Chapter 6 Chapter 5 Amancio Ortega Gona, Spain: The Speed of a Kingdom
In the world fashion industry, the 69-year-old president of Inditex Group, Amancio Ortega Gona, is second only to Bernardo Arnault, the French fashion giant and owner of the Louis Vuitton Group, but his reputation may Only one-thousandth of Bernardo Arnault's - except in Spain, of course. On July 12, 2004, at the "Spanish Famous Trademark Forum" held in Madrid, when Ortega, the founder and president of Inditex, was appointed as the honorary ambassador of "Spanish Brands", the richest man in Spain began to become more famous. The focus of many people's attention.
Ortega, 69, seems to prefer to live outside his social circle - he never gives media interviews, refuses to wear a tie and prefers to wear blue jeans.Even though his company has more than 2,000 chain stores and more than 40,000 employees in 48 countries and regions around the world, he still stubbornly sets the company's headquarters in La Coruña, an unknown small city in the northwest of Spain, and never Advertise for a penny for your own chain. In 2005, he ranked 23rd on the Forbes Global Rich List with a net worth of US$12.6 billion, and became the well-deserved richest man in Spain.
Ortega's wealth mainly comes from the fashion retail industry. In this industry known as the most difficult to do in the world, his Inditex Group's clothing brands include Zara, Massimo Dutti, Pull & Bear, Bershka, Stradivarius and Oysho, etc., among which Zara is the largest and most profitable department of Inditex Group, with annual sales accounting for 78% of the group's total sales.
The starting point of Ortega's wealth myth was at 11:15 am on July 1, 2001. For most people, this may be a very ordinary morning. The shares of Inditex Holding Group were listed on the Madrid Stock Exchange for the first time. The price per share soared from 14.70 euros to 18.00 euros on the day of trading, an increase of 22.45%, making the company's market value reach 9.2 billion euros.In the case of the slow development of the European clothing market, the increase in Inditex's stock after listing is considered a miracle for the world's fashion industry.On the day of the listing, when Ortega, who was 65 years old, staggered out of his office in an industrial area in the Port of A Coruña in northwest Spain, he owned most of the shares of Inditex Holding Group, and he already owned 60 billion dollar wealth.He has since sold a 26% stake for $2 billion in cash.
What was even more deified by the Spanish media at that time was another thing.Although the son of a railway worker and housewife is now the second richest man in the fashion industry by total wealth in the world, there was not even a single article about him in any Spanish newspaper before then, and he was never in Appear in front of the media.Later, someone found two photos of him, one of which was the first report on Inditex’s listing in 2003, and the other was a picture of the report after Inditex’s stock listing, and what is more interesting is that these two photos The chubby Ortega - Spain's richest man - was wearing the same dress.
After more than 30 years of hard work, the unknown Ortega has turned Inditex from a family-style clothing workshop into a powerful group, with six professional clothing brands targeting different consumer groups. Inditex's profit growth more than tripled between 1996 and 2000, reaching 31% in 2001, a year in which many clothing chains around the world saw a collapse in both sales and profits.
Ortega, who owned US$6 billion in 2001, ranked 33rd on the Forbes Global Rich List with a net worth of US$9.2 billion in 2004. In 2005, his wealth increased to US$12.6 billion.Now, this low-key old man has become the pride of the whole of Spain. His lifelong experience in fashion marketing has turned into a marketing strategy that can set off a revolution in the world's manufacturing industry.The uniqueness of his wealth myth lies in this: In today’s globalization, Ortega overthrows the taken-for-granted “relentless pressure of globalization” with his unique “fashion speed” mode, and he uses first-rate fashion, second-rate High-quality manufacturing and third-rate prices have educated the "fashion" manufacturers who are still making copies today.
Ortega was born on March 28, 1936 in Leon, Spain.His family was poor, his father was a railway worker and his mother was a housewife. At the age of 13, he started working as a handyman in a clothing store in La Coruña in northwestern Spain. His first job was to deliver shirt samples.Ortega is very studious. During his part-time job, he gradually discovered that the process of designing a piece of clothing to making it, and then putting it on the shelves of the store contains huge profits.He realized that if he worked hard, he, too, could one day make money from it.La Coruña, where Ortega works, is a traditional textile and garment industry center in Spain. There, people have many opportunities to master the complete business process of fashion from design, processing to wholesale and retail. Ortega likes to personally Participate in the design and production of clothing.
