ZARA CLOTHING IN EUROPE

Zara: Taking the Lead in Fast-Fashion

With its bright-red H&M logo on 1,200 stores, Swedish retailer Hennes & Mauritz has long been the world's leading purveyor of cheap-chic apparel. No more. On Mar. 29, Spanish retail group Inditex -- best known for its Zara stores in Europe -- reported 21% sales growth in 2005, to $8.15 billion. That puts Inditex ahead of H&M, which posted $7.87 billion in sales last year.

Zara's secret? It moves fast. With an in-house design team based in in La Coruña, Spain, and a tightly controlled factory and distribution network, the company says it can take a design from drawing board to store shelf in just two weeks. That lets Zara introduce new items every week, which keeps customers coming back again and again to check out the latest styles.

Zara's success is all the more surprising because at least half its factories are in Europe, where wages are many times higher than in Asia and Africa. But to maintain its quick inventory turnover, the company must reduce shipping time to a minimum. The fast-fashion approach also helps Zara reduce its exposure to fashion faux pas. The company produces batches of clothing in such small quantities that even if it brings out a design that no one will buy -- which happened during an unseasonably warm autumn in 2003 -- it can cut its losses quickly and move on to another trend.

BASIC BLACK.

Zara's fast pace means that some popular items appear and disappear within a week, creating an image of scarcity that many shoppers find irresistible "They've built up an excitement around snapping up new clothes before they go," says Kris Miller, a New York-based retail analyst with Bain & Co. "As well as keeping sales high throughout the year, it also keeps margin-stripping markdowns to a minimum," Miller says. That helps explain why Inditex profits soared 26% last year, to $973 million.

H&M uses a slightly different strategy. Around one quarter of its stock is made up of fast-fashion items that are designed in-house and farmed out to independent factories. As at Zara, these items move quickly through the stores and are replaced often by fresh designs. But H&M also keeps a large inventory of basic, everyday items sourced from cheap Asian factories.

To add pizzazz to its lineup, the Swedish retailer has also struck deals with high-fashion designers Stella McCartney and Karl Lagerfeld to create limited, one-time collections, which generally sell out within days. H&M is a strong financial performer too. Sales during the first three months of this year were up 20%, after rising 14% in 2005.

RAPID EXPANSION.

No wonder fast-fashion companies such as H&M, Zara, Spain's Mango, and Britain's Top Shop, are among the brightest stars in Europe's retail landscape. A 2004 Bain & Co. study found that fast-fashion outlets in Spain and Britain posted average double-digit sales growth, compared with 4% growth in overall retail sales in those countries.

These companies are expanding rapidly. Zara's parent, Inditex, whose other retail chains include Massimo Dutti and Bershka, opened 448 new stores last year, while H&M inaugurated 145. This year Inditex expects to add as many as 490 stores, which includes its first Chinese outlet, opened recently in Shanghai. By 2010, its global total could grow from 2,700 to 5,000.

So far, Inditex and its European counterparts have expanded cautiously in the U.S. Zara has only 19 stores stateside. H&M has 91, but that's tiny compared to the company's 1,200 worldwide total. NPD Group, a New York-based market research outfit, says that fast-fashion accounts for only 1% of the $181 billion U.S. apparel market. That compares with 18% in Spain, 12% in Britain, and 8% in France, according to Bain & Co. estimates.

HOMEGROWN COMPETITION.

The U.S. represents a tempting opportunity for Inditex. But some analysts think the Spanish company should slow down a little. "Inditex's cost growth is exceeding its sales growth at the moment," warns Lehman Brothers (LEH) retail analyst Allegra Piaggi. "I'd like to see more penetration of existing markets before it moves into others." Others worry that Zara will be unable to stick to its fast pace, with so many more stores to supply.

But Zara and its European counterparts know that if they don't lead the parade toward fast-fashion in the U.S., homegrown retailers certainly will. Chico's FAS (CHS), a Florida-based women's apparel chain, is already introducing new styles at more frequent intervals, luring shoppers with the slogan, "You'll find something new every day at Chico's."

That's tough competition, all right. But Chico's still can't match Zara's efficiency: The U.S. company takes about six months to get an item from the drawing board onto store shelves, compared to as little as two weeks at Zara. Better keep an eye on this nimble Spanish retailer.

Most people may not have noticed but one of Zara clothing's uniqueness is its lack of advertising. Is it arrogance or merely an excellent business strategy?

Zara is a Spanish brand, owned by Amancio Ortega under the Inditex group. First launched in 1975, it is considered one of the fastest growing fashion retail chains. They are up to 1,500 stores worldwide today.

All this with zero advertisement. Money which is not spent on advertisement is instead invested in the quality of design and manufacturing process. Zara has proven over and over again, through the testimonial of its own customers that it is the product that speaks for itself. Loyal Zara customers swear by the product's good quality at the price they deem worth it.

It is quite a testament of the product that, the economy being as it is, a male customer, married with two young children in Asia can still justify buying Zara clothes on a regular basis. It is important to note that due to currency exchange rates, Zara is leaning toward high end products area in Asia. "It is not cheap by any means, but you get exactly what you are paying for. The style and quality."

Another point of satisfaction when it comes to Zara clothing is the good turnaround. New products are produced and delivered to customers in less than half a year. Other clothing lines spend a lot of time from design stage to production to delivery. Zara, however, manages to create its own efficient cycle of researching people's demand, producing and delivering it in as fast as five months. Changes in existing styles are done in a matter of two weeks. Zara is the only clothing stores out there which introduce new accessories and clothes style once a month. This ensures that Zara clothing line is one of the fastest growing retail stores in the world.

It is undeniable that Zara has reached places not too many other brand has. It enjoys success in Spain and the rest of Europe, as well as UK. It is considered one of the most favorite brands in Asia, despite its cooler climate style. The length of Zara's arms has been reaching into the US and it is already getting a tight grip.

The brand caters to a wide demography. It comes with lines for both women and men, as well as children. With its cycle of manufacturing, Zara seems able to satisfy customers demand of fresh new products, ones which are in style and yet demure without being old-fashioned. Zara clothing line is not exactly known for its wildness or quirkiness and it is not recommended to those who consider themselves a rebel.

Being the fastest growing fashion retailer in the world, Zara is certain to be found in any major city worldwide. But even for those who live nowhere near a big city, Zara is available online to browse and order. The streamline and classy designs are usually deemed as easy to mix into one's wardrobe. Purchase regret is extremely rare when it comes to Zara clothing line.