INDITEX
Mariela Georgieva, 13114101
Kristina Boseva, 13114110
TABLE OF CONTENTS
I. Introduction, History and Background
II. Financial Performance
III. Brands
1. ZARA
2. Bershka
3. Stradivarius
4. Pull & Bear
5. Massimo Dutti
6. Oysho
7. Zara Home
8. Uterque
IV. Suppliers and Production
V. Retailing
VI. Swot Analysis
1. Strengths
2. Weaknesses
3. Opportunities
4. Threats
VII. Porter's Five Forces (Competitive Analysis)
I. Introduction, History and Background
Industria de Diseño Textil S.A., also known as The Inditex Group, is the world's leading and fastest growing fashion producer and retailer, headquartered in Arteixo, Spain. It began its life in 1963 in a small workshop for women clothing. The founder of Inditex is Amancio Ortega – the richest man in Spain and the world's third richest man. The company started by introducing a new concept of fashion design: instead of long-lasting pieces of clothing, they offered a great variety of high quality products at affordable prices. Inditex has always been focused on listening closely to its customers in order to offer them the fashion they desire. This was exactly the reason that gave rise to Inditex to launch the Zara brand and open the first Zara store in 1975 in La Coruña (Galicia, Spain). In the beginning, the brand Zara became famous by offering clothing at low prices and then slowly worked its way up to match the quality of today's best brands. The international expansion of the group began in 1988, with Inditex opening its first foreign store in Oporto, Portugal. Today, Inditex's stores can be seen in places like New York's Fifth Avenue, Milan's Piazza Duomo, London's Regent Street and Oxford Street, Frankfurt's Zeil, Shanghai's Nanjing West Road, etc.
In May 2001, Inditex turned into a publicly traded company, being valued at $8 billion.
The group Inditex possesses the following brands: Zara, Pull&Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home and Uterqüe. These brands sell high quality fashionable clothes, accessories, cosmetics, etc. All products meet the most rigorous health and safety standards and each store is created and managed under eco-efficient criteria. For Inditex the customer service and the customers' satisfaction are of greatest importance. For that reason they have a workforce of about 137,000 employees and their logistics system, which is centred in Spain, delivers new products twice per week to all of their stores around the world in order to meet their customers' needs.
The most important factor of the Inditex's supply chain is the concentration of its suppliers. They are all located near Spain and very close to the manufacturing plants, the Head Office and the logistics platforms. Although most manufacturing is done in low cost countries like Morocco, China and Turkey, much production continues in Spain and Portugal, particularly for the Zara brand.
Nowadays, Inditex is present in 88 markets in five continents, with more than 6,680 stores. The Group is committed to its customers and more than 128,000 employees are focused on the customers in order to give them what they want and satisfy their needs.
II. Financial Performance
Inditex has had a very good financial performance in the past 8 years. The company has seen a stable sales growth of around 10% each year from 2007 to 2014. The cash flows of the company have also been steadily increasing during the same period of time. The company has been taking care of its shareholders by paying them dividends, which have increased by 0.13 in 2007 to 0.208 in 2014. It is really important to consider the fact that the company has been expanding and opening new stores in different countries all over the world. As a matter of fact, the stores have almost doubled, from 3,691 in 2007 to 6,683 in 2014. Overall, paying dividends and expanding by opening new stores shows continuous improvement in the company's operations, which gives us an indication of continuous improvement and growth in the future.
Inditex is an extremely healthy company with strong financials allowing continued self funded expansion. Net sales for Inditex reached $18.1 billion in fiscal 2014, an increase of 10% from 2013.
III. Mission Statement, Vision Statement and Values
1. Mission statement
" Inditex is one of the world's largest fashion retailers with eight brands and over 6,460 stores throughout the world. We are inspired by a responsible passion for fashion and, above all, by our customers"
2. Vision statement
" At Inditex we are a team of over 128,000 critical-thinking professionals. Working on the basis that there is always room for improvement is what enables us to continue to grow. We are demanding and non-conformist. We see problems as opportunities and our most important mission is to search for solutions to these issues. We have faith in every individual and create a work environment in which everyone is heard and anyone can voice their ideas. We believe that if we are to continue to evolve we must all have a say in how to do things better. We like people who believe they can always learn something new"
3. Values
" Sustainability forms the basis of all our decisions. It is ever-present in all our processes, inspired by our commitment to selling ethical, safe and community- and environmentally-friendly products. We call this philosophy, which permeates everything we do, Right to Wear, with capital letters. It constitutes our quality seal. Right to Wear is an ambition and an everyday reality. Its purpose is to guarantee the quality and sustainability of all our products and business activities. To this end it is subdivided into specific specialist initiatives:
Clear to Wear and Safe to Wear: These standards guarantee that all the products we sell comply with the most stringent health and safety standards.
