The world's No. 1 SPA brand, Zara's success formula

Zara's success factors

Zara's success factors were identified as three major factors.

1. Vertically integrated system
2. Active data use
3. Fast during fast, fast-paced battles

First, let's look at the vertical integration system.

Zara is a company that does everything from production to distribution and design in-house.

Zara has an organic integration system in its own way.

So, the proportion of outsourcing to China or India in production is small.

It is different from its competitor, H&M. And he said that the system was successful because he was able to bring quick decisions straight to production and eliminate inventory.

But not long ago, I researched the failure factors of a company called American Apparel.

The cause of the company's failure was the high labor cost due to production in the United States.

Of course, Spain and Portugal are cheaper countries than the US.
(Considering that production is also made in Morocco, a neighboring country, I do not think labor costs are high even if it is not produced in China and India.)

However, it is a pity to say that Zara's success factor is only that it has lowered inventories by accepting relatively high labor costs and producing in Spain and neighboring countries.

American Apparel insisted on it, but went bankrupt because it couldn't afford the labor cost.

(By the way, when American Apparel was doing well, that system was the reason for their success. Originally, advantages and disadvantages are two sides of the same coin.)

And the turnover of growing clothes is so fast that once you see it, you have to buy it on the spot.

Imprinting this sentiment on consumers is the key to success.

Jeff Bezos and Zara's chairman Amancio Ortega's Success secret

Amazon's Jeff Bezos and Zara's chairman Amancio Ortega are basically doing the same thing.

1. Focusing on customer satisfaction.
2. Dominate the market by realizing economies of scale.

Ortega's grandfather divinely realized the spirit of 'if the customer knits, we knit'.

How did my grandfather become a god of customer satisfaction?

Experience encompassing production, distribution, and design. My grandfather was poor when he was young.

After his school, he followed his mother to the grocery store.

“What the grocery store owner said
He remains in my memory as time goes by.”

“Joseph, I’m so sorry, but I can’t give you any more trauma.”
“I was only twelve years old”
“I vowed never to let her mother go through something like that again.”

(Amancio Ortega, founder of Inditex)

After that time, my grandfather did not receive any more formal education.

But he quickly gets promoted to store manager and opens his own shop, GOA, at the age of 27.

He had a different mindset when it came to work.

“I was just an errand man”
“But I always thought it was my job and I was always trying to learn”
“From the moment I first entered the store, I worked with a serious sense of responsibility”
“That’s why customers often praised my boss for me.”

For more than 10 years, what remained was not only praise from customers.

A strong network with fabric manufacturers and their own customer portfolio have also been built up.

During GOA, Ortega would buy fabric, process it, and then sell the product to retailers or directly to clothing stores.

At this stage, he realized that the system needed a change.

He identified the desire for customers to have a wide range of choices.

“I had a strong desire to fill the void that existed in the textile industry,” he said.

He was already over forty when his grandfather started the business in 1975.

He's been stepping up so he's been able to go through every step of the worthy chain as a body.

Working through producers, buyers and store associates, he understood from his experience that business is a combination of manufacturing, store distribution and design.

Elite designers who graduated from fashion school and elite executives with MBAs did not know what it was like to combine design and distribution.

Some knowledge can only be known through physical experience.

His grandfather caught the problem with his body, and so he could be sure.

There is no gonzo, the only gonzo is ‘customer satisfaction’

His grandfather had short straps. He would need extraordinary resourcefulness to lead a global brand like Zara.

This grandfather is constantly learning. He stands for customers and employees

“I like to spend my time in the design department”

“It's always good to hang out with creative young people and take their opinions into consideration.”

“You can learn a lot by listening to the stories of the employees.” This grandfather didn't start his business to realize his noble taste in the first place.

So he knows who to listen to.

If you think about Zara's target audience, you can see why he has this attitude.

But I don't think he's taking this attitude just because he has a business advantage.

“We need to respect people’s innate independence”
“That is the key”
“You have to like people” There are times when he is also decisive and cold-hearted towards his employees. This is when employees don't think thoroughly customer-centric.
“When designing clothes, it is important to keep in mind that the customer is universal, so the clothes must be universal.”
“We don't do different designs for 80 countries, we send the same kind of clothes to 80 different countries.

Zara is the first and most mentioned name when talking about fast fashion, and it is said that fast fashion brought "fashion democratization".

I think Zara brought about the democratization of fashion because he had these values.

A new type of store: store, store, store, and online!

My grandfather's top priority is always the store, the store.

“The reason for Ortega’s success?”
“He has the heart of a store clerk!”
“He has a special ability to sense what people want.”

“And the only people who can do that are those with experience as store associates”
(Antonio Camunas, former president of the Spanish Chamber of Commerce)

At Zara, decision-making priority lies with the people who come into contact with the customer.

Also, the marketing cost of Zara is lower compared to other SPA brands. I only use about 0.3%.

We spend money on store display and pre-occupancy, and we do marketing with it.

Even these people have been working hard on online sales lately.

Has the strategy changed?

No, I don't think so. This grandfather is doing exactly the same thing.

The reason he valued the store was that it was a space where he could observe customers.

Grandpa probably knew at some point that online was a place to observe and understand customers in a different way but better.

So he's increasing online sales. Because that's another store.

As I was writing this article, I also felt that if I grew up and had a grandfather who could have this point of view, he could be happy and excited even if he worked on the weekend to study this person.