How Zara Took Over The Industry Using Fast Fashion

I’m Alex Berman and you’re watching SELLING
BREAKDOWNS. Let’s kick off with a nice depressing statistic. Your average American will throw away 77 pounds
of clothing every single year. And that’s true across the majority of the
western world. That is two suitcases of clothes, just dumped. Today, we’re going to look at the history
of Zara, its parent company Inditex, and the fashion industry in general, to see how it
became possible to create such a high churn rate in the fashion industry. Zara’s first store opened in 1975, in a
city called A Coruna in northern Spain. Owners Amancio Ortega and Rosalia Mera had
wanted to name it after a favorite Greek film called Zorba the Greek, but a bar on their
street had already beat them to the punch, so they settled for Zara, since they had already
had the letters made for the sign. Inditex was set up in 1985 as holding company
for Zara and the manufacturing plants. They went on to set up and take-over many
other high-street brands that follow Zara’s format; such as Pull and Bear, Bershka and
Stradivarius. They now have over 6000 stores globally. Zara’s early business model was to create
similar copies to high end lines but at an affordable price. As they expanded through Spain, Ortega pushed
the idea of instant fashion, where Zara could react incredibly quickly to new trends so
they could put new lines on the shelves in a fraction of the normal time. Historically, fashion has moved at a glacial
pace, with trends taking years to come in and out of popularity. Before tv and photography, a new style might
come from the fashion houses of Paris and it would spread when visitors to the city
bought the clothes and then wore them in other cities. Or perhaps an apprentice would spend a few
years learning the trade and then return to their home country, bringing new ideas with
them. Even in the 20th century, there was a time
delay. Industry events, like textile conventions
in Paris, would be only for those in the business, so they would see what new materials and colour
palettes were emerging. This then influenced the design for the catwalk
shows the next year. The public would get glimpses of the fashion
weeks in the press and this would lead to the styles in commercial stores later in the
year. So, it was a two or three year process. But this has changed completely now. Thanks to Instagram, Snapchat, live streaming
and so on, the public see a lot of pieces before they even reach the catwalk. This is why Zara’s business model is so
successful; they are able to put out a new collection that reflects what’s being shown
at the major fashion weeks, almost as it’s happening. Zara is incredibly fast. It’s said that they can take an idea from
a paper sketch to the shelves in just four weeks. For most other brands, we’re talking six
months on average. So how have they become so efficient? In 1990, they upgraded their factory to adopt
the famous Toyota production system called Just-In-Time. We’ll look into this in more detail in another
video about Toyota but the basic idea rather than making a product, storing it, taking
it out of storage, and then delivering it; you skip the storage all together, carefully
organising your production so everything is picked up fresh off the production line and
delivered straight to stores. That’s a bit of an over simplification but
you get the general idea. What is the benefit of this speed to Zara
though? Is it just to make them right on the cutting
edge of trends? It’s a factor but there’s another motivation
and this is really the key behind their success. Zara have created urgency in their customers. If you go into a luxury brand store, you can
find a piece you like, think about it for a month and then go back and get it. In Zara, some lines are only in the store
for a month total. That coat you look so good in might be gone
forever in the morning. And it’s exciting for shoppers; they know
there’s plenty of new treasures to discover every time they come through the doors. Your average Spanish high-street store expects
loyal customers to shop there about 3 times a year. At Zara, it’s seventeen times! Store managers get a good amount of autonomy
over their space so each store doesn’t feel like a carbon copy of the other. In fact, there’s a lot working in the store
managers favour. They don’t need to discount old stock to
free space, because they barely have any stock; a new line is delivered every couple of weeks. Also, Zara doesn’t advertise so individual
stores don’t need to stick to a campaign. The brand relies on word of mouth, including
that generator by its celebrity fans, such as Kate Middleton. Zara’s marketing is very subtle and is almost
a part of its business model. They benefit from the mountains of free press
that the fashion industry generates and with their hyper-fast logistics, they are often
first to spot a trend and provide it to the general public. Wanna learn more about business theory and
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