King of clothes: how the founder of Zara became the richest man in the world

 Spaniard Amancio Ortega topped the rating of the richest people in the world according to Forbes on September 9. Zara chain, founded 40 years ago by the son of a railway worker and a maid, is steadily increasing profit.
16.09.2016
RBC
Origin source
Status of the founder of the fashion industry's biggest group of companies Inditex, Zara brings together brands, Massimi Dutti, Pull & Bear, Stadivarius, Bershka, Oysho, Uterque and Lefties, Forbes estimated at $ 78 billion on 9 September. At Gates appeared on the $ 100 million less. "It is easy to get it - easy go - commented castling journalist Dan Alexander Forbes. - The states and Ortega Gates will continue to fluctuate up and down as the rise and fall of their companies' shares. "

Ortega stayed at number one for two days, again losing all the same Gates. Nevertheless, it remains the third consecutive year in the top three leaders of the rating, and his empire - a leader in its industry. Chain stores Zara, founded 40 years ago, the son of a railway worker and maid, stretches across the globe, and his concept of "fast fashion" forces the oldest fashion houses to change their business strategies.

Proud baby

Amancio Ortega was born in March 1936 in the village of Busdongo de Arbas has a population of 60 people in the northwest of Spain. He was the youngest child in a family of four children. The family was very poor. "My father's salary was 300 pesetas (less than € 2 at the moment). Do not say that in those days it was not so bad. The family had three children: Anthony Senior, Pepita, the only girl, and I, baby. And that salary is never enough to stretch to the end of the month "- he shared his memories with his close friend, the author of his biography" The phenomenon Zara »Covadonga O'Shea.

In his first work Amancio left in 13 years. By this he pushed the case at the grocery store, where he once came with his mother for food. "There was such a high counter, I did not see who was talking with her mother, but I heard a man's voice, which said that I carried in themselves through time and never forget. "Josefa, I'm sorry, but I can no longer sell you goods on credit. I was shocked, "- he recalled. As O'Shea writes in Ortega since childhood was a very strong sense of pride and humiliation experienced prompted him to leave school and begin to help the family.

Ortega got a job in a small shop-studio Gala, was running for the entire store. "I washed, packed, unpacked and interacted with customers when there were a lot of people. It seems that our customers have told me the boss, because noticed that since I just came back, I applied to work very seriously and responsibly ", - recalled Ortega.

The atmosphere that prevailed in the studio, shaped his attitude to work as an activity in which meaning is by no means only in generating profits. "I keep as a treasure, the first contract from Gala», - he said.

The store is still operating. "He seems frozen in time - shared his observations of the author of the biographical book" Zero to Zara »Csaba Blanco. - Plaid shirt, caps for fishing and wool sweaters - they are still selling the same things, and Amancio - Mr. World. "

15-year-old manager

After working at the Gala year, Ortega got an assistant in a high-end shop - La Maja, which at that time worked his older brother and sister. He was quickly promoted to manager, and in his place came 16-year-old Rosalia Mera Goyenchena, whom he married two years later.

Having enough experience Amancio retired, and sentenced to 17 years, in 1963, he founded his first company - GOA Confessoines (Ortega's initials backwards). Start-up capital amounted to 2.5 thousand. Pesetas (less than € 20 to date).

In a small workshop for women sewed quilted bathrobes. As O'Shea writes, bathrobes sold very well. Reinvest most of the money earned, Amancio put the studio on his feet and found a mediator, who bathed him all the goods produced. The aim Ortega was a big production. As he explained Blanco in his book, in Galicia in connection with a small selection of work thousands of men working in the sea, while their wives stayed at home. "For a small fee, they are very well sewn," - he told Ortega. He began to organize thousands of women in the sewing cooperatives. It was easy. "We knew Amancio. He was very close to the workers, "- one of the participants described their impressions of the cooperative work at Ortega.

During the ten years of Ortega established links with the Catalan textile workers, who sold his cloth, without intermediaries, increased its production capacity and has collected a large customer base. In the early 1970s he started spread and hired a team of designers, and in 1975 opened in the center of A Coruña its first retail store. He wanted to call it of Zorba, after a character in the movie "Zorba the Greek", played by Anthony Quinn, but to get the rights to use the name of the character failed. The store called Zara.

"Fast" mode

Zara - the main and most recognizable asset Inditex group, which was in 1985 on the basis of GOA, and today is the largest group of companies in the fashion industry.

The success of the strategy has brought, contrary to most of the principles, which are on the market supply chain. Zara operates without intermediaries and agents. Unlike many other suppliers of clothing, using outsourcing, manufactures its clothes mostly on their own. The company itself is engaged in the purchase of materials, design, storage, distribution and logistics. "Our business formula is based on a very small generation of fake. We prefer to earn less on each thing, but to sell them much more ", - explained Ortega.

The main thing - speed on the new model, including design, production and delivery to stores, laid no more than two weeks. over a hundred designers work in Zara. Another difficult for companies to sustain this race: to develop only design sometimes takes months, new collections on the shelves of maybe two or three times a year. For retailers set a rigid schedule of placing orders and receiving goods, the delivery of the stores should not go more than 48 hours. Zara does not strive as much as possible to increase the production volumes: company distributes new models in limited quantities, and twice-monthly updates. Even the most popular models do not stay on the shelves for over a month, and large areas in shops Zara intentionally left blank. Thus heated customer interest: as stated in the book "Business Genius: more inspiring approach to entrepreneurial growth", while other clothes shops customers visit an average of four times a year, Inditex stores, they are nearly 17 times a year. Zara in fact become synonymous with retailers used the concept of "fast fashion".

