Why Inditex is the world’s largest clothing retailer

Why Inditex is the world’s largest clothing retailer

In “On the Origin of the Species” Charles Darwin expressed his theory about the relevance of evolution. Adapt or die. It’s not always as drastic as he said, but it doesn’t come as a surprise that all industries have to, at one point, adapt to new technologies. The same goes for the fashion industry, where online shopping seems to increase every year. As time evolves, the customer behaviour does as well. One in every two European purchase is now made via the internet. Last data shown by Eurostat in 2015 states that 53% of the consumers bought products or services online.

Let’s focus, for example, on Spain. To shed some light, let’s take a look at some numbers: the percentage of online consumers here is not as big as above mentioned, narrowing it down to a 42%. It’s not a secret that Spain hasn’t had the best of times economically speaking — somewhat called economic crisis — although that doesn’t seem to matter in the fashion industry. In 2015, a vast amount of 7.3 million people bought clothes, complements and sports goods online, spending in this process more than 800 million euros. Yet after seven years without barely any movement, 2015 sales still increased by 4%.

Nowadays, we happily say that the fashion industry in Spain is a well-oiled machine that is gaining more acknowledgment internationally. It is the only country with two representatives within the biggest fashion groups in the world: Inditex and Mango. Last mentioned is present in more countries than any other brand, and Inditex being the indisputable leader with a revenue of 18.12 billion euros annually and selling in 88 markets worldwide.

“Zara is probably the most innovative and devastating retailer in the world”. This sentence was said back in the 90’s by then director of LVMH, Daniel Piette, when Zara (main protagonist from the group Inditex) was a complete stranger in the United States and wasn’t even in the top 10 worldwide sales-wise. “Devastating” might have been a bit harsh, however, it would seem that the group Inditex was craving for a revolution in the, at that time, conservative fashion industry. As of recent numbers, no one can doubt the success of Zara. The Spanish firm closed the second period of 2015 with a turnover 17% higher than the first fiscal semester, selling for 9.4 billion euros, and a net profit of 1.1 billion which is 26% higher compared to the same period the previous year.

One might wonder how is this possible? Or what makes Zara different than other brands? Why is it leading in the no-mercy fashion arena?

If we take a glance at their business model, we will see three key points from which other brands could learn from. First of all, the multinational company has worked their way up through online sales. Since some years ago, the retail giant — as they like to call it in Spanish — bets firmly on e-commerce, establishing their online presence all around the globe of their main brands like Zara, Zara Home, Oysho, Stradivarius, Massimo Dutti and Pull & Bear. Since going online in 2010, Inditex has opened online stores in China, Denmark, Japan, Sweden, Hong Kong, Taiwan and Macau. All in all, the group is selling online in 28 countries.

Secondly, the strategy of the company involves very little stocking and updating the collections often. Unlike other brands that try to predict trends one year in advance, Zara’s business model eliminates the risk of “missing” this trend by restocking their designs twice a week. This strategy has two great outcomes: the customers go more often to the stores, as well as it makes the customers feel that if they want to buy something they should buy it now or the stock will run out.

Last, but not least, the group’s presence on social media has a big impact on their sales. Their profiles on the different social media platforms are a reflection of their campaigns and products from their online stores. With millions of followers, the retail giant makes sure their fans and supporters are always up-to-date with the latest news and styles. For example, Zara has 1 million followers on Twitter, while their Instagram are followed by more than 9 million people worldwide. However, to calculate a real presence of all Inditex’ brands on these networks, we would have to sum up all the followers from all the brands, which each have millions of followers. It’s clear to say, that the brands’ online presence is huge and they are using the social media tools in clever ways to drive sales.

Inditex has worked hard to become the world’s #1 fashion distributor and keeping their international crown, while others brands are still trying to get to the top. The retail giant tries to keep their distance from their direct rivals such as H&M group and Gap. With more than 6.800 stores worldwide, Inditex is focusing on their development in growth of already existing markets — both offline and online.