HERE COMES ZARAMANIA
Byline: Barbara Barker
MADRID — Zaramania. That’s what Spaniards have dubbed the fashion retailing phenomenon Zara, which is expanding across Europe and the Americas at a rapid pace. While many retailers are still plagued by sluggish sales, and the U.S. retail scene is characterized by consolidation, Zara is bulldozing ahead. A medium-priced retail chain featuring women’s, men’s and children’s wear, Zara has 118 freestanding stores in Spain, 36 in the European community, six in Mexico and five in the United States, including a flagship daringly located near Bloomingdale’s in New York.
Now Zara shops are sprouting up all over France, and 80 store openings are planned over the next five years. An impressive freestanding store with about 8,800 square feet of selling space recently opened on Paris’s Champs-Elysées, for example.
On the other side of the Atlantic, Zara has ambitions in Mexico and plans to open 26 shops there by the year 2000. Another market Zara wants to conquer is the U.K., according to a company spokesman, who said that expansion there is targeted for “the near future.”
“Zara is the only fashion influence in Spain today. Who cares about designer clothes? Look at the street; everyone is wearing denim, black leather and T-shirts,” noted one industry observer, a former top retailer here.
“No question, Zara is hurting top-level markets. It is merchandising fashion in the right way, and at the [right] price level,” he added.
According to top Zara executive Juan José Lopez Romero, Zara accounted for $1 billion of the $1.2 billion in revenues its parent company, Inditex, had last year. Net profit figures are not disclosed.
Inditex was founded in 1960 by the notoriously press-shy and secretive Amancio Ortega Gaona, who reportedly holds a 79 percent stake in the privately held company. The company does not disclose who holds the remaining 21 percent, but observers guess that top managers are shareholders.
Industry sources credit an international buying structure and in-house tailoring for part of the chain’s success. For example, fabrics — purchased from high-grade production countries like Italy, France and Germany — and silks from China and India are tailored in Spain by thousands of local women. Roughly 40 percent of a Zara garment is handstitched before being finished in industrial production, according to Lopez Romero.
Profit margins are slim, and per-unit inventories get pumped up twice weekly, but sources here say Zara’s real talent is the speed with which it translates street trends to consumer tastes, and then gets the looks into the store.
To keep on top of trends, Zara employs a staff of 40 to cruise hot clubs, restaurants and shopping areas in the U.S. and Europe. Zara observers say the company has an eight-day average cycle from design to first distribution. Starting as a modest maker of robes and nightgowns, Inditex now operates 20 factories, which produce roughly 75 percent of Zara’s apparel. Inditex also uses additional contractors in Europe, Australia and South America. Women’s sportswear, accessories and footwear account for 61 percent of Zara’s volume. Men’s wear represents 20 percent, and children’s wear, 19 percent.
Zara subcontracts production when it is efficient to do so. The company works with producers in Paris’s Sentier, or garment district, to get small series of fashion-forward sportswear. The Sentier makers are known for their ability to make and deliver hot fashion looks fast. One Sentier manufacturer here said he sends his production, in series of 1,500 to 2,000 pieces, directly to Spain, where Zara ships the selection to chosen stores in a matter of days.
Those stores are typically spare with few decorative details. Even the poshest Zara store in Madrid — located just off the well-trafficked Puerta del Sol — is just four simple whitewashed floors of selling space with huge windows. The company won’t disclose store revenues or sales per square foot.
But many fashion retailers look on Zara with envy and respect. “The luxury multibrand independent is dead. Not just in Spain, but all over,” observes Maria-Teresa de Vega, a retail pioneer and Chanel consultant.
“Consumers want quality at decent prices. I only believe in mass business today, estilo Zara,” she concluded.