How Inditex rules the weaves, and plans to carry on doing so
The Galicia-based firm behind the Zara brand has a complex global supply
system
It combines it with the sharp commercial instincts of a successful local
business
By EL PAÍS
Like Hawaii, but tropical."
"And what about the
Japanese flower?"
The four women are not talking
about botany, but about fashion. On the table before them are fabrics, sketches
and a sales inventory. Better to use large flowers, but not huge, either. In
five weeks - two to make the fabric and three to sew the clothes - this cotton textile
with a pattern suggesting daisies will show up on thousands of models at stores
in 86 countries. This is Zara, the mother of "fast fashion," the
heart of a giant called Inditex.
The center of that heart had
been off limits to the press until now. It is the design department in Arteixo,
the Galician town where the global group has its headquarters. It is an
enormous building housing 300 workers - mostly young people, representing 30
nationalities. There are computers, coat hangers that separate the work areas,
bolts of fabric and sewing machines used to make prototypes.
The backbone of this place runs down the center of the room: a line of
tables from where a close watch is kept on sales in its stores across five
continents. Store managers have to provide detailed reports of each day's
takings. This information is key in order to fulfill the company mantra: people
buy what they like, so we need to make what they like in order to sell it to
them (but without repeating what we already did before). This syllogism rules
the empire of the third wealthiest man in the world according to Forbes and
Bloomberg: Amancio Ortega, who created the largest global fashion chain in the
world out of what was nothing more than a humble housecoat workshop half a
century ago. His formula combines fast production, impeccable logistics and
global tastes: the same jacket is sold in Toledo and in Shanghai.
Over in a corner of the room,
the four workers agree on the print pattern. They feel the various cloths -
silk, viscose, cotton - and they take a look at the half a dozen pieces of
paper with pencil sketches on them. The items must go together well. It helps
to have Tere around. She is the model, and she is walking around wearing a
prototype silk outfit that will have to be okayed before heading to mass
production. The question now is whether the pants would go better with a jacket
or with a tunic. The pattern makers, María José and Socorro, always like to keep
the wearer's comfort in mind.
"We all have an opinion.
We are customers of our own business," says Loreto, the designer.
"It's important to like the item, even if you would not always wear it
yourself." None of the women would give out their surnames. This is all
about teamwork, and egos are not welcome in a company that exudes discretion
and humility.
"We always seek a
consensus," adds María, the saleswoman, who is familiar with the sales
figures of any item at any store.
In order to guess what the
customer will like, creation builds on experience: sales, the items that people
request at stores, and the failures when they happen. But intuition also plays
a role, in order to create something new. The goal is to follow the trend, that
fuzzy line separating what's 'in' from what's not. To do that, they keep tabs
on the dominant tones at televised gala events, watch what people wear on the
street, and search for clues on the internet.
"The world is contained
in a computer," explains Loreto. "You make a salad out of everything
and start seeing common denominators."
"Fast fashion is a
reaction to what's happening on the street, to the Oscars awards ceremony or to
the latest article in Vogue," explains José Luis Nueno, author of a study
on the Zara model for Harvard University - Inditex is a case study at many
business schools.
Loreto and María follow the
trends, but they also help create them. For customers, fashion is mostly the
new items they find at stores. And at its 6,009 outlets in 86 countries,
Inditex offers 27,000 designs a year (18,000 at its flagship brand, Zara). Last
year's figures showed there are 960 million garments from the Inditex galaxy in
the world.
"When people like something, it triumphs everywhere," says María.
And if they don't, there is enough flexibility to fix the problem. Production
can be modulated and the color tone can be altered. These are the advantages of
the vertical production system, which controls every step of the process.
"The clients today want
what they saw yesterday. They want to wear what's in, at a good price. There is
very little risk associated with the purchase, because the cost is not very
high," analyzes Nueno. And Inditex has the garments in its store windows
within three weeks, thanks to a complex and highly efficient production system.
Speed is also key to the consumer: if the item looks nice, better to buy it
now. New garments are coming in twice a week, and that's the best way to keep
customers coming back to stores that are meticulously designed and maintained.
Nothing is left to chance, not even the background music. The store windows for
next fall, with a predominance of blacks and golds, are already at the testing
stage.
