Analysis: Exportivo la Coruna: Zara Reigns from Spain ; Spanish Chic Is Cutting a Dash across the World, Writes Ben Rosier

By Rosier, Ben | The Independent (London, England), May 13, 2001 | Go to article overview
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Analysis: Exportivo la Coruna: Zara Reigns from Spain ; Spanish Chic Is Cutting a Dash across the World, Writes Ben Rosier


Rosier, Ben, The Independent (London, England)


If the beleaguered bosses of the struggling high-street retail chains are looking at ways of growing their businesses, they could perhaps do worse than take a few Spanish lessons.

While high-profile names like Marks & Spencer, C&A, Benetton and even Gap are scaling back or retrenching their international operations, Inditex, the little-known name behind Spanish fashion chain Zara, is bucking the trend.

With 1,080 outlets in 33 countries worldwide, the group from La Coruna - a town only football fans will have heard of - is teaching other clothing retailers a thing or two about how to build an international business.

Walk into any of the company's Zara stores and you'll see colour palettes and styles that wouldn't look out of place in Vogue. Zara has traded heavily on its ability to deliver cosmopolitan catwalk- style chic at mid- market prices, a positioning that has greatly helped it roll out across international borders in a sector known for its parochialism.

"By and large, I don't think clothing retailers can go global," says Emily Shamma, an analyst with stockbroker WestLB Panmure. "Two segments can - those that offer vanilla basics and those that mimic the already internationalised world of high fashion. [Zara] taps into people who aspire to buy global merchandise ... it's a template you can export."

The Spanish company burst on to the British retail scene three years ago. Today there are seven Zara outlets in the UK, but with plans for eight more already under way, the chain could soon be coming to a high street near you.

The markets will deliver their verdict on Inditex at the end of this month when 26 per cent of the company is floated on the Madrid stock exchange. With the share price set at between 13.50 and 14.90 euros, the company is valued at around 9.3bn euros (about pounds 5.8bn) - a measure of how much it has already achieved.

Inditex now owns five key brands: alongside Zara there is Massimo Dutti, Pull & Bear, Bershka and Stradivarius. But Zara remains the flagship chain, providing just under 80 per cent of the group's total earnings from 449 stores.

"I think [Zara] is one of the outstanding retailers in Europe right now," says Richard Hyman, chairman of retail consultancy Verdict Research. "The way in which they translate the latest fashions and reinterpret them for their market is a very powerful competitive edge. They make you want to buy - that's the essence of retailing and not something you can say about too many retailers at the moment."

Inditex developed in the unlikely surroundings of La Coruna in north- western Spain, where its founder, Amancio Ortega Gaona, started his first fashion business in 1963, manufacturing ladies' dressing gowns. He opened the first Zara outlet in 1975 and in the 1980s began to push abroad. Now Zara is one of the town's two best- known exports - the other being reigning Spanish league champions Deportivo La Coruna.

Despite being one of the richest men in Spain, Mr Ortega Gaona has kept a low profile, rarely granting interviews and guarding his privacy.

Until now, Inditex has also adopted something of a low profile itself, largely shunning big-budget advertising. Instead, it has conveyed its brand images, and that of Zara in particular, by opening wellpresented stores in central locations - and leaving the rest to word of mouth.

Even rivals have expressed their admiration. Daniel Piette, fashion director of luxury goods giant LVMH, once described the chain as "possibly the most innovative and devastating retailer in the world".

Perhaps Zara's greatest strength lies in the speed with which it can adapt. Unprofitable lines can be cut overnight and new lines developed and shipped worldwide in a matter of weeks - a salutary lesson to those British retailers whose production processes can still take the best part of a year.

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