Zara Case Study

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9-703-497

REV: DECEMBER 21, 2006

PANKAJ GHEMAWAT

JOSÉ LUIS NUENO

ZARA: Fast Fashion

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Fashion is the imitation of a given example and satisfies the demand for social adaptation. . . . The more an

article becomes subject to rapid changes of fashion, the greater the demand for cheap products of its kind.

— Georg Simmel, “Fashion” (1904)

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Inditex (Industria de Diseño Textil) of Spain, the owner of Zara and five other apparel retailing

chains, continued a trajectory of rapid, profitable growth by posting net income of € 340 million on

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revenues of € 3,250 million in its fiscal year 2001 (ending January 31, 2002). Inditex had had a heavily

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oversubscribed Initial Public Offering in May 2001. Over the next 12 months, its stock price increased

by nearly 50%—despite bearish stock market conditions—to push its market valuation to € 13.4

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billion. The high stock price made Inditex’s founder, Amancio Ortega, who had begun to work in the

apparel trade as an errand boy half a century earlier, Spain’s richest man. However, it also implied a

significant growth challenge. Based on one set of calculations, for example, 76% of the equity value

implicit in Inditex’s stock price was based on expectations of future growth—higher than an

estimated 69% for Wal-Mart or, for that matter, other high-performing retailers.1

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The next section of this case briefly describes the structure of the global apparel chain, from

producers to final customers. The section that follows profiles three of Inditex’s leading international

competitors in apparel retailing: The Gap (U.S.), Hennes & Mauritz (Sweden), and Benetton (Italy).

The rest of the case focuses on Inditex, particularly the business system and international expansion

of the Zara chain that dominated its results.

The Global Apparel Chain

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The global apparel chain had been characterized as a prototypical example of a buyer-driven

global chain, in which profits...