EkaLore has looked at many Alien Invaders who've waltzed in to new markets, broken the rules, and blindsided competitors by "breaking the rules." This post looks at Inditex's Zara label and its business model, overturning traditional sales of fashion clothes. This disruptive approach to clothing sales has been embraced by many consumers, while questions about its practices have been aired in the media.
Zara, and related fast fashion labels, use the Internet and eCommerce sales to disrupt the buying behaviors for high fashion clothes. Zara combines those sales with brick and mortar outlets (1,946 stores in 95 countries after shutting 502 in Russia and 84 in the Ukraine). The fast fashion labels bring up to 500 new garments a week (Zara alone may bring up to 1,000 styles per month) to global sales after a 3–5 week prototype and production process with rapid delivery to consumers and favorable terms on returns. The retail shop experience with very high markups and long fashion cycles measured in months or longer is totally disrupted by the online retailers' approach and the fast-turn approach in brick-and-motor sales at Zara (new styles are brought in twice a week and not just on seasonal changes). Inditex believes in this approach to bring affordability to consumer demand for fashionable clothing.
In 2022, the consumer behaviors behind fast fashion came into question. A segment of regulators (starting in the EU) found the industry pattern to have 'overproduction and overconsumption of clothing'. The regulators desire clothing to be 'long lived and recyclable' (not well defined) before 2030. Regulatory proposals are due out in March 2023 from the EU Environment Commission. A debate rages on the Internet whether or not fast fashion creates demands on the sustainability of the production supply chain, consumer expectations, clothes reuse/recycling, and materials. The perceived conflict between sustainability, regulatory management, and consumer behavior is unresolved.
Consumers are voting with their behavior. Fast fashion sales at Inditex grew 18% last year and are more than 15% larger than pre-Covid-19 2019 sales. In the global marketplaces Inditex grew retail store sales by 23%, while decreasing floor space by 6%, showing an increase in productivity. The retail locations will see increased investment using RFID-style clothing tags and more distribution warehouse automation. Inditex, and competitor Mango, are seeing lower returns and growth in China (likely due to Covid-19 shutdowns in 2022) and so are concentrating investment and growth in the North American marketspaces. Inditex has continued its use of 'closer shoring' with production in Bangladesh and Turkey with reduced production in logistics-challenged China.
Our next post will talk about another formidable competitor in the fashion industry, Amazon. You'll find that and other Alien Invader posts at www.ekalore.com/alien-invaders
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