This enormous army of sewing
soldiers gets its weapons ready. The textile is analyzed at a lab to ensure it
meets legal requirements. From design concept, it moves on to the
pattern-makers. The 10 factories that Inditex operates at this industrial park
cut the cloth into garment parts: sleeves, backs, collars and so on. The eight
brands in the Inditex galaxy - Pull & Bear, Massimo Dutti, Bershka,
Stradivarius, Oysho, Uterqüe, Zara Home and the flagship Zara, which includes
Kiddy's Class and Lefties - work autonomously and rely on a network of 1,490
workshops in 60 countries. That is where the actual sewing takes place.
The trendiest items are
manufactured "in proximity," which to Inditex means Spain, especially
Galicia, plus Portugal, Morocco and Turkey. These countries represent around 51
percent of production, according to the company. The rest is made in more
faraway locations, especially Asian nations where labor is cheaper, such as
China, Cambodia, India and Bangladesh. There deadlines are longer.
But right now, proximity means Arteixo itself, a town of 30,700 inhabitants
near A Coruña and the birthplace of this textile empire. There, between the
road and an orchard where chickens run around, Matilde Matas, a former Inditex
employee, and Juan Campos, a former machinery salesman, have created one of the
hundred or so Galician workshops that service the group. This morning, the task
at hand is making checkered shirts for Pull & Bear, at the rate of 3,000 a
day. This is pure Taylorism: dozens of women huddle over their sewing machines;
one sews on the cuffs, another does the buttons, a third makes the buttonholes.
"This is the only way to
be productive," explains Campos. Although the music helps, dressmaking
"is hard work." Yet there is no shortage of candidates to join the
production line, either in Spain or in the countries where the slower fashion
gets made, such as t-shirts and many other wardrobe basics.
Whether near or far, all the
workshops that supply Inditex need to follow a code of conduct that includes
adequate work conditions and fair wages. But there is still the occasional
outbreak of trouble, such as a fire that broke out at a Bangladesh factory last
January, killing seven people. In Arteixo they say that a local provider
subcontracted that workshop without the necessary permission from Inditex. The
company now works with neither one. "We provided financial compensation to
the wounded, to the families of the deceased and to the workers who lost their
jobs," says Félix Poza, head of Corporate Social Responsibility (CSR).
In this business, any scandal
can be as global as fashion itself. Inditex has reinforced its responsibility
policy since 2007, subscribing to global agreements with the unions and
increasing the amount of surprise inspections. When irregularities are found, a
deadline is offered for correction, followed up by an evaluation. But oversight
is the company's weakness, according to Spanish unions, who are otherwise
satisfied with conditions at the factories - though not quite as much with
conditions at the more than 1,900 retail stores in Spain, especially because of
the emphasis on part-time jobs. "When a complaint is filed, they react
well, but the prevention measures are not there," says Paula Alves of the
labor union UGT.
"The company is unable to prevent subcontractors from violating the
ethics code," adds Carmen Expósito, of the textile industry sector of
CCOO, Spain's other major union. The Galician CIG goes further: "The code of
conduct is a way to save face without any practical effects," says Dores
Martínez.
"Companies act following
complaints, not through prevention. But at least Inditex is the kind of company
that does something about it," says the activist Albert Sales, who is
working on a campaign called Ropa Limpia (Clean Clothing) that is set to run in
14 countries, including Spain. This campaign is targeting job insecurity in the
global textile industry, which is dominated by "difficulties in planning
and the need to meet deadlines."
"Inditex is the world's
leading company. It forces others to take a stand on corporate social
responsibility and to make some commitments, but time has shown that they are
inefficient," he holds. The "structural" problem is a result of
a production model that entails "very strong pressure on producers. In
fast fashion, the business risks are transferred to the workers, and become
social risks for them," concludes Sales.
"We've moved from
reactive to proactive," argues a spokesperson at the CSR department in
Inditex.
"We are demanding, but we are not the oppressive type. We believe in
the obligation to be decent," says an employee one rung up the corporate
ladder. "Human and labor rights are inseparable."
External factories are a vital
part of the process, but so is technology and logistics. New items arrive by
land, sea and air, and they always end up inside a truck that takes them to
enormous logistics platforms. Every item sold at Zara first stops at the
Arteixo logistics centers before heading out to one of the 1,925 Zara stores in
the world.
More elegant garments such as
suit jackets pass by the Arteixo factory, which right now is filled with
fuchsia tones (expect bright colors this summer). Each one gets pressed along a
chain system; some workers press the sleeves, others the fronts. A dozen female
employees press 4,000 jackets a day. Some of them, like Isabel Naya, takes this
opportunity to choose what she will be purchasing herself.
