You’ve probably never heard of Amancio Ortega but chances are you own a piece of his clothing.
The Spanish retail magnate, labelled the secretive billionaire, is the founder of high street chain Zara. He also owns a massive chunk of the rest of the high street (literally the bricks and mortar in some cases thanks to his massive property portfolio). Today Inditex announced record half year sales and profits with a 3% rise in net income to £1.2 billion for the six months to July 1.
Yet no one seems to know very much about Ortega. But without him we’d never have heard of the term ‘fast fashion’ and our shopping habits would certainly be very different.
I first discovered Zara 20 years ago whilst strolling along the Champs-Élysées in Paris. I literally couldn’t believe my eyes when I found all the season’s key catwalk trends at high street prices. It just hadn’t been done before.
To put it into context, in 1998 you had to be invited to a fashion show to see what was happening on the catwalk. And it took six months before the likes of you and me could buy something ‘inspired’ by a designer on the high street.
Zara blew my mind. It became ‘my little secret’ and I can’t describe the buzz I got back in the UK when people asked me where I’d bought my skirt-dress-shoes-coat, assuming they were expensive designer pieces. But sadly global expansion followed and soon my secret was shared by all.
So where did it all begin?
Ortega left school at 14 and started working for a local shirt maker in his local town of A Coruña, Spain. He started his first company in 1972 selling quilted bathrobes before opening the first Zara store in 1975 with his first wife Rosalia Mera.
The couple initially named the store Zorba, after their favourite film Zorba the Greek, but a bar further down the street had the same name so they were forced to change it.
By 1983 the couple had opened nine stores across Spain, most near prestigious shopping districts in the country’s largest cities. Five years later they expanded into Portugal followed by the US a year later. Fast forward 40 years and Zara’s arrival in Hawaii marked the company’s 7,000th store.
It’s been a meteoric rise for Ortega, the inventor of fast fashion who has changed the way we shop forever.
In 2009 Zara became part of the Inditex group, a parent company that owns Pull & Bear, Massimo Dutti, Zara Home, Bershka, Stradivarius, Uterque and Oysho.
Ortega stepped down as CEO of Inditex in 2011, passing the reins to Pablo Isla, but retained 59% of the business. It took a further six years for him to commence his retirement but it’s reported he continues to go to work and remains involved in the running of the business.
What is the secret behind Zara’s success?
On the face of it, none of it really makes sense. For starters the company doesn’t advertise and still manufactures most of its products in Europe.
But when you look at the heart of Ortega’s business you start to see what a true retail visionary he is. Right from the outset Zara’s business model has been built with flexibility and speed at its heart. Instrumental to the company’s success is the connection between the stores, the in-house designers, and its factories. This has always been a key factor, coupled with the company’s deft logistical management.
It’s these vital ingredients that enable him to interpret trends and get them from the catwalk to the high street within weeks. Before Zara came along it took five to six months. And once we’d had a taste of what is now commonly referred to as ‘fast fashion’ we just couldn’t get enough of it.
How did Ortega build the world’s largest retail empire?
Well, the running of the stores plays a big part. Unlike other high street retailers, the stores change their stock twice a week when each store manager sends an order to HQ. This order is based on the individual sales data from each store and also calculated around anecdotal evidence from shoppers about what they like and don’t like.
It’s then up to the commercial team to interpret this data and compile the order. In turn they add in new products and balance out demand with other stores, before sending it to Inditex’s manufacturing hub. Within two days, the order has reached the store.
This means that Zara store managers play a huge part in the process, acting much more like store owners. A big part of their job is watching customers’ reactions and anticipating demand. Their pay is target driven and they can double their salary through bonuses.
Designing fast fashion
Another thing that sets Zara apart from the competition is that, unlike most other retailers, they don’t just produce one product range per season. Thanks to a huge design team, Zara has the ability to identify new trends and immediately put into production. This means they can produce four or five updated and relevant collections after the initial seasonal launch. This way they never miss a trend.
The key to their success is keeping these new introductory ranges small allowing mistakes to be discarded and the hits followed up quickly. These collections are in effect dictated by customer demand. The clever part being how quickly Zara responds to consumer behaviour.
Distribution is the key to the speed in which the company can respond. Every item of clothing produced comes through Spain.
At the company’s vast 10,000 sq ft base in Arteixo, not far from where it all began in A Coruna, an extensive tunnel network carries a huge carousel that transports clothing from the on-site factories to the distribution centre.
Inside the distribution centre, clothes move along the carousel until they reach their allocated box. This box, earmarked for an individual store, will be packed with different products and reach its destination within 36 to 48 hours.
A massive success story
Today Inditex operate more than 7,475 stores in 96 markets, making them the world’s largest and most influential retail group. Net sales have reached a milestone, smashing past £10.7 billion and they are processing 249,000 online orders per hour. It’s hard to image a women in the UK that doesn’t own a piece of clothing made by them.
As for Ortega, well while I secretly wish he hadn’t been quite so successful and that Zara could have remained ‘mine’. But I’d like to thank him for the fabulous clothes. AND I’d like to add that over the past 20 years I’ve played my part in making him one of the richest men in the world.