Due to the high attendance at Zara there is no need to pledge significant resources on advertising. As a result, Zara steadily ahead of competitors in terms of net profit. In 2015, Inditex net income increased year on year by 14.8% to $ 3.2 billion For comparison, the net profit H & M in 2015 to $ 2.5 billion (up from $ 2.4 billion a year earlier), GAP - $ 920. million (US $ 1.3 billion a year earlier). Overall, Inditex group the last ten consecutive years only increases profits and revenues. In 2015, revenues amounted to $ 22.8 billion.

"The Spaniards turned the numbering a hundred years dvuhsezonny cycle in the fashion industry - said the editor of the London fashion magazine Tank Golsorhi Masood, who was quoted by New York Times. - Now, about half of the high fashion segment companies such as Prada and Louis Vuitton, producing four to six collections a year. It is because of Zara ».

Communication and Control

Developing supply chain, Ortega made a bet on vertical integration - an unpopular and generally difficult to achieve a model for the fashion industry. He built a chain reaction with the scratchpad and distributed control of nearly all of its units.

The system is based on three fundamental principles, says Harvard Business Review (HBR). The first - in the architecture at Zara communication system provided for tracking products at all stages of production and sales in real time. At Zara uniform design and production center [located at the headquarters in La Coruña]. Typically, after the start of the next season of clothing manufacturers allow retailers to correct no more than 20% of the volume of orders, but the communication system at Zara can correct up to 40-50% of initial orders. This helps to avoid over-production and sales.

In addition, the Zara is the owner of almost all the stores where its products are sold. Competitors generally work on a franchise system, which limits the impact of the manufacturer on the state of stocks in retail. Zara Guide itself sets the rhythm of the necessary flow of information and products.

Finally, the company, unlike many competitors owns its own factories for the production of clothing (in 2015 there were 6.3 thousand. Worldwide), self-sufficient in textiles and dyes. This allows you to control the amount and timing of release and remain independent from third-party suppliers, says HBR.

unsociable enthusiast

All the time Ortega was as head of the company (he left it in 2011 at the age of 75 years), it is preferred to control all the processes occurring in it. Even holidays, including New Year's Eve and day of his birth, he spent at work. "If I want all continued to function, I have to be at his post as usual," - he explained O'Shea.

Most of all, he recalled, he liked to spend time in the design department - a huge room, littered with drawings and a variety of clothing, including well-known brands. "We should be inspired by that love and that people are looking to the international market! Here we study the garments apart, draw sketches, gather again, adapt to our own style, produce and send to the market ", - explained O'Shea Ortega. He did not have its own office. "My job - this is not the paper work, and work at the factory", - explained the businessman.

Until 1999, only a photo with his image was a photograph on the identity card. "I'm trying to be quiet, to be a simple person, to be able to go wherever I want to drink coffee on the veranda at the Maria Pita Square, the traditional location in La Coruña, or take a walk with a cocktail on the street, where no one knows, who I am "- he says.

Great forger

The Zara has a special department of the dozens of people who are dispersed in the New York clubs, the business districts of Paris, bars and fashionable streets of Spain. "We call the procedure for checking the analysis of trends in market conditions in the target audience" - said Ortega.

Representatives attended the Zara fashion shows and copied the models of clothes, and then slightly modified models of luxury brands appeared on the shelves of Spanish stores. The company has repeatedly been accused of plagiarism, but every time Zara claimed that no copies and catch trends. In particular, in 2008 with Zara unsuccessfully sued French fashion house Christian Louboutin, who claimed that the Spanish company had violated its trademark, releasing shoes with very high heels with red soles (called in labutenami people). Zara shoes at that time were worth no more than $ 100, while the cost of shoes Christian Louboutin pair often exceed $ 1 thousand.

In July 2016 the Spanish company accused of plagiarism American illustrator Tyusdey Bassin, on which the statement, fashion brand has copied her illustrations. Zara has initiated an internal investigation of the case and suspended the sale of items with pictures, like the work Bassin.

As he wrote Fortune magazine, similar complaints were made by 11 other designers. One of them, Adam Kurtz, posted on the Internet the results of a comparative analysis of their works and Zara. The names of other designers of the magazine did not name.

continuous growth

In 2001, Inditex has entered the IPO on the Madrid Stock Exchange. The company was valued at $ 9.7 billion. Since then, its market capitalization actually grew steadily, and on September 15, 2016 the value of the group was $ 111.5 billion. As Forbes notes, the company managed not only to survive the global financial crisis, but continue to improve financial performance . From 2009 to 2014, according to the magazine, Ortega has earned $ 45 billion for the shares owned by him. According to Inditex and Bloomberg terminal at the end of 2015 Ortega owned 59.3% of its shares worth $ 66 billion.

Even when I was a nobody, and I have almost nothing, I dreamed of the development and growth. Growth - a survival mechanism. Without growth, the company dies. The company must live for the sake of people who invested in its growth. And now, when I was 72, I feel the same. You can not cease to grow and develop, "- says Ortega.

Ortega was always focused on the development of their companies. In 1988, Zara has made expansion abroad by opening the first store in Portugal, in 1989 - in New York, in 1990 - in Paris, and in 2003 - in Russia.

Today Zara chain has more than 2.1 thousand. Stores in 88 countries around the world. In Russia - 91 store Zara. This is one of the key markets for Inditex. Even in the crisis of 2014-2015, the country has several new Zara stores. At the end of 2015 Russia was the third market for Inditex in the number of stores (after Spain and China).

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