Tuesday, June 4, 2013

Are you being served?

One day, in post Civil War Spain Amancio's mum was turned down for credit by the grocer. Amancio didn't like it and decided, then and there, to stop it happening again. So at 13, he left school and started as a gofer in a shirt shop in La Coruña, in Northern Spain, He's 76 now and the richest man in Spain. He's the richest man in Europe and he's amongst the five richest people on the planet. He still lives in La Coruña and, by all accounts, maintains a simple lifestyle passing time with his boyhood friends and eating his favourite meal of egg and chips in local restaurants.

Amancio Ortega started what is now Inditex in the early 1960s with a loan of 2,500 pesetas (17€). He made quilted dressing gowns. His business flourished but he quickly decided that he could make more profit by designing, manufacturing, distributing and selling his clothes directly. This control of the whole process is usually quoted as one of the key reasons for the success of Inditex. If the name of the company doesn't ring a bell maybe the shop names will. Zara, Pull & Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home and Uterqüe are all Inditex.

Amancio had other thoughts about selling clothes. When he started fashion trends were dictated by the couture houses. He turned that on its head. His idea was to see what the hip and trendy were wearing in Parisian streets, New York discos or the clubs of Shanghai. Designers were hired to turn his thoughts into clothes. He wanted it done quickly too. From design to the shop hangers in two to three weeks. Inditex now has a hundred or so “trend spotters” worldwide.

He didn't like the idea of seasons either. Far too slow; a drag on turnover. Clothes in each shop are changed constantly. Local managers select stock from the whole manufacturing inventory and get two deliveries per week. Customers, aware of the rapid stock turnover, know that if they like something but don't buy it now, it may be gone when they return. Visits become sales.

Ortega realised he couldn't do it alone He seems to have had a knack for spotting talented people to help him develop his business. He knew too that information was key to business success and was one of the first to use computers to keep tabs on sales. Sophisticated systems now measure not only sales but which clothes move from the rails but not through the tills.

Zara shops maintain an image. Whilst the prices are moderate the look is high end with good locations often in interesting buildings. Staff are expected to be well turned out and to work on the “customer is always right” principle.

In the late 1980s Inditex opened its first shop outside Spain, in Portugal, rapidly followed by stores in New York and Paris. The first London shop opened in1998. There are now over 6,000 shops in 85 countries. Surprisingly Inditex took till 2011 to get online. They're currently tackling the last big untapped markets in Asia. China may well prove quite a challenge for the Inditex model.

Ortega officially retired in 2011. Inditex is now in the hands of Pablo Isla, one time boss of the tobacco giant Altadis. It will be interesting to see if the Inditex miracle continues without its founder and mentor.

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