By  on May 9, 1994

MEXICO CITY -- Zara, an apparel retailer headquartered in Spain, has found a fertile field for growth in Mexico.

The vertically integrated retailer, which embarked on international expansion in 1988, moved into Mexico in December 1992, when it opened three stores in Mexico City. It now has seven stores in the capital city, all opened by the end of 1993, and plans to open 26 more in Mexico in the next two years. These will include additional stores in Mexico City and units in Guadalajara and Monterrey.

Mexico is Zara's second most-aggressive target for expansion, next to the 80 to 90 stores planned for France over the next five years.

In contrast, growth in the U.S. is moving much more slowly. Zara opened its first U.S. store in New York in September 1989, opposite Bloomingdale's in midtown Manhattan, and only now is moving on additional stores.

Officials say they are negotiating leases that could lead to five or six stores in shopping malls in the greater New York area. Because Zara still sees the U.S. as a test market, these stores will carry only its women's lines.

In Mexico City and elsewhere, though, most Zara units blend women's, children's and men's apparel and footwear into a 7,500-square-foot concept. In 1993, the company said it posted sales in Mexico of $20.3 million. With 341 stores, companywide sales for the Zara chain were $1.07 billion. In addition to Spain, Mexico and the U.S., Zara has stores in Portugal, Belgium and Greece.

Based in La Coruûa, Spain, Zara and its parent company, Grupo Inditex, are managed by a close-knit core of 35 executives whose corporate culture dictates anonymity. Along with data supplied by the company, information for this article was derived from interviews with officials here and in Spain, none of whom agreed to speak for attribution, a stance reflecting that of the company's low-profile owner and founder, Amancio Ortega Gaona. Officials pointed out that he rarely poses individually for a photograph, preferring instead to stand among his employees.

In moving to Mexico, company executives said, the firm viewed Mexican consumers as hungry for moderate-price European fashions that are not mass distributed -- things Zara could offer since it produces its own apparel in a vertically integrated operation using the latest just-in-time technology. Another incentive for entering Mexico was the then-pending North American Free Trade Agreement and its promised economic expansion ushering in increased consumer spending.Initially, Zara looked at Mexico merely as a test market, planning to open three stores the first year and then wait. But in the first month, sales exceeded expectations by 45 percent, signaling a need for a more aggressive strategy.

Like the rest of its stores, Zara's Mexican operation reflects the corporate credo of teamwork, in which each of the 35 core executives has a say in the fashions produced. They are described as an eclectic group with tastes ranging from classical to the latest Paris runway trends. Commercial directors assigned to each line weigh the basket of opinions and ultimately make the final decisions.

Because Zara's stores keep low inventories -- which in Mexico are replenished with twice-weekly deliveries -- the risk of failure is minimized because apparel that isn't selling isn't reordered and can easily be pulled and replaced. Similarly, bestsellers can be reordered, although not in the same fabric or exact style in order to maintain Zara's image of exclusivity.

It's up to the store managers to size up their customers and stock inventory accordingly. Managers, too, report requests for specific items not in the Zara line to headquarters. If a manager receives about five requests for an item, Zara considers that a trend worth paying attention to. Regardless, when an order is placed for new apparel, it is produced and delivered within 20 days.

Zara's ability to achieve such a fast turnaround has evolved since the 5,000-employee company first began producing apparel in 1963. In 1975, the first Zara store opened. Five years later, the chain, operating under the holding company Grupo Inditex, embarked on a store expansion, during which it also increased its production and hatched other retail concepts in Spain and Portugal that operate as part of Inditex. These include Pull & Bear, a young men's retailer; Bershka, a mid-market women's retailer, and Kiddy's Class, a children's boutique.

Inditex now has 20 factories producing roughly 75 percent of the textiles, apparel and footwear sold in Zara stores. Because of the company's rapid growth, it has had to round out production through contractors in Spain, France, Italy, Portugal, Australia and Peru.

Women's apparel, representing 61 percent of Zara's volume, is the focal point of its stores and is always positioned against children's wear, which accounts for 19 percent of sales. Men's wear is sold in a separate area off the women's department and, in some cases, has its own entrance.While Zara stores typically have an uncrowded look and bright decor, with light hardwood floors and pine armoires and tables, they maintain their individuality. Display windows vary from store to store, and because of the varied apparel offered, inventories are often widely different while offering a range of apparel from suits to jeans.

Among Zara's spring-summer bestsellers for women -- all prices cited are approximate, depending on the exchange rate -- is a sleeveless linen dress in a floral or checked pattern, for $86. A classic black, double-breasted cotton and linen blazer in navy blue or beige sells for about the same price. Its matching skirt costs $38.

Casual fashion items are marketed for young women and older women who want to keep pace with the latest trends. Among the recent bestsellers was a crushed viscose skirt at $56, to be paired with a multicolor, striped Southwestern-style vest at $38.

Footwear and accessories are displayed among the apparel, offering ideas to the customers about mixing and matching fashions. For example, at the Centro Coyoacçn store, ankle-high canvas boots with rubber soles at $28 and suede sandals with slight platform heels, also at $28, are tucked in the shelves next to cotton dresses and khaki pants.

Children's apparel ranges from classical to whimsical, catering to ages two to 16. Girls' long-sleeve blouses, embroidered with Aztec symbols, are popular at $21, as are red-checked cotton jumpers at $58.

Among the men's items are lightweight wool and nylon blend suits at $190 and a soft summer wool blue, double-breasted blazer at $125. Tailored shirts, stacked in bookshelves, run the gamut from conservative, with button-down collars, to those with stripes and colorful prints. All plain shirts cost $28, with prints at $34.

Zara's strategy is to open stores in well-trafficked malls, following its success with locations in Mexico City's Plaza Universidad, Plaza Satelite, Galerias Coapa, Centro Coyoacçn, Centro Comercial Santa FÄ and Centro Comercial Perisurca.

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