The fashion industry might seem small and unimportant, especially in today’s world, when clothes couldn’t be cheaper and more available. But make no mistake, there is money in fashion, so much so that the second wealthiest man in the world made his fortune in this industry. That’s why the topic of this article is the world’s largest clothes retailer, Zara.
Our story starts in Spain in 1950. In the northwestern part of the country lies La Coruña, a small but beautiful coastal city. Amancio Ortega, who was barely fourteen years old back then, had just gotten his first job as an errand boy, delivering fabrics for a local clothing retail store. The young Ortega excelled at his work, and as he grew older, he started dealing with the store’s customers and suppliers, eventually becoming a senior manager in 1960.
When not at work, Amancio would develop his designs out of his sister’s house. He practised reproducing popular designs using the less expensive materials left over from the retail store while adding his modifications and improvements. Amancio would frequently design nightgowns and lingerie, which he would then sell at the retail store.
Creating Own Company
In 1963 he felt confident enough to leave his managerial job and to start own company. Working out of his own home, Amancio established Confecciones Goa with a meagre $25 of initial capital. He got his brother, sister and wife to work alongside him, and before long, Amancio was supplying retail stores across the city. When there were no more family members to put to use, Amancio organized women across the province into sewing cooperatives.
During the 1960s Amancio expanded to service the whole of Spain, but even then he was still only a supplier to retail stores without a brand of his own. He was hesitant to start his brand due to Spain’s political climate. Back then, Spain was still a dictatorship under Francisco Franco, the Nationalist general who seized power after the Spanish Civil War.
Among other things, the Franco regime had very tight dress-code regulations. On top of that, there were very few women participating in the workforce, which meant that most of Amancio’s clients wouldn’t have a lot of money to spend on clothes. Luckily for Amancio, Franco died in 1975, and totalitarian Spain died along with him.
The 1970s saw sweeping social and economic reforms across Spain, which revitalized the nation. These years came to be known as the Spanish miracle, and Amancio was eager to take advantage of it.
Business Name Selection
He opened his first retail store in La Coruña just a few months after Franco’s death. Amancio wanted to select business name as Zorba, in honour of his favourite movie, Zorba the Greek. He had already bought the letter moulds for the store when he discovered that just a few blocks down there was a big bar with the same name. Whether out of laziness or thrift, Amancio decided to reuse the letter moulds he had already bought, and thus he called his retail store Zara.
Zara’s Fast Fashion Strategy
The timing of Zara’s launch was perfect, and Amancio’s unique approach to fashion helped kickstart the brand’s popularity. You see, most clothing retailers even today function on a seasonal model with huge production runs, and towards the end of each season, they heavily discount the clothes they didn’t manage to sell.
Zara, however, could afford to develop new designs all year round and would only produce them for a brief period, thus eliminating the need for discount sales. Zara’s customers soon learned to buy their clothes quickly before their favourite designs got sold out. These limited production runs also ensured that clients knew their clothes would be relatively unique, compared to the mass-produced designs of seasonal retailers. This also gave people an incentive to visit the store frequently, since they knew they’d find new designs every time they visited. Because Amancio was in control of the entire production process, from his sewing cooperatives to his storefront, he could market new designs in as little as two weeks.
Zara’s model, now known as ‘fast fashion’, became a huge hit and redefined the fashion industry. Over the next decade, Amancio expanded throughout Spain and built a 10,000 square meter logistics centre.
In 1985 he got ready to expand internationally, and so he created a holding company for his stores, called Industria de Diseño Textil, or Inditex for short.
Scaling The Business
To test the waters he opened Zara’s first international store in nearby Portugal in 1988. That turned out well enough, and so Amancio ambitiously opened a store in New York in 1989 and Paris in 1990. Over the course of the 1990s, Zara opened over 550 new stores across the globe.
Zara’s Brand Extension Strategy
Amancio was eager to expand Inditex’ collection beyond Zara, and to that end, he started Pull&Bear as a casual urban brand in 1991. During the same year, Amancio purchased Massimo Dutti, for high-end cosmopolitan clothes. By the turn of the new millennium, Amancio had also created Bershka and bought Stradivarius. He was already 64 years old by that point and was looking forward to retiring, so in 2001 he took Inditex public by selling 20% his shares, which made him the wealthiest man in Spain.
By 2004 Inditex had created two new brands, Oysho and Zara Home, and had opened store #2,000 in Hong Kong. Since then, Inditex has been opening more than one new store every single day.
In 2008 they created the fashion accessories brand Uterqüe, and they blew past H&M, and the GAP to become the largest clothes retailer in the world. The financial crisis barely slowed Inditex down, and in 2010 they inaugurated store #5,000 in Rome.
Today, Inditex has a total of 7,292 stores spread across 93 countries, and Amancio is the second wealthiest man in the world, worth $67 billion. He officially retired in 2011, but even after his departure, Inditex has continued to dominate the fashion industry.