investment of everyone else lowering their cost of borrowing (0% T-bills).
It's irrelevant how many people in America actually produce - what is relevant, is that enough production is carried out. Nowadays that means robots and automation - not people. America will do fine so long as it stays innovative and keeps itself at the centre of the IP world - even if the vast majority of Americans don't do jack (but then again so do the vast majority of Chinese - most could be replaced with a machine).
They really take the old maxim that 'fashion is fleeting' to heart in their operations and manufacturing chain.