The story goes that a motor bike roars up to a red traffic light in La Coruna in Northern Spain. It stops alongside a black town car. From inside, the passenger glances out and sees the young biker leaning over the handlebars. His jean jacket has appliqued patches… a throwback to the 1970s. The old man grabs his phone and calls an aide in the office. Without taking his eyes off the jacket, he describes the jacket’s stitching, its shape and color. He finished the call with a single instruction – ¡Hacedlo!“ – Make it.
40 years ago, Amancio Ortega founded Zara on two key principles: give the customers what they want and give it to them faster than anyone else. As the story illustrates even today, those two key principles are at the heart of Zara, the world’s biggest fashion retailer.
Zara stores refresh their stock twice a week and receive orders in 48 hours or less. That has required some key organizational and supply chain decisions. “We never go to fashion shows,” says Loreta Garcia, a 23-year Zara veteran who heads up Zara Woman’s trends department. “We track bloggers and listen to customers, but we change our opinions all the time,” she says. “What seems great today, in two weeks is the worst idea ever.”
The old man in the car was the reclusive founder of Zara, a Spaniard who is now the third richest man in the world, worth over $56 billion. The empire he’s built has revenues of nearly $20 billions and stores in 80 countries.
At a time where Spain has 24% unemployment and crippling debt, Zara announced revenue was up 17% YOY for the first three quarters. And that growth shows no sign of slowing.
There can be no better proof of the importance of speed to market, or the Two-Second Advantage as TIBCO’s CEO Vivek Ranadive describes it in his latest book: The Two-Second Advantage – How We Succeed by Anticipating the Future – Just Enough. But combine that with driving great customer experience and the results can be stunning, which is why the acquisition by TIBCO of LoyaltyLab has been so critical.
The story of Ortega, from 14 years old folding shirts in the local Gala store to leader of arguably the most successful fashion retailer is compelling. If you want to understand the whole story, read the excellent Fortune article, Meet Amancio Ortega: The third-richest man in the world, which inspired this blog.
So, 40 years ago with a small chain of shops in Northern Spain you can probably understand how Ortega achieved his objectives. But, how can he still with a huge business spread over multiple continents and global online competition?
The secret is the effective use of technology everywhere, but nowhere more so than in logistics. The 400,000-square-foot logistics building is organized around a labyrinth of conveyor belts extending up five stories. From here, customized orders are delivered to Zara stores around the world with an SLA of 24 hours for Europe and Middle East, and 48 hours for the rest of the world.
But to make the company function so effectively is the culture – an “entrepreneurial, self-critical, completely flat organization.” Ortega has an uncanny ability to connect with employees at every level. Perhaps this is borne out of his upbringing, which was dire poverty with little education.
This is another story of a fantastically successful business founded on some strong customer-centric philosophies which has exploited technology to stay ahead in a globally connected world.
Inspiring.
Can you get the biggest retailer in the world to make shirts, trousers and pants for people between 5’11 – 6’3 please…
So, that “idea” sounds nearly as ridiculous as what PriMark is doing. Horrifying is, both companies are doing very well with their “low price strategy”. Interesting question is, how long customers will acceppt the circumstances of production of these low-prices-items…
I fail to see what’s inspiring about this story. Someone has got obscenely rich, others have been exploited along the way, and relentless advertising and marketing is used to try to convince people to buy clothes they don’t need.
What other kind of stuff inspires you Ian?
Zara don’t buy any ads whatsoever, they only depend on their stores for making the brand known. That’s probably why they waited so long for going online.
throwaway clothing for a throwaway society.
$58bn dollars should go to housing some of the people still working in the sweatshops churning out this crap. Fashion victims!!
You should take into consideration the role that the conditions of the Chinese, Moroccan, Tunisian, Indian and Bangladeshi plays on the profits ZARA gets every year.
I guess the same role than in NIKE, Ralph Lauren and many others.
Didn’t they only just implement online shopping like within the past year?
2011…and growing to all lines of business since then: Zara home, Zara Kids, Massimo Dutti, etc..
it says he was a passenger, not the driver. So he can use his cell phone as much as he wants. So shut up thank you please.
So this guy thought he’d provide bikers with what they actually want? What bikers actually want more than anything is for car drivers to not use their cellphones while driving. It makes us get a little bit dead. I’d rather live in shabby clothes, than be dead in a good-looking jacket. So dont call the office to describe a biker outfit, unless you’ve safely pulled off the road to do so. Standing at a red light is not a safe place to make a phone call.
It says ‘the passenger glances out…’.
They actually don’t listen that much to what people want. For years the european women have been asking for “true to size” clothing and for real sizes to be available at the Inditex brands but it seems that Señor Ortega only wants models and thin women to wear his clothes…
That’s true. Sizes at Inditex stores are getting smaller and smaller. I used to be able to buy in all stores, now I only find my size in Zara and Stradivarius and only occasionally.
I got 56 Billion Reasons to believe you!
Fun to hear they make that much money when it took them 4 months to refund a pair of shoes I bought online and they couldn’t be bother to return my email or apologise…