The Inspiring Journey of Amancio Ortega
Imagine being born into a poor family with nothing to eat or drink. At 14, you’re forced to leave your studies and start working. But you don’t give up. You keep going. At every step, you fight through hardships and continue moving forward. Then one day, when you open your eyes and look around, you realize you’ve become the 12th richest person in the world.
This is the story of a boy who lost everything in his childhood. Yet, despite all the losses, he built a company beyond anyone’s wildest dreams. His name is Amancio Ortega, and his net worth is $73 billion.
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How Zara Became a Global Fashion Brand
This is the story of the world’s largest fast fashion brand, Zara. Today, customers are so passionate about Zara that, on average, a customer visits a Zara store 17 times a year. And that too when Zara doesn’t spend a single rupee on marketing. Despite this, Zara sold clothes worth ₹3,60,000 crores last year. In the world of fast fashion, Zara is the most profitable company today. While the profitability of brands like H&M is only 6%, Zara’s profitability is 13%. Today, Zara launches a new collection of clothes every 1–2 weeks.
Which goes out of stock within the next 15 days of launch. The most interesting thing is that the quality of the clothes Zara sells is not premium, yet they are sold at high prices. Have you ever wondered why? After all, what did a 14-year-old delivery boy do that his company now rules the entire fast fashion industry? And more importantly, what are those powerful business strategies we can learn from Zara and implement in our own businesses?
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How a 14 Year Old Delivery Boy Built Zara
The story begins in 1936 when Amancio Ortega was born into poverty as the son of a railway worker. Due to his family’s poor financial condition, Amancio had to leave his studies at the age of 14. He had so many responsibilities at home that, if he hadn’t stepped up, his family wouldn’t have had anything to eat. In those early days, Amancio started working as a delivery boy at a local tailor’s shop.
He was assigned the job of delivering clothes to customers. But he worked so hard that he was quickly promoted to the position of assistant. Many years later, in the 1960s, Amancio became a shop manager. As a manager, he noticed that many people came to the store wanting to wear very expensive and stylish clothes. But in reality, only a few could afford them. Amancio then conducted in-depth research on this.
During his research, he discovered that these expensive clothes were not of very high quality. People paid so much for them because they were seen as a kind of status symbol. These clothes were fashionable and offered a wide variety of designs. This was the reason why the companies that produced them overcharged their customers. This gave Amancio a business idea.
He thought, “Why don’t I also start delivering these expensive clothes to people at reasonable prices? All the customers who are paying more elsewhere will come to me.” To do this, he and his team went just outside Spain to a city called Barcelona, where they purchased very cheap fabrics. After that, they used cardboard patterns to create clothes similar to those made by premium brands. When it came time to sell, they would go to local shops and sell the clothes at a premium price.
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The Birth of the Zara Brand
Then, as their business grew, in 1963, they opened a factory called Confecciones Goa. Initially, the clothes produced in their factory were not branded as Zara but as Zorba. The name “Zorba” was taken from a Greek movie called Zorba the Greek. However, not far from their factory, there was a beer bar also named Zorba.
As a result, people began associating their company with the bar. That’s why Amancio changed the name of his brand from Zorba to Zara. For the next 12 years, they continued making clothes under this brand. Then, in 1975, Amancio Ortega and his wife, Rosalia Mera, opened the first Zara store. This marked the point where Zara transitioned from manufacturing to the retail business.
Zara’s Global Expansion Journey
In the next 10 years, Zara opened 9 stores in major cities across Spain. Gradually, people in Spain began to see Zara as a brand that produced high-end clothing but sold it at mid-range prices. Following this success, Zara began expanding into other countries as well.
In 1985, they established a holding company called Inditex. Today, this company owns several major brands in addition to Zara, such as Pull & Bear, Bershka, Stradivarius, Oysho, and Zara Home, all of which manage luxury fashion brands worldwide. By 1989, Zara had more than 100 stores in Spain alone. And by 1990, Zara had entered neighbouring countries like France and Portugal.
After that, Zara expanded into countries like the United States, Mexico, and other parts of Europe. In 2010, Zara finally entered the Asian continent. Today, Zara alone contributes 66% of its parent company Inditex’s total revenue.
But the question is, how did all of this happen in such a short time? What did Zara do that other brands couldn’t? The answer lies in Zara’s business model canvas. Let’s now understand in detail how this entire system works. To put it simply, Zara’s business model canvas is primarily based on three key pillars. The first pillar is Fast Fashion.
