I’m Alex Berman and you’re watching SELLINGBREAKDOWNS.Let’s kick off with a nice depressing statistic.Your average American will throw away 77 poundsof clothing every single year.And that’s true across the majority of thewestern world.That is two suitcases of clothes, just dumped.Today, we’re going to look at the historyof Zara, its parent company Inditex, and thefashion industry in general, to see how itbecame possible to create such a high churnrate in the fashion industry.Zara’s first store opened in 1975, in acity called A Coruna in northern Spain.Owners Amancio Ortega and Rosalia Mera hadwanted to name it after a favorite Greek filmcalled Zorba the Greek, but a bar on theirstreet had already beat them to the punch,so they settled for Zara, since they had alreadyhad the letters made for the sign.Inditex was set up in 1985 as holding companyfor Zara and the manufacturing plants.They went on to set up and take-over manyother high-street brands that follow Zara’sformat; such as Pull and Bear, Bershka andStradivarius.
They now have over 6000 stores globally.Zara’s early business model was to createsimilar copies to high end lines but at anaffordable price.As they expanded through Spain, Ortega pushedthe idea of instant fashion, where Zara couldreact incredibly quickly to new trends sothey could put new lines on the shelves ina fraction of the normal time.Historically, fashion has moved at a glacialpace, with trends taking years to come inand out of popularity.Before tv and photography, a new style mightcome from the fashion houses of Paris andit would spread when visitors to the citybought the clothes and then wore them in othercities.Or perhaps an apprentice would spend a fewyears learning the trade and then return totheir home country, bringing new ideas withthem.Even in the 20th century, there was a timedelay.Industry events, like textile conventionsin Paris, would be only for those in the business,so they would see what new materials and colourpalettes were emerging.This then influenced the design for the catwalkshows the next year.The public would get glimpses of the fashionweeks in the press and this would lead tothe styles in commercial stores later in theyear.So, it was a two or three year process.But this has changed completely now.Thanks to Instagram, Snapchat, live streamingand so on, the public see a lot of piecesbefore they even reach the catwalk.This is why Zara’s business model is sosuccessful; they are able to put out a newcollection that reflects what’s being shownat the major fashion weeks, almost as it'shappening.Zara is incredibly fast.
It’s said that they can take an idea froma paper sketch to the shelves in just fourweeks.For most other brands, we’re talking sixmonths on average.So how have they become so efficient?In 1990, they upgraded their factory to adoptthe famous Toyota production system calledJust-In-Time.We’ll look into this in more detail in anothervideo about Toyota but the basic idea ratherthan making a product, storing it, takingit out of storage, and then delivering it;you skip the storage all together, carefullyorganising your production so everything ispicked up fresh off the production line anddelivered straight to stores.That’s a bit of an over simplification butyou get the general idea.What is the benefit of this speed to Zarathough?Is it just to make them right on the cuttingedge of trends?It's a factor but there’s another motivationand this is really the key behind their success.Zara have created urgency in their customers.If you go into a luxury brand store, you canfind a piece you like, think about it fora month and then go back and get it.In Zara, some lines are only in the storefor a month total.That coat you look so good in might be goneforever in the morning.And it’s exciting for shoppers; they knowthere’s plenty of new treasures to discoverevery time they come through the doors.Your average Spanish high-street store expectsloyal customers to shop there about 3 timesa year.At Zara, it’s seventeen times!Store managers get a good amount of autonomyover their space so each store doesn’t feellike a carbon copy of the other.In fact, there’s a lot working in the storemanagers favour.They don’t need to discount old stock tofree space, because they barely have any stock;a new line is delivered every couple of weeks.
Also, Zara doesn’t advertise so individualstores don’t need to stick to a campaign.The brand relies on word of mouth, includingthat generator by its celebrity fans, suchas Kate Middleton.Zara’s marketing is very subtle and is almosta part of its business model.They benefit from the mountains of free pressthat the fashion industry generates and withtheir hyper-fast logistics, they are oftenfirst to spot a trend and provide it to thegeneral public.Wanna learn more about business theory andhistory?Be sure to like and subscribe to be notifiedof our next segment.
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