Teams to Wear: This sums up a corporate culture and philosophy that fosters business ethics, respect for others and their diversity, honesty in everything we do, transparency and professionalism.
Tested to Wear: A production process audit and monitoring methodology designed to ensure that all our products are made upholding ethical criteria and human, labor and environmental rights.
Social to Wear: Social investing initiatives with which we strengthen our ties with the communities in which we do business.
Green to Wear: The strategy designed to ensure we make and sell environmentally-friendly products."
IV. Brands
Zara
Zara opened its first store in the town of La Coruña, Spain in 1975. Zara has over 2,000 stores strategically located in leading cities across 88 countries. Some people describe Zara as "the most innovative and devastating fashion retailer in the world". Zara has also been described as a "Spanish success story" by CNN.
Zara provides a complete fashion solution for women, men and children. It offers lots of different styles – from daily clothes to casuals and formals. The customer is at the heart of Zara's business model, which includes design, production, distribution and sales through an extensive retail network. Zara's designers and customers are interrelated, because customers buy and give their opinions and in that way specialists receive a constant feedback, which in turns inspires and gives new ideas to Zara's creative team that includes over 200 professionals. Zara is always striving to meet the needs of its customers at the same time as helping to inform their ideas, trends and tastes. The idea is to share responsible passion for fashion across a broad spectrum of people, cultures and ages.
Zara's business model is characterized by a high degree of vertical integration in comparison to other models developed by its international competitors. It covers all phases of the fashion process: design, manufacture, logistics and distribution to its own managed stores. It has a flexible structure and a strong focus on customer in all its business areas.
Zara's team of designers are continuously assessing the customers´ preferences, wishes and demands offering each year 10,000 different models for sale in its stores. The availability of the factories owned by the company and the wide range of highly experienced external suppliers allow Zara to manufacture a model and to have it for sale in its stores worldwide within the average term of approximately 14 days.
Bershka
Bershka was created in 1998 as a new brand of the Spanish group Inditex, with a new retail format that responds to the demand of young people, who are interested in and highly aware of new trends. The company has over 910 shops in more than 64 countries, with sales representing 10% of the total revenue of the group Inditex. The company's business encompasses the design, manufacture, distribution and sale of fashion in the shops.
In order to always have the latest trends at the shop, Bershka uses its flexible business model to adapt to any changes occurring during the seasons, responding to them by bringing new products to the shops within the shortest possible time. The models for each season are developed entirely by their creative teams, who take as their main source of inspiration the fashion trends prevailing in the market, through information received from the shops, as well as the customers themselves.
The Bershka design team consists of more than 60 professionals who are continuously assessing the needs, desires and demands of consumers, and offering more than 4,000 different products in their shops each year.
Bershka selects the best commercial sites in each city and positions itself in the most notable areas of the main shopping centres. Music, screens, projections, modern graphics, fashionable colours, contemporary furniture design, state-of-the-art lighting and so on, are all features that turn Bershka into a shopping 'experience'. All the shop's elements are designed by the Bershka image team and are updated every season.
Like Zara, Bershka attaches great importance to its windows, displaying the most important items of the collection and the predominant theme to its public. The windows are constantly being renewed every season and the garments match the style of the shop's interior, reflecting the trends of the whole season.
The area dedicated to women's wear is the most important. This section has two product lines: Bershka and BSK. The first focuses on the latest fashion and includes the leading trends. It has a wide range of jeans wear, eveningwear, casual wear and latest fashion-wear.
BSK is the brand for younger people, and always caters to the interests and needs of this public by basing its collection on their taste in music, their idols, rock stars and so on.
