Fashionably fast the key to Zara success

AMID the pervading gloom in the retail sector, one fashion chain is so dazzlingly successful its founder has overtaken Warren Buffett as the third-richest man in the world.

AMID the pervading gloom in the retail sector, one fashion chain is so dazzlingly successful its founder has overtaken Warren Buffett as the third-richest man in the world.

Amancio Ortega, the major shareholder of fashion retailer Zara, was the fastest mover on the annual Forbes magazine rich list released this week. The personal wealth of the 76-year-old Spaniard grew by almost $20 billion to $57 billion in the past year on the back of Zara's record profits. Only Mexican telecommunications giant Carlos Slim and Microsoft founder Bill Gates are wealthier.

Zara has cracked the secret recipe for fashion retail success, and customers love it - but it is not a model that impresses all observers.

"Zara has really driven the formula for modern-day chains in that what they are capable of doing is getting on-trend fashion into store faster, higher quality and better priced than most of its competitors," said Karen Webster, chairwoman of the Australian Fashion Council. "They're able to get the Prada look in store before Prada does."

Since opening its first store in Galicia, Spain, in 1975, Zara (owned by fashion distributor Inditex) has grown to a worldwide success story that can lay claim to developing the philosophy of "fast fashion".

It's a model that relies on fast turnover of stock at its 1700 global stores to always keep the customer coming back to buy more.

While even the best-run traditional fashion retailers might have new stock in the store every four weeks, Zara has compressed that to between two and three weeks and is believed to launch 10,000 new designs a year. This model led one fashion industry executive to describe Zara as "possibly the most innovative and devastating retailer in the world".

Zara's success is based on not exactly copying but "editing" the latest catwalk looks from premium fashion houses, insiders said.

"Some of the pieces are very closely referenced to what we see on the runway in terms of design. So obviously the ethics behind that are a bit questionable," said Edwina McCann, editor of Vogue Australia. "It's not successful because it's a unique offering, they're just very good at editing what others have done, and they deliver the consumer trend at a very affordable price and very quickly."

Webster said: "Zara are really astute at scanning the trends, they know which designers to watch and they are prepared.

"[Before the designer shows] they already have a sense through their market intelligence about what kind of fabrications and colours are going to be happening."

Zara has also been very effective at streamlining manufacturing. "They basically have a manufacturing facility that's modelled on Toyota," said Carla Ferraro, senior research consultant at Australian Centre for Retail Studies.

"So the way they approach their manufacture of product is very efficient and very lean.

"Each individual store is linked directly to the designers in the company, so on any given day information is sent about the design from customers [through purchases] essentially to those designers in real time and products are altered pretty much in real time."

This helped Zara hit its famous two-week turnaround, giving customers new fashion almost instantly while rival stores look off the pace in comparison with stock that might be only one month old.

Zara has six stores in Australia, with two new stores opening this month in Canberra and Melbourne. A spokeswoman for Zara said its success was simple: "Zara always aims to provide its customers the best product at the best prices. We're very happy with how the Australian market has warmly welcomed the brand."

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