Zara’s Fast Fashion Business Model
Fast Fashion means that as soon as a new trend emerges, Zara quickly creates designs based on it producing a large number of designs in a short time. Even if there is a slight compromise in quality, the focus is on making the product as quickly as possible. The product should reach the customer’s hands first. Today, the entire world considers Zara to be the pioneer of the fast fashion industry.
This is because Zara is the company that introduced the concept of fast fashion. To date, no company has been able to surpass Zara in this game. From product design to reaching the customer’s hands in the store, Zara takes only a week. In contrast, other companies in the industry take up to six months to do the same. What difference does this make? Well, while Zara uses this model to deliver more than 12,000 designs in a year, other companies can produce only 2,000 to 4,000 designs at the same time.
Why Zara Is So Popular Among Young Women
Now, the younger generation, especially those aged 18 to 34, is very enthusiastic about this particularly females. Around 70% of Zara’s customers are women. Men hardly shop at Zara. But why is that? Even boys love clothes we shop too. So why is there such a big difference in numbers? Think about it: if you’re a boy, try to remember the last time you were in a group of male friends discussing clothes or showing off what you were wearing.
I’ve never seen that happen. But in a group of girls, you’ll often notice that they talk a lot about clothes. It’s rare to find a girls’ group that doesn’t talk about fashion. Do you know why? The answer lies in the idea of clothing as a status symbol. It’s not the same for boys. But for girls, their clothing is a way to showcase their status. Here, status doesn’t mean being rich or poor it reflects one’s personality. All of us, as young people, want to look different from others in our social circle. We want to stand out. And we always want to present ourselves as modern and up-to-date as possible.
Zara’s Limited Stock Strategy
Whenever people visit a Zara store, they find new and unique designs. The key feature here is that the designs customers see have only been in the market for a short time. This creates an impression in people’s minds that if they own these clothes, they will automatically appear different from others because not everyone has those designs.
And after a while, that design won’t be available in the market. Now, look at how Zara takes advantage of this. They create a large number of designs, and most customers buy them quickly because they feel that if they don’t purchase the design now, it won’t be available later. This happens because Zara changes the entire collection in its stores every 1–2 weeks, and no stock from the old collection is made available again.
How Zara Attracts More Buyers Without Ads
But there’s another effect of this strategy frequent visits. Data shows that a Zara customer visits the store 17 times in a single year. But do you know how many times customers visit competing brands? A maximum of four times. Now, since you know Zara changes its entire store collection every 1–2 weeks, you’re likely to visit a Zara store whenever you get the chance just to see what’s new. Even if you don’t buy anything, Zara still benefits from your activity. Let me explain how: because of these frequent visits, there are always customers in Zara’s stores.
So, whether people buy something or leave without purchasing anything, those watching from outside people walking around the store always feel that there are so many customers inside, that the clothes must be great. As a result, they also come in to take a look. And since Zara has a large collection, people end up buying whatever they like.
So, as you can see, Zara doesn’t spend a single rupee to attract new customers yet they consistently have a steady flow of them. By using this technique, Zara manufactures and sells more than 45 crore products every year.
Zara’s Secret System Called The Cube
But have you ever thought about how Zara produces so many products in such a short time? From packaging and designing to production and delivery tasks that take months for other companies Zara manages to complete them within a week. The secret lies in the second pillar of Zara’s business model canvas, which is called The Cube.
Why Zara Uses Just-in-Time Production
When Amancio Ortega was working as a delivery boy at the age of 14, he began observing the process from designing a product in a factory to getting it into a store and identifying the factors that increased its cost. He noticed that most of the money was spent on warehousing and distribution. So, he concluded that this part should be eliminated first. Later, in the 1980s, when he was expanding Zara globally, he focused on this strategy. He decided that from manufacturing to distribution, he would control everything so that both speed and cost remained under his control.
The foundation of Zara’s distribution system is The Cube a highly automated distribution centre spread over 5 million square feet. It is located in the city of Arteixo, Spain, where Zara’s headquarters are also situated. The Cube is, in a way, Zara’s brain, from where all global operations are managed. But here’s the catch: unlike other companies, Zara’s production does not begin in a factory. The first step in Zara’s production starts with agents. These agents are essentially fashion designers positioned all over the world.
They attend social gatherings, clubs, and fashion shows, and closely monitor platforms like Instagram and TikTok to better understand people’s preferences for upcoming clothing trends. As soon as they spot an inspiring design or trend from these sources, they sketch it and send it to the fashion designers at The Cube. The designers at The Cube then brainstorm thoroughly, deciding what fabric will be used to make the garment, how much it will cost, and what its final price will be. Most importantly, they evaluate how many people are likely to buy the product if it is made.