The men's section offers much more than fashionable jeans wear for young people. This product line offers casual, sports and fashion wear as well.
In addition, apart from the wide range of clothing, Bershka also offers a wide range of accessories and footwear.
Stradivarius
The brand Stradivarius was created in 1994 in Sabadell, Spain and in 1999 was acquired by the group Inditex. The brand has an innovative concept in fashion targeting young women between the ages of 20 and 35.
Stradivarius designs thousands of garment and accessories in Spain that they distribute exclusively in their 871 stores in over 57 countries worldwide. They believe that one inspired girl can change the whole world. The brand has a workforce of more than 7,300 employees who work passionately and give their best putting their personal mark on the Stradivarius brand.
Pull & Bear
Pull&Bear started up in 1991 with a clear international mission and with the intention of dressing young people who are engaged with their environment, who live in the community and relate to each other. Young people who have a casual dress sense, who shun stereotypes and who want to feel good in whatever they are wearing. To meet their needs, Pull&Bear takes the latest international trends, mixing them with the influences that are seen on the street and in the most fashionable clubs, and reworks them according to their style thus turning them into comfortable and easy to wear garments, always at the best prices.
Pull&Bear evolves at the same pace as its customer, always watching out for new technologies, social movements and the latest artistic or musical trends. All of this can be seen reflected not only in its designs but also in stores. Inspired by the legendary Californian city of Palm Springs, the product lines are constantly being updated. All stores worldwide receive new merchandise twice a week.
Pull&Bear brings the latest international trends to the street in the form of easy, comfortable and casual clothes. The Pull&Bear collections are conceived with the idea of dressing men and women with a young mindset, taking into account that age is not an obstacle when choosing our wardrobe.
The textile collection is backed up by the footwear, accessory, jewellery, fragrance, headphones, long skates and sunglasses lines.
In only 23 years, Pull&Bear has opened 853 stores in the main streets and shopping centres in 63 markets (plus a further 5 markets where it operates exclusively online). A trend towards fashion globalisation that Pull&Bear has included in their new collections has facilitated the rapid growth in points of sale. All of this is thanks to a young team of over 9400 professionals who, with their enterprising spirit, involvement and enthusiasm, have succeeded in making Pull&Bear a reality.
Turnover at the close of 2013 stood at 1191 million euros, a 10% rise over the figure for 2012. More than 79 million items were sold in total, including over 21 million T-shirts.
Massimo Dutti
Massimo Dutti was founded in 1985 and was acquired by the Group Inditex in 1991. Nowadays, it has over 770 stored in more than 70 countries.
Massimo Dutti offers more tailored, sophisticated clothing that targets men and women in their mid-20's and higher. This brand occupies smaller prime retail locations, and is the group's most upscale format with a strong emphasis on design and quality fabrics. Despite its comparitively higher price point, the Massimo Dutti concept adheres to the same flexible distrbution model as the other Inditex brands.
The brand was originally aimed at men's fashion. Starting in 1992, women's fashion was launched in all its dimension: from the most urban lines to the more casual. With this, Massimo Dutti has consolidated at all levels as a group with national and international growth, which today has over 4,000 employees.
In 2003, the brand launched a children's fashion range under the trade name Massimo Dutti Boys & Girls. This line is being implemented progressively in stored in several countries, where the stored are large enough to house its specific space.
Since September 2006, the company has been fully designing and marketing the following lines:
Men: Men's wear, accessories, soft, personal tailoring, fragrances
Women: Women's wear, accessories, soft, fragrances
Boys & Girls
Oysho
Inditex opened their lingerie and loungewear retail format "Oysho" in 2001, now with more than 530 stores in 35 countries. Oysho has slowly started to also offer casual outerwear, accessories, and sportswear. As part of the Inditex Group, Oysho shares the same fashion management strategy and philosophy and collections are renewed as fast as trends, thereby providing customers with a quality design product. At our head offices in Tordera (Barcelona), a team of designers of different nationalities, who are specialist in their product segment, work each season to develop new collections for women and girls. At Oysho customers can find fun, sexy and feminine underwear, casual clothing, comfortable and informal clothing and original accessories.
