How Zara is doing well in a sector in crisis

^{Zara headquarters in Arteixo, Spain. Housing 5,000 employees, its extension cost 130 million euros, a symbol of the conquering power of the flagship brand of the Inditex group.}

“Our business model is running at full speed”

Since its creation in 1975 by Amancio Ortega, Zara, managed since April by his daughter Marta, has stayed on course for growth. However, the ready-to-wear sector is recovering badly from the confinements. In France, sales fell by 10% over the first seven months of the year compared to the same period of 2019. Conversely, Inditex posted record results: over the last six months (to July 31), its turnover business grew by 24.5% and its net profit by 41%. In comparison, its great Swedish rival H&M posted a 9.6% increase in sales over six months (to August 31) and saw its profit fall by 22%. “Our economic model is running at full speed”, welcomes the general manager of Inditex, Oscar Garcia Maceiras… thanks to his locomotive Zara. His recipe? Flexibility based on an information system and state-of-the-art logistics, allowing it to stick as closely as possible to the fashion of the moment.

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^{Design of a coat. The bestsellers are available in multiple versions.}

^{(Glow Photo Estudio – SP)}

Production in very small series

Every morning, the sales and design teams meet at Arteixo HQ in front of a huge screen where the best sales scroll in real time. Have fashionistas snapped up that metallic asymmetrical top or that plaid dress? It is up to the two teams to design new models inspired by it. Because, to maintain desire, the brand produces in very small series, one or two copies per size of each model for each store. The best-selling dress will therefore be available in multiple versions and finishes. “Zara has this ability to capture customer expectations and adapt to them better than anyone,” recognizes Julien Pollet, president of the competing French brand Promod.

^{Zara is gradually closing stores, but consolidating its profits thanks to e-commerce (25.5% of sales).}

The brand employs 300 designers, in a collaborative way. “No diva designer is allowed here,” breathes one of the stylists. And to deliver new products every week, suppliers are mostly chosen nearby, in Spain, Portugal, Morocco and Turkey. “It’s the anti-Camaïeu, which had favored Asia”, notes David Benichou, specialist in the sector at the consulting firm Alvarez & Marsal. This weighed down the French brand, at a time of soaring sea freight costs and the dollar.

More than 1 billion invested in its digital transformation

Moreover, unlike H&M and its giant posters or Nike and its spots with sports stars, Zara spends nothing on advertising, preferring to put its money into its site, faced with the rise of e-commerce. This year, 1.1 billion euros have been invested in its digital transformation. On the top floor of the headquarters, state-of-the-art photo studios have been set up, where, when they leave the factory, the latest tweed jacket or pair of padded boots are shot, visible the next day online. Result: the share of digital sales is 25.5%, and will reach 30% by 2024.

^{Brand photo studio. When they leave the factory, the latest garments are photographed and visible the next day on the website.}

^{(Glow Photo Estudio – SP)}

Finally, Zara demonstrates the same reactivity to manage its store network. After having invaded the shopping streets even in medium-sized cities, more than 200 stores have closed in two years worldwide (including 86 in Russia), the brand preferring to focus on new flagship formats, such as its “connected store” inaugurated in October in London. Customers can buy the clothes there by scanning the QR code on their smartphone without queuing at the checkout. “This agility in a multinational is a real strength”, comments Sébastien Manceau, of the strategy consulting firm Roland Berger.

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^{Connected store in London. Avoiding the queue at the checkout, customers pay by scanning a QR code on their mobile.}

^{(Glow Photo Estudio – SP)}

Marginal disaffection

What can stop Zara? Clothing brands are increasingly questioned about their social and environmental impact. Barely dented by the scandal of the Uyghurs, forced textile workers in China, the group remains silent: “Inditex has never responded to our requests”, deplores the Clear Fashion team, which analyzes the ethics of brands. . And if, in November, a thousand sellers and workers of the company demonstrated in La Coruña against their poor working conditions, these turmoil did not disturb the Spanish giant.

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On the ecology front, Zara is striving to green its image, by testing the use of recycled fibers and with the launch of a second-hand platform in England. Insufficient for Eva, 25: “I bought from Zara for a long time, but I am now turning to more committed brands.” A disaffection still marginal, but, in the long term, the ambitions of the brand could be hampered by “the limits of the sector itself, because the customer is led to consume less clothing”, predicts Cédric Rossi, analyst of the bank Bryan , Garnier & Co. What if the very model of fast fashion, on which Zara thrived, went out of fashion?

Bershka follows the movement of its elder

Created in 1998 by the Inditex group, Bershka targets a younger and trendier clientele than its elder Zara. It targets “an audience that knows the latest trends, likes music, social networks and new technologies”. With more than 1,000 stores, Bershka is present in some 70 countries. “Zara is the standard bearer of the group, underlines Cédric Rossi, analyst at Bryan, Garnier & Co. But other brands like Bershka benefit from it”, relying on the same springs of agility in creation and logistics. Weighing 9% of the total sales of the Spanish group which also owns Massimo Dutti, Pull & Bear, Stradivarius and Oysho, Bershka is doing well in a very competitive segment, with net sales of 2.1 billion euros in 2021 (and 330 million in pre-tax profits), compared to 1.8 billion in 2020.