Why Zara Is Leading the Fashion Industry: Takeaways From Their Upside-Down Business Model (2024)

Have you heard of Amancio Ortega?

Chances are, you haven’t. So who is this mysterious entrepreneur whose fortune reaches over $65 billion and is one of the richest people in the world?

He’s the founder of Zara, the international Spanish clothing brand that’s shaken up the retail industry.

One thing I love doing is looking at successful brands and seeing what lessons can be learned from them.

As a clothing brand, Zara is like no other. People across the world from teenagers to recent retirees love to shop there. At the mall, it’s one of the busiest stores around.

So what’s their secret? Do they operate like other popular clothing retailers, or is there something else happening behind the scenes?

Turns out, Zara operates in a completely different way from other clothing companies.

The best way to describe how Zara operates is ‘fast’.

Normally, clothing brands release the same collections in one year: one for spring/summer and another for fall/winter. Traditional retailers try to predict fashion trends a year in advance.

They spend a large amount of time and resources designing, planning, and launching their collections. Unfortunately, this presents a high risk for brands.

If the designs resonate with buyers, then sales go well. But if they miss the mark, it means markdowns and cutting into profits for the season. Zara eliminates this risk with its approach.

Zara designs, produces, distributes and sells its collection in only four weeks, as opposed to the several months that its competitors take to do the same thing. This also means updating the stores with two new designs a week and keeping low stock levels.

As a result, Zara’s approach has a few benefits:

• Less clothing in stock means lower storage costs and fewer markdowns.
• Shoppers will frequently stop by Zara to see fresh and trending designs.
• Since merchandise is limited, there’s a…