Zara Home
In 2003 Inditex made its first move outside of fashion retail when it launched Zara Home. Zara Home sells constantly updated home décor and linen reflecting the latest trends in more than 440 stores in 48 countries. Inditex's intention was to capitalize on its existing flexible sourcing model to introduce more "fashion" into a traditionally slower moving market. Stores are laid out such that different areas display different themes rather than different product categories, making shopping more about a complete vision of trends and styles. Zara home is constantly refreshing its product range throughout the year.
Uterqüe
Uterqüe was set up in 2008 with a clear aim: to restore accessories to their rightful place in women's wardrobes. It is a Latin word that means "one thing and the other" or "both", and which nicely sums up the philosophy that accessories are the perfect complement to a well-rounded look.
Since it was created, the company has evolved to include a carefully selected Ready-to-wear collection in which quality materials and attention to detail are of the most importance.
Limited-production collections, and a manufacturing process that is controlled from start to end, result in garments that are made to stand the test of time and are destined to become must-have items for any woman who values quality above all else.
Since 2008, Uterqüe has been consolidating its position in the domestic and international market with more than 100 stores in 19 countries. The company also has an online boutique with a presence in 11 countries.
V. Suppliers and Production
Inditex's supply chain is uniquely concentrated and over 50% of production takes place in close proximity to the Group's' head offices and logistics platforms in Spain. This hallmark flexibility extends to Inditex's suppliers, which have grown hand in hand with the company.
This concentrated group of suppliers located near to Spain, is the most important component of a supplier base that numbers over 1,500. The remaining suppliers are based in various global markets and this diversity provides the Group with a variety of textile manufacturing specialties. All of the Group's suppliers are bound by the social and environmental responsibility values that define Inditex and are enshrined in its Code of Conduct for Manufacturers and Suppliers.
However the company's efforts go beyond mere compliance, a sustainable and robust supply chain is only achieved with constant improvement, which can solely be articulated through social dialogue and coordination with the company's different stakeholders. In Inditex this dialogue is developed through its own tool, the clusters or groups of suppliers, and also through the Framework Agreement with IndustriALL Global Union, the industry's international association of unions, which gives rise to numerous joint actions. This is complemented by Inditex's active participation in international platforms such as the Ethical Trading Initiative and the United Nations Global Compact.
VI. Retailing
Business Model
Inditex's success is based upon its refined and fast supply chain responsible for providing its eight retail formats with a high turnover of fashionable clothing and accessories at affordable prices and in low quantities. Through this process, Inditex avoids large inventory and risk, and promotes frequent buying. The fashion items found in most of Inditex's retail formats are highly imitative of designer styles, which Inditex scouts on runways in Paris and Milan and in high-fashion catalogues. Inditex does not employ well-known designers but instead draws from a team of 300 to come up with products that mirror these trends in more affordable fabric, which it manufactures through a partially vertically integrated process that occurs largely in close proximity to headquarters. Franchising is not a part of Inditex's overall corporate strategy, and it is only utilized in markets with strict foreign regulations. The company currently owns 88% of its retail stores. Inditex is also unique in that it has no advertising budget. While Gap, H&M, and the industry spend 5, 4, and 3.5 percent of revenues storefronts in chic locations and lets this strategy do the signalling to customers, supporting a high-end image despite their lower price point.
The Inditex corporate strategy is to provide general back-office support to its retail concepts, and assist with international expansion and new concepts in existing markets. Each retail format capitalizes on the fast fashion model, while every concept is managed independently and has control over its own design, purchasing, and logistics. Each of Inditex's eight retail brands targets a different customer demographic. This segmented marketing approach allows Inditex to capture a larger share of the consumer market, while each individual format can specialize. The store offerings and décor of each brand vary, and are tailored to appeal to different age groups and styles.
Supply chain management and a perfect logistics system are the key to Inditex's business strategy and success. The secret of fast fashion retailing is the ability to generate quick turnover of merchandise in the stores. Inditex creates new products regularly and makes deliveries of small batches of new goods frequently. New fashion designs are shipped at a rapid rate, there are few basics and reorders are rare. The customer knows that he/she should buy an item he/she likes when he/she sees it, because it may not found it later. The amazing thing about the brand is that it needs only two to three weeks do design and manufacture a new product and then to distribute it to the stores all around the world. Designers develop new models daily – sometimes three or four a day – which are then reviewed and are put into production. It is no wonder that versions of new designs by fashion designers in Paris are in Zara stores within a very short time of appearing on the runway. To work well, this fast fashion system depends on a constant exchange of information throughout every part of the supply chain – from customers through managers to designers and buyers of raw materials.