In 1963, 27-year-old Ortega opened a clothing factory in La Coruña based on what he had learned in a clothing store, specializing in the production of women's pajamas, and the products were sold directly to clothing wholesalers. In 1975, a German customer temporarily canceled a large order. In order to dispose of the pajamas that had been produced according to the order, Ortega opened the first Zara retail store in this small town.It was this accidental experience that made Ortega realize the importance of the "marriage" of production and the market, and Ortega's road to wealth opened inadvertently.
In the next ten years, Ortega began to open Zara brand chain stores continuously, and its sales network began to extend to major cities in Spain. In 1985, Ortega formed the Inditex holding company as the parent company of his companies.
In the next ten years, under the operation of Ortega, the Inditex Group continued to expand. In the 1980s, Inditex Group began to rapidly expand overseas markets. In 1988, Zara opened its first overseas branch in Portugal, and then began to develop to other European countries, North America, Latin America, Asia and Africa.By 2004, the 2,000th branch of Inditex Group opened in Hong Kong.So far, its sales business has extended to more than 50 countries and regions around the world.
While expanding abroad, Inditex is committed to developing more brand series in order to meet the needs of different target customer groups.Ortega introduced Pull'Bear' in 1991 to offer men's casual wear.Massimo Dutti, which was launched in the same year, is a high-end men's formal wear brand in the group. Compared with its competitors, it has a clear price advantage. In 1995, on the basis of the development of the above two brands, Ortega entered the field of women's clothing, and launched Bershka in 1998. This new brand provides very cheap but absolutely fashionable clothing to young women aged 14-24. In 1999, the company acquired Stradivarius, which further strengthened its response to the needs of young ladies. In 2001, Ortega acquired the Oysho brand, which mainly deals in underwear, cosmetics, accessories and sports goods.These five brands are all operated independently, with their own independent retail stores, procurement channels, warehousing and distribution systems, subcontracting and organizational structures.
How to integrate these brands? Ortega has never forgotten the truth of letting the market speak. He knows that what he wants to sell is fashion that makes people feel fashionable and affordable, so he chooses a fashion that is completely different from ordinary clothing companies. strategy.These brands of his only share some common things in terms of legal, financial, etc., but they all adhere to the purpose of "providing fashion at an affordable price" proposed by Ortega, emphasizing excellent quality, and in purchasing, production and Distribution and other aspects adopt a similar management model, emphasizing the important role of retail stores in the entire production and sales process, so as to respond to market demand at the fastest speed.
Ortega, who accidentally embarked on the road of ready-to-wear chain sales, has found a growth path that many chain retailers have not found: providing fashionable clothes, keeping prices low, and having production and sales in between that others cannot match. design speed.As Diaz, a senior marketing staff member of Inditex, emphasized in 2001: "For us, five fingers are often used to touch the production situation of the factory, while at the same time, the other five fingers are sensing the needs of consumers."
Every Inditex garment a consumer puts on her body—whether it’s plush or woolen—willingly provides Ortega with a fortune.
Ortega's success is due to the fact that he allowed the Inditex Group to establish a system that can respond to consumers' tastes in a timely manner.
Zara accounts for more than 70% of the sales of Inditex Group.As the flagship store of the group, its business strategy is quite different from that of large clothing retailers such as Benetton in Italy, Gap in the United States and H&M in Sweden.It is not limited to the fashion trends of each season, but keeps an eye on the latest fashion styles and provides products that can meet customer needs as soon as possible.Usually, when fashion magazines are still previewing the fashion trends of the season, Zara's windows are already showing these products.