"Before this, I used to
call a friend who works at a store to tell her to warn me when the item got
there, but with the internet I don't have to any more," she says, smiling.
Indeed, online sales are the new jewel in the crown of Amancio Ortega's
empire, although the company refuses to reveal any figures. It began rather
late in the game, in 2010, but it is already operating in 23 countries,
including China. Customers typically pick up the item at the nearest store, and
often buy something else while they're there.
The fuchsia jackets advance on
their rails towards the logistics platform. Computers control the system, which
combines elements of luggage transport, mail sorting and bar codes. This is how
the twice-weekly shipments to Zara are organized. "A couple of days go by
from the moment a store in Japan places the order and the moment they receive
it," says Inditex spokesman Jesús Echevarría.
That Japanese store is just
like any other in the Zara chain: minimalist and glamorous, with a relaxed
atmosphere. The store - a word that is pronounced with devotion in Arteixo - is
the main display piece for a company that barely spends anything on
advertising. This entails significant savings.
"Each customer should
have her or his own image of Zara, and be its judge without any influence from
advertising," defends Echevarría. And if the customer happens to be a
celebrity who wears the brand - a fact that usually gets around - what better
publicity can a company expect?
Yes, they may be homogenous,
but there are also Zaras in unique locations, and increasingly in exclusive
spots such as New York's Fifth Avenue. Between March 2011 and June 2012,
Inditex earmarked 960 million euros for the purchase of three flagship stores
in as many Golden Miles in New York, Milan and London. But the company insists
that it is not veering towards the real estate business.
"That is not our
business. Generally we rent, because the costs and the risks are lower,"
says a spokesperson. But they weren't about to overlook a good investment
opportunity, and there was certainly enough money for it.
Inditex began the fiscal year
with over four billion euros of disposable funds. Year after year, the retail
giant beats records. From February 2012 to January 31, 2013, sales grew 16
percent to over 15.9 billion euros - two-thirds of which correspond to Zara
sales. This is the equivalent of more than 1.5 percent of Spanish GDP. Net
profit was 2.36 billion euros, a 22-percent increase. Inditex is the Spanish
company with the highest share value on the stock market.
The business born out of the
reclusive Ortega's intuition grows and grows as though there was no crisis:
this year, Inditex is planning to open at least 440 stores, especially in Asia
("a key element of expansion"), the Americas and European countries such
as Russia. None in Spain. The time is not right: turnover fell five percent
last year, the sharpest drop in company history. Inditex justifies it through
"a slight" decrease in sales and the fact that the company did not
pass on Spain's drastic VAT hike to its customers.
Using the formula of giving
customers what they want and doing it fast, the company has grown into an
empire. Inditex has 120,000 employees, of whom around 80 percent are women. And
all this is taking place 38 years after Amancio Ortega opened his first Zara
store on the corner of A Coruña's Juan Flórez street - an establishment that
looks like new despite already having two generations of regular shoppers to
attend to. It is difficult to bring to mind a past filled with housecoats, when
the present is filled with nearly one billion items a year, including women's,
men's and children's wear, decorative goods, footwear, perfume and more.
"Inditex advances like a
Roman legion in which the troops are hooked together and advance at the same pace.
It has populated the city centers with its own competing brands that seek to
attract consumers who pay medium prices, but which also offer premium
products," says Josep Francesc Valls, a professor of marketing direction
at the business school Esade, who considers Ortega "a pioneer of low
cost."
Amancio Ortega, 77, has never
granted a single interview in his whole life. He still drops by Arteixo, or so
they say down at headquarters, a place where suits and ties are a rare sight.
This is not the only sign of a man who is fabled for his humble attitude and
who started working as a young boy in his native León.
In 2011, Ortega, who holds a
59.6-percent stake in the firm - netting him a tidy 813 million euros during
the last fiscal year - took a step back, and appointed Pablo Isla chairman of
the company. "Ortega plays an inspirational role, and he is always
available for advice," they say. Meanwhile, Ortega's youngest daughter,
Marta, is currently on maternity leave from her work as a store clerk. She will
one day inherit the business, but ownership and management are two separate
branches.
As for the future, "we
have a huge way to go. We have enormous growth potential. Our presence is
global, but in 90 percent of the markets we're just getting started," says
a company spokesman.
"Inditex has an excellent
business model and it can still grow a lot," says Professor Nueno.
"Something terrible would have to happen for it to fail, some kind of
Armageddon."
But if the Apocalypse does come, maybe it will be wearing Zara clothes