The CEO of Inditex - Jose Maria Castellano Rios, says the following: "The original business idea was very simple. Link customer demand to manufacturing, and link manufacturing to distribution. That is the idea we still live by." Inditex's founder, Amancio Ortega, saw the great importance of having retailing and manufacturing closely together in the apparel industry and from his view. At the heart of Inditex's success is a vertically integrated business model spanning design, just-in-time production, marketing and sales combined with a strong focus on the customer. This gives the group more flexibility than its rivals have to respond to fickle fashion trends. Unlike other international clothing chains, such as Hennes & Mauritz (H&M) and Gap, Inditex makes more than half of its clothes in-house, rather than relying on a network of disparate and often slow-moving suppliers. The company has been able to achieve excellent financial status due to its core competencies that provide the chain with a competitive advantage over traditional retailers in the industry.
Starting with basic fabric dyeing, almost all Inditex's clothes take shape in a design-and-manufacturing centre in La Coruna, with most of the sewing done by seamstresses from local co-operatives. Designers talk daily to store managers, to discover which items are most in demand. Supported by real-time sales data, they then feed repeat orders and fresh designs into the manufacturing plant. This, in turn, ships the desired items directly to the stores twice a week, eliminating the need for warehouses and keeping inventories low (see chart).
The result is that Inditex can make a new line from start to finish in just two to three weeks, against an industry average of nine months.
The secret to Inditex's success is the vertical integration – from design through manufacture to retail. Unlike companies like Gap and H&M that purchase their clothes from suppliers, Inditex makes most of its own. 60% of its goods are made in house. This helps the company manage its inventory with extreme efficiency. It also allows the company to respond to seasonal and fashion changes very quickly. While Gap and H&M may take up to nine months to introduce a new line of clothing, Zara can do it in two to three weeks. The firm can respond quickly to any market contingency.
Twice a week, a store managers send an order to HQ, which is based on the sales data for the store but also on the customer feedback about what they like and don't like. The commercial team will then compile the order, adding in new products and balancing out demand with other stores, before sending it to Inditex's manufacturing hub. Within two days, the order has reached the store.
At the same time, the commercial team is a liaising with the in-house designers, who they sit next to in the offices at Inditex HQ. When sales trends are identified – either from evidence in stores or the catwalk – the commercial team will work with the designers to develop new products to meet the trends. New fashions are then produced in relatively small batches, so flops can be disregarded after their first appearance and hits can be followed quickly by similar incarnations.
Logictics
Inditex takes advantage of its centralized logistics and the ability to make decision in a very coordinated manner. All of Inditex's logistics centres, which in turn manage all shipments to all stores around the world, are located in Spain, close to the head offices of each of the Group's brands. Inditex controls and optimizes across different steps of the supply chain, not within them, even though it may increase costs at some steps. Inditex ara sticks to a deep, predictable and fast rhythm, based around order fulfilment to stores.
Each outlet sends in two orders per week on specific days and timing with shipments from Spain, which are prepared during the night. Trucks leave at specific times and shipments arrive in stores at specific times. Garments are already priced and have labels depending on the county of destination. Deliveries arrive one to two days after ordering and typically it takes the company up to 24 hours to deliver products in Europe and up to 48 hours in the USA and Asia.
As a result of this clearly defined rhythm, not only every stage of the supply chain – from design to procurement, production, distribution, and retail – know their activities. Even customers know when the shipments arrive and when to visit the store for new fresh designs.
Technology
Information and communications technology is at the heart of Inditex's business. Information of customer needs and demands flows daily and is fed into a database at head office. Designers check the database for these dispatches as well as daily sales numbers, using the information to create new lines and modify existing ones, thus designers have access to real-time information when deciding with the commercial team on the fabric, cut, and price points of a new garment. In order to make the product design and approval process, Inditex warehouses the product information with common definitions allowing it to quickly and accurately prepare designs, with clear-cut manufacturing instructions. Inditex's state-of-the-art distribution facility functions with minimal human intervention.
