Richest man

Chapter 13 Europe: Amancio Ortega Gona (2)
Ortega's approach is very effective, especially in the off-season, which can prevent competitors from stealing market profits through large-scale purchases and low-price dumping. Maria, CEO of Inditex Group, admitted: "Our approach has enabled us to maintain a huge advantage over our competitors."

The Ortega and Zara model may not be unique, but its core value is a perfect, simple principle: In the fashion industry, nothing is more important than the speed of market response.

From Cindy Crawford to the cleaning lady - Ortega's affordable fashion
It takes only half a month for Zara fashion to go from design, manufacture to retail. One of the purposes of doing so is to reduce costs.At the same time, most of the production bases of Inditex Group are located in Spain and Portugal, which can ensure the quality of products.Ortega's new business model is said to have become a textbook for many business administration schools in the West.

At present, many fashion companies in the world place the production process of clothing in third world countries with cheap labor in order to save costs to the greatest extent.But Inditex's flagship brand Zara, as well as Pull & Bear, Massimo Dutti, Bershka and Stradixarius, [-]% of its clothing is still made in Europe, and [-]% of it comes from Spain. Inditex has purchased advanced machinery and set up factories in Spain to perform capital-intensive automation processes such as dyeing and cutting, while the sewing process is completed in small factories in neighboring areas.

Ortega has insisted that the vast majority of the group's production and sourcing be done in Spain or Europe, and that it manufactures more of its clothes itself.This is also different from rivals such as Gap Company of the United States and H&M Company of Sweden. In today's fierce global competition, more than half of the ready-to-wear garments sold by Zara are produced by itself. Most of Zara's fashion is designed, cut and produced in La Coruna's modern factory, which was completed three years ago at a cost of $1580 million.

Controlling all aspects of production gives Zara a flexibility that other competitors do not have.

But will this increase the cost?

Of course, Ortega knows that the price of textile raw materials in Asia is cheaper than in Europe, and the labor cost is also much cheaper than in Europe, but he believes that their fashion profits are not low. This is not such a serious problem.Adhering to "Made in Europe" can guarantee speed and enable the company to launch new fashions in the shortest time, thereby reducing sales cycle and inventory time, and reducing costs from channel circulation.

Because of this consideration, even if millions of pieces of clothing are sold worldwide every year, Ortega still guarantees the number of clothing he produces, and this self-control from production design to sales is considered by many critics to be the whole Anomalies in the international fashion industry - many big brands have already handed over their production to others.

Of course, some people think that Zara seems to be sacrificing quality for speed.If there's one complaint consumers have about Zara, it's that its fashions sometimes don't last. Zara offers trendy styles at low prices, but the quality is not necessarily good.If you want to buy fashionable styles that you will only wear for a while, you can choose Zara, which is cheap and trendy.

But what is fashion? Isn't fashion a race against time? Of course Ortega knows this better.

In Singapore, Zara sells $19 camisole tops to $26 long-sleeved tops, which is also quite cheap among mid-range fashion brands.Unlike some young women who spend a few months saving money to buy Louis Vuitton leather bags or Chanel fashion, Zara is a good choice if they can afford famous brands and want to keep up with the trend.

For almost 30 years, Ortega has always set up his headquarters in La Coruña. In 2003, his second logistics center in the city was officially put into operation. This center, which cost 1 million euros, covers an area of ​​12.3 square meters and has a distribution capacity of 8 pieces of clothing per hour.This is a railway and highway hub, and it is also very close to the international airport. The convenient transportation is the main reason for Zara's location.Using such a city as its headquarters and distribution center, Inditex's transportation costs can be imagined.In addition to these two logistics centers, Zara also has three relatively small distribution centers in Brazil, Argentina and Mexico to cope with the opposite seasons and long distances in the southern hemisphere and Europe, so as to reduce transportation costs.

The international clothing industry has made an incisive summary of Ortega's mode of operation in clothing brands, that is, first-class image, second-rate products, and third-rate prices.

Yes, Ortega's fashion concept is very inconsistent with well-known brands such as Arnault. When they all think that "fashion" products have more brand value in addition to their own high R & D and production costs, so , when it should and must be high value, Zara thinks differently.They think that no matter how good a product is, if it is not sold, it is just a pile of waste products that occupy the warehouse and stagnate funds. Instead of waiting for the price to be sold, it is better to quickly generate cash and promote secondary production. Zara allows more consumers to buy without hesitation as long as they look at a piece of clothing. Although the consumption price of each piece of clothing is not high, customers who spend multiple times can also keep more cash in their pockets. Inditex's major chain stores

Who are the customers who buy Zara? A senior manager of Zara once described their customer base to the media in this way: whether it is Cindy Crawford or ordinary cleaning women, whether they live in London or Shanghai, people’s There may be a piece of Zara in the wardrobe. When they wear Zara, they feel the same fashion from Spain.

Buying a first-class brand at a third-rate price is exactly how Ortega works miracles.

How long can he last in the wave of globalization

No one can conclusively say why Ortega has maintained such a speed advantage in an industry so traditional and easy to follow.

However, in the clothing industry with extremely low barriers to entry and increasingly fierce competition, Ortega has to face a lot of confusion.

