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Case 32
ZARA: Fast Fashion*
Fashion is the imitalion of a given example and satisfies the demandfor social adaptation. . . . The more an article becomes subject to rapid changes offashion, the greater the demandfor cheap products of its kind.
-Georg Simrrtel, "fashion" (1904).
Inditex (Industna de Diseiio Textil) of Spain, the owner of Zara and five other apparel retailing chains, continued a trajectory of rapid, profitable growth by posting net income ,~ of €340 million on revenues of€3,250 million in its fiscal year 2001 (ending January 31, 2002). lnditex had had a heavily oversubscribed Initial Public' Offering in May 200 I. In the next 12 months, its stock price increased by nearly 50o/~-despite bearish stock market conditions-to push its market valuation to € 13.4 billion. The high stock price made lnditex's founder, Amancio Ortega, who had begun to'work in the apparel trade as an errand boy half-acentury earlier, Spain's richest man. However, it also implied a significant growth challenge. Based on one set of calculations, for example, 76% of the equity value implicit in Inditex's stock price was based on expectations offuture ;:i~rowth-higher than an estimated 69% for Wa[-Mart or, . ·"~;itor that matter, other high-perfonning retailers. I The next section of this case briefly describes the structure of the global apparel chain, from producers to final customers. The section that follows profiles three of inditex's leading international competitors in apparel retailing: The Gap (U.S.), Hennes & Mauritz (Sweden).
and' Benetton (italy). The rest of the case focuses on Indiiex, particularly the business system and international expansion of the Zara chain that dominated its results.
The Global Apparel Chain
The global apparel chain had bp.en characterized as a pro"totypica[ example of a buyer-driven g[obal chain, in which profits derived from "unique combinations of highvalue research, design, sales, marketing, and financial services...