Inditex spends only 0.5% of its total revenue for Information Technology systems. The company uses the VMI (Vendor-Managed Inventory) – a model for optimizing Supply Chain performance in which the manufacturer is responsible for maintaining the distributor's inventory levels. The manufacturer has access to the distributor's inventory data and is responsible for generating purchase orders. In the case of Inditex, which is vertically integrated, the information about inventory level is transmitted from stores to headquarters and distribution centres. The head office receives electronic data (usually through EDI – Electronic Data Interchange) that tells them the sales volume and stock levels. The head office can view every item that is sold as well as true point of sale data. Through the VMI system, stores automatically send their orders and after that professionals from the head office analyse the data and calculate what will include the next shipment. These calculations are based on sales, inventory levels and each SKU available.
Inside the factories, IT is used for the production of goods such as large computer-controlled cutting equipment that cuts fabric in pattern using the most of all the fabric available. Distribution centres uses much of automation and computerization as well. Orders that come into the distribution centres are process by computers which locates the products in the warehouse and supplies such orders. Applications used in the distribution centres were created by the IT department exclusively for the use of Inditex.
Advertising
Inditex uses no advertisement strategy. Instead of spending money on promotion and advertising, the company focuses heavily on their product, place and pricing. It turns out that Inditex's products are what keeps customers coming back to the stores. Products are advertising themselves alone. The company, however, believes that its shop windows are all the advertising its needs. The philosophy seems to have worked. The company's success is a proof that it is still possible to build a massive brand by doing no more than meeting customer's needs and satisfy them.
VII. SWOT Analysis
1. Strengths
The success of Inditex as the world's leading fashion retailer is built upon the parent company's numerous strengths, which also make it a formidable opponent within the market.
Vertical Integration
The fast fashion industry is highly competitive. Product life is short and must be differentiated from competitors in order to build brand image. Firms in this industry also largely compete on price, which intensified as companies began to utilize low cost outsourcing. Today, competition has shifted and is also dependent on quick response time. Therefore, the vertical integration of Inditex gives it an advantage in implementing processes that shorten the production cycle. Competitors more highly dependent on third party negotiations are less nimble and flexible in their response time. Inditex employs over 1,000 people in its central product department, has 13 textile manufacturing subsidiaries in Spain, 11 logistics subsidiaries, eight distribution centers, and 6,009 retail stores. This means that Inditex staff is involved in each step of the value chain, spanning design to retail.
Brand Name
The high investment in the Zara brand name is an asset for Inditex, as well as their other retail formats through association. For example, customers who correlate Zara with desirable, affordable, must-buy products are more likely to shop at Zara Home when searching for home décor because of the positive name association. While Inditex only spends 0.3% on marketing, its high investment in real estate and storefronts with uniform Prada inspired layouts gives the Zara brand a unique image as high-end despite its lower price point. Signaling, word of mouth, and free publicity due to the company's rapid success have continued to generate brand strength. The name Zara itself generates a buzz among shoppers who return frequently, with loyal customers even referring to delivery day as "Z-day." In some ways, Inditex has not only created a strong brand name with Zara, it has created a culture.
Reach
Inditex has a broad reach, both globally and within the industry. With stores currently in 86 countries, Inditex captures a wide range of global shoppers. This global reach also minimizes the risk associated with regional economic fluctuations.
Real-time Data and Communication
Inditex maintains a strong link between product teams and store staff. Each retail format's head office is home to a product team of designers, merchandisers, and store liaison managers that work together to develop new products and analyze current sales data. Designers use a variety of information about customer preferences, including scouting runway shows in Milan and Paris to develop new products. Store employees are then tasked with soliciting feedback from shoppers about what they'd like to see more of, done differently, in different colors or necklines, and so on. Stores send daily sales totals, customer feedback, and detailed information about what items sold broken down by color and size to headquarters twice a week. Store managers place orders twice weekly based on what they feel will be successful in their specific store, and designers review both formal and informal feedback daily. Because Inditex monitors its sales at the store level and adjusts accordingly, each individual store could end up with different product offerings at the end of a season. In this way Inditex again reduces inventory risk, and makes customer decisions and ideas the central element of its supply process. By exactly matching supply to changing and varied customer demands, Inditex's business model is noted as being the "democratization of fashion." While Inditex is heavily reliant on such communicative feedback and data analysis, it keeps its technology simple, "even a little old fashioned." Managers make decisions about suppliers and external providers informally, without the need for supply chain software, and no permanent networks link stores, headquarters, factories, and distribution centers. Inditex has honed a highly efficient technological response system that produces results, while spending five to ten times less on IT costs than its rivals.