How Long Can Fashion Fast Food Last?
Ortega's Zara and other brands are currently the most important clothing brands in Spain that still stick to the classic, refined and low-key style of European fashion. For several years, his slogan is-let us consume fashion like fast food, consume , consumption, consumption again!
"Fashion is interactive" - ​​this is Zara's fashion philosophy. On average, Zara's stores put on new products twice a week. The perfect logistics distribution system ensures that more than 600 stores around the world have a near-synchronous delivery time, with a difference of only a few hours. With its popular design, relatively good quality and low price, Zara has become the first choice brand for European office workers.Similar brands include Mng, which operates in a similar way to Zara. It has 67 chain stores in 624 countries and is also a popular brand among women.

For decades, mass consumer brands represented by Zara and Mng have truly integrated fashion into the lives of ordinary people.Perhaps in the eyes of many people who love fashion art, Zara and Mng are not considered art like popular fast food, but they make you inseparable - fashion is ultimately for people to wear, and it is better to wear it than to look up, isn't it Is it

Is fashion going to change? If fashion is just fast food rather than a classic, a product thrown into the closet after two seasons, how many working-class people will accept it? With the acceleration of the world's cultural integration trend and a more personalized wear With the advent of the clothing era, does Ortega also need to consider brand derivatives?

How to maintain the cost advantage in today's globalization
In Spain 80% of people can afford Zara clothing, but in Mexico this figure may be less than 10%.Perhaps the most important reason why is the increasing integration of globalization and the economic level of different countries.But the problem is that Zara can guarantee the low price of its products in the European market, but in North America and Asia, you must know that Ortega still insists on putting most of the production work in Spain, and more than 50% of Zara's products Produced in-house, this ratio is higher than many of its competitors. Zara has 22 factories in Spain, 18 of which are located in and around the A Coruña region.Another 50% of products come from 400 suppliers, 70% of which are in Europe, while the remaining 30% are mainly in Asia.

Due to the different transportation costs, the prices of chain stores in various places will vary.Generally speaking, the price in Northern Europe is 40% higher than that in Spain, while in other parts of Europe it is 10% higher than in China, in the Americas it is 70% higher, and in Japan it is 100% higher.

Of course, higher prices abroad have also changed Zara's positioning. A senior executive of Zara pointed out that in Spain, 80% of people can afford Zara products.But the customer base in Mexico is much narrower, for cultural reasons, information reasons, and economic reasons: the per capita annual income in Mexico is $3000, compared with $1.4 in Spain.So Zara's target customer group in Mexico is the upper middle class. People in this class often shop in Europe, New York or Miami. They know fashion, and there are about 1400 million people.

In addition, Ortega's tradition is completely opposite to his fashion style. So far, his advertising expenses have only been 0.3% of sales. Insufficient.

Ortega, who insists on the characteristics of European fashion, also faces tremendous pressure from his main competitors. His biggest rival, the American fashion group Gap, began to change its strategy in 2000-no longer launching too fashionable products. products, and returned to the traditional basic style of products, reducing the number of retail stores.More importantly, after looking back this time, although the prices of Gap's brands are still higher than Zara, they are already close to Zara in the fashion field.

Expanded Security

Among Zara's more than 600 chain stores all over the world, only a small part is operated through joint ventures and special distribution methods-in today's globalization, these two branch models seem to be able to better adapt to local conditions and ensure financial security , reduce risks, and can save a lot of energy from the head office.Benetton, which is constantly innovating in the business concept of chain stores, has made similar successful attempts: the company set up nearly 2001 franchised dealerships in 120 countries in 6500, and the head office does not directly own these stores.So, as Zara further expands its scale, will it also adopt more models like its competitor Benetton? But will the increase of this special dealership and other changes affect the Zara headquarter has always been firmly established? Firmly control the supply chain in your own hands, and this supply chain has always been Zara's trump card to win over its opponents. Once there is a change, will it directly weaken the company's strength?

But if nothing changes and the head office still controls almost all the chain stores and supply chain, will the very successful model now work equally well when Zara grows to 2000, 3000 chain stores around the world with all these branches Can you still calmly and gracefully dance to the beat of the local market?
most famous ortega

The low-keyness of Spanish companies is well-known in the world. The only things that impress us in this country are bullfighting, beauties, beaches and Barcelona, ​​and of course the most famous team in the world-Real Madrid.But if you find that the famous "Big Bubble Gum" more than ten years ago and the "Golego" that frequently appeared on TV came from General Candy Company and Nudelesba Company in Spain, this low-key The feeling may be more prominent.

On July 2004, 7, the equally low-key Ortega reached the pinnacle of national honor when he was named honorary ambassador of "Spanish brands" at the "Spanish Brand Forum" held in Madrid.According to the media, he is the Real Madrid of football in the Spanish clothing industry-he has become the most famous Spaniard in the world.

The famous Ortega deserves more people's expectations.

After going public in 2001, Zara has developed at an average speed of opening a chain store every week.In 2003 alone, it opened 95 new stores around the world, bringing the total number of stores to 626, of which 65% of the sales stores are outside Spain.By the end of 2003, the total area of ​​sales stores reached 68.6 square meters, and the average annual sales per square meter was 5192 euros. In May 2004, Zara opened a chain store in Hong Kong. This is the 5th branch of Inditex Group in the Asia-Pacific region. It also marks that the group has 18 retail stores in 50 countries on four continents, Europe, America, Asia and Africa.

Ortega never thought of stopping, so how many more chains will he own? The harder it is for people, the better for us.

(End of this chapter)