How Zara Cuts Costs and Still Looks Premium
Zara uses this method to create more than 40,000 designs every year. After filtering out the rest, around 12,000 designs remain, which are sent for further production. Once the designs are finalized, the next step is fabric sourcing. Very few people know this, but the truth is that Zara uses only 4–5 types of fabrics in a year. However, the quantity of fabric purchased is extremely high.
The advantage of doing this is that when the quantity is so high, the supplier provides all the fabric at a very low price, which significantly reduces the production cost.
Smart Use of Medium-Quality Fabric
But there’s a twist here as well. The fabric sourced is neither of very high quality nor very low quality it’s always medium quality. Zara understands its customers very well. It knows that its customers don’t want clothes that last for 1–2 years. Instead, they prefer a fabric that can be washed 10–15 times, worn for a season, and then discarded.
Monorail, Fast Shipping, and No Warehouse
The fabric used by the company in its clothing is primarily sourced from cities like Italy, Spain, Portugal, and Greece, where it is relatively inexpensive. From there, the fabric is transported to The Cube. To cut and stitch this fabric, Zara operates 11 clothing factories, all located just 16 kilometres from The Cube. These factories are connected to The Cube through an underground tunnel with a monorail system.
As soon as the fabric reaches The Cube, it is transported via monorail to the factories. Once the final product is ready, it is sent back through the same monorail system to The Cube. After this, the products are moved to Zara’s Zaragoza logistics centre, which is located in the heart of Spain. Once the products arrive there, they are dispatched via trucks and planes to Zara stores around the world. Now here’s the magic once Zara’s products reach the stores, they are placed directly on the shop floor.
Limited Stock Increases Urgency and Sales
Zara’s stores don’t maintain a traditional inventory. The fabric that arrives by truck is sent directly to the shop floor for display, and only 3–4 extra pieces are kept in stock. There are two reasons for this approach:
1. Robust Stock Replenishment Cycle
As soon as the stock runs out, it is quickly replenished. For this reason, Zara stores receive deliveries twice a week.
2. Illusion of Scarcity and Massive Inventory Turnover:
When a store has limited stock, there is no need to invest heavily in inventory. Additionally, because the stock is so limited, customers feel a sense of urgency believing they must buy the item immediately before it runs out. This significantly increases the speed of inventory turnover.
The products sell very quickly. And if a Zara product doesn’t sell within a week, it is removed from the store. Now, let’s understand the details. In Spain, Zara pays its employees €11 per hour. But do you know how much this salary is in Asia? Only €0.80. Despite this, Zara carries out 50% of its total production in Spain. Another 26% is done in other European countries, and only 24% in Asia and Africa.
Just-in-Time Model Saves Zara from Losses
Now you might ask why is that? What’s the benefit? Zara does this because, unlike other companies, it doesn’t operate on a just-in-case model but rather on a just-in-time model. This well-known production model was developed by Toyota. In the just-in-case model, the company manufactures the product first and then sells it in the market, which increases inventory costs. First, the product must be stored somewhere, and if it doesn’t sell, all the invested money goes to waste. However, Zara saves on both manufacturing and inventory costs by using the just-in-time approach.
Zara follows the just-in-time model. When Zara receives an order from a store, production begins only after that. And because the process is so fast, the product is manufactured within a week and reaches the store quickly. Additionally, since the product is already in demand, there are no storage costs. As soon as it arrives at the store, it is sold. In such cases, Zara rarely has unsold inventory. Even today, Zara pays its workers in Spain 13 times more because they are kept ready for just-in-time production.
Zara’s Customer-First Store Strategy
Have you ever wondered how Zara manages to sell more than 12,000 designs without any marketing? How do they convince customers to buy so many products? To understand this, we must look at the third pillar of Zara’s business model canvas.
This pillar is called the Customer-Centric Approach. Other brands spend a lot of money to promote their products and build their brand image. But Zara doesn’t spend on marketing it spends on choosing the right location for its stores. You will always find a Zara store in areas frequented by high-end, high-profile customers. In simple terms, you’ll find Zara’s stores located near brands like H&M, LV, Prada, Gucci, Armani, and other luxury names.
This gives Zara access to wealthy customers, and the rest of the work is done by the store itself. Now, take a close look at a Zara store. You’ll notice that both the interiors and exteriors are designed in a luxurious style, similar to how other premium brands design their spaces. Whether the clothes are premium or not, the store always looks premium. Because of this, high-end customers outside perceive the brand as premium. But wait a minute what difference does the store make to the business? Let’s understand this with an example.