Oracle Retail Week Awards: Fashion giant Zara powers ahead globally

Rarely are retail leaders so fulsome in their praise of rival businesses - but then again, Zara is no ordinary retailer. Year upon year, the business has set itself ambitious targets and year upon year it has delivered. Yet the company’s business model remains blissfully simple: to offer innovative, on-trend designs at a competitive price.

The formula still works wonders for Zara’s owner Inditex: in the first three quarters of 2012/13, group sales rose by 17% to £9.2bn and net profit climbed 27% to £1.4bn.

It is well documented how Zara’s uniquely successful vertically integrated business model has allowed it to deliver fast, flexible fashion for a keen price, but the speed with which it has increased its international coverage is almost - if not more - impressive than the fortnight it takes for garments to go from concept to shelf.

One judge commented that “they have leveraged their international business massively” in the past few years, hopping from country to country opening retail space and transactional websites - and that this has resulted in the company “completely obliterating the competition”, in the opinion of another judge.

Overseas markets now account for around 80% of Zara’s sales, and although Europe remains its geographic heartland, owner Inditex has put a strong focus on building a presence in economies and emerging markets ranging from China to Russia and Mexico. It is also one of the few European retailers to have a presence in Brazil as well as in South Africa, where it sits at the premium end of the two markets.

New territories added in 2012 included Ecuador, Peru, Armenia and the Former Yugoslav Republic of Macedonia, taking its total number of markets to 86.

The reasons behind Zara’s success are many, but a key reason has been the successful joining up of its online and physical store businesses, which the judges held up as a shining example of a successful multichannel approach. “They’ve been incredibly successful online,” says one judge. “The online service is terrifically integrated with the stores.” Zara has an online presence in 18 European countries at the moment, and significantly it has launched transactional websites in the US, Japan and most recently China, with a Canadian website due to launch this year.

Vertical integration of its supply chain remains a key differentiating factor for the business. It is estimated that Zara produces around 12,000 styles per year, compared with the retail average of 3,000, and a single garment can go from idea to store in less than a fortnight thanks to the responsiveness of its Spanish in-house design team, which oversees product and is able to translate the latest catwalk trends into stores at record speeds.

Despite the perilous state of the Spanish economy, Zara remains loyal to its home market and Inditex vows to continue to invest both in stores and online in Spain. The retailer has recently embarked on a programme in which all 336 Zara and 159 Zara Kids stores will be remodelled to a new concept - a move signalling that it is taking a long-term view of the prospects that its home market represents, and that it will not countenance losing its strong domestic position despite the drive for international expansion. As one judge puts it: “They deserve huge credit for maintaining their momentum with such an apocalyptic home market.”

At a time when Spanish business success stories are a rarity, it is only right that Zara’s role as a global retail leader should be celebrated.