2. Weaknesses
Underdevelopment of non-Zara Brands
Currently, Zara accounts for 65% of Inditex's total revenue, and the company's other 7 retail formats make up the rest. The company's next biggest sales generator is its Bershka brand, accounting for approximately 10% of sales. However, while there are roughly twice as many Zara stores as compared to Bershka stores, Zara generates about 6.5 times more sales. While the Zara brand has become well known globally, the other 7 are more limited in this regard. At this point it appears that Inditex has bet much of its success on one concept, and while this strategy doesn't currently seem problematic given Zara's prominence and success, the fashion world is fickle and can change quickly.
Overdependence on European and Domestic Markets
All of the company's manufacturing and logistics centers are located in Spain, and the "proximity" sourcing which allows its retailers to respond so quickly to changing demands is based on proximity to its Spanish headquarters and distribution centers. Inditex ships clothing to its stores either by truck or plane in under 48 hours, and the costs of shipping to different continents so quickly are higher, a cost which the consumer will partially share, making price points less competitive. As Inditex continues to pursue non-European markets, it is moving more of its business transactions further from this central location, though it is this centrality that generated much of Inditex's success. As the pace of its global expansion away from Europe quickens, Inditex must be acutely aware of the effects this distance will have on its costs and speed of distribution.
3. Opportunities
Online Sales
Inditex is continuing to increase its online presence, with both Zara and Zara Home having presence in about 20 key markets. There is still much room for continued roll-out, especially in the Americas for Zara, and further development of the other retail brands. All of Inditex's additional online platforms such as YouTube channels, apps, social media, and newsletters are intended to both facilitate online retail and allows customers to explore look books and product ranges.
Expansion
A study by Deutsche Bank concluded that 6% to 9% growth in Inditex's retail space should be sustainable for the next 10 years, given the company's financial strength, little debt, and strong cash reserves.
Inditex is currently favoring expansion within China. CEO Pablo Isla claims "going into China is like beginning again in Europe for Inditex." The company opened 179 new stores in Asia in 2011, 156 of which were in China. By the end of 2012, Inditex had increased the number of Chinese stores to 400.
4. Threats
While the state of the European and Spanish economies continues to pose an overarching threat to Inditex due to its strong dependence on these markets for the majority of revenue, there are three more Inditex specific threats to be mindful of.
Fast Fashion Fatigue
Fashion is fickle, and trends can change overnight – trends that not only influence the clothing that we buy, but also how we buy it. In the industry, fast fashion has been referred to as "McFashion," or "throw away fashion," and criticized for promoting "today's treasures, tomorrow's trash. " Today's young consumers are part of a generation highly concerned with sustainability, the environment, and green values, and are slowly becoming aware of how their fashion choices can support sustainable progress as well
Increased Competition
The success of the Inditex business model has created increased competition as other retailers adjust their own processes to more closely resemble the quick time-to-market and just-in-time delivery utilized by the industry leader. H&M, the second largest global retailer for example, has been incorporating three-week turnaround items into their more traditional seasonal lines, and their trendy, low-priced products draw some of the same core demographic as Zara, Bershka, and Stradivarius
Growing More Quickly than the Business Model
As Inditex continues to expand outside of Europe, they are moving farther away from their centralized design, logistics, and distributions centers as well as their suppliers. The company's record setting time-to-market, rapid response to real-time data and feedback, and just-in-time deliveries upon which its success was built were made possible by sourcing 50% of materials and labor locally and keeping design close to distribution. As Inditex continues to target foreign markets, it seems to be growing without also growing its successful business model.
VIII. Porter's Five Forces (Competitive Analysis)