Analysts from the international fashion industry and financial investment institutions spoke highly of Inditex Group's operating performance.Its fashion philosophy is: creativity, high-quality design and quick response to market demands. Inditex's staff around the world will report popular information in different markets every day, and designers in Spain will keep an eye on relevant materials and the group's daily sales, adjust existing designs, and plan new clothing series.At Zara alone, Ortega employs 200 designers.Based on the inspiration they obtained from fashion shows in Milan and Paris, they create a large number of creations, so that the company's fashion production can be more in style and less in quantity. Zara launches more than 20,000 fashion styles every year, which is quite an astonishing figure in the industry.
Zara's production process often starts from the store. All its chain stores are equipped with portable special equipment. The store manager enters the required samples and orders into the computer according to the sales situation of the day, wirelessly sends them to the Internet, and finally delivers them to Zara. Zara headquarters in La Coruña, northwestern Spain.
And in a bright, spacious room at Zara's headquarters, 200 designers and production managers are deciding what clothes to make.Every day, they collect suggestions from more than 600 store managers from all over the world, not only orders, but also ideas for cutting and clothing fabrics.
After evaluating the ideas of the store managers, the group decides what to produce.Designers sketch out their latest ideas on computers, which are then sent via a local area network to several nearby factories.In a few days, cut, dyed, sewn, and in as little as three weeks, the clothes will be hanging in stores in Barcelona, Berlin, Beirut and more. Zara is not just a little faster than its competitors. For example, Gap’s order-to-delivery time is 9 months, while Zara only needs more than 10 days, which is nearly 20 times faster than Gap’s.
What makes Zara different is the overall sales industry network it has established. It is connected to retail stores, design studios, and internal factories. It has established a nearly perfect real-time response system in the fashion industry. Its incredible and flexible factories Being able to re-produce or re-style a pair of jeans is almost as fast as today's teenagers suddenly change their minds.It is said that it only takes two weeks for a Zara shirt to be designed from the design studio in La Coruña to the store in New York or Tokyo, and Zara will use this short period of time to conduct market research. to find the best sellers from a variety of different clothing styles.In this way, the company can quickly stop the production of slow-moving fashion.
Zara firmly believes that its business model can only be realized logically if it has the most responsive supply chain in the world. Half of the clothing Zara sells is made in its own factories, which is superior to contract manufacturers who actually make other retailers' branded clothes. Zara has a twice-weekly delivery plan, not only for replenishment, but also for newly designed clothing.To ensure efficient distribution capabilities, Zara's prolific design department designs more than 10,000 styles of clothing each year, far exceeding what competitors do. The advantage of Zara's unparalleled market response time far offsets the 15%-20% higher production cost than competitors.Responding so quickly to customer preferences, Zara rarely needs to have large inventory write-offs to correct sales planning mistakes, and the company also has a stable 10% profit margin, which is the best in the industry.
Ortega's approach is very effective, especially in the off-season, which can prevent competitors from stealing market profits through large-scale purchases and low-price dumping. Maria, CEO of Inditex Group, admitted: "Our approach has enabled us to maintain a huge advantage over our competitors."
The Ortega and Zara model may not be unique, but its core value is a perfect, simple principle: In the fashion industry, nothing is more important than the speed of market response.
It takes only half a month for Zara fashion to go from design, manufacture to retail. One of the purposes of doing so is to reduce costs.At the same time, most of the production bases of Inditex Group are located in Spain and Portugal, which can ensure the quality of products.Ortega's new business model is said to have become a textbook for many business administration schools in the West.
At present, many fashion companies in the world place the production process of clothing in third world countries with cheap labor in order to save costs to the greatest extent.But Inditex's flagship brand Zara, as well as Pull & Bear, Massimo Dutti, Bershka and Stradixarius, 80% of the clothing is still made in Europe, and 50% of it comes from Spain. Inditex has purchased advanced machinery and set up factories in Spain to perform capital-intensive automation processes such as dyeing and cutting, while the sewing process is completed in small factories in neighboring areas.
Ortega has insisted that the vast majority of the group's production and sourcing be done in Spain or Europe, and that it manufactures more of its clothes itself.This is also different from competitors such as Gap in the United States and H&M in Sweden. In today's fierce global competition, more than half of the ready-to-wear sold by Zara is produced by itself. Most of Zara's fashion is designed, cut and produced in La Coruna's modern factory, which was completed three years ago at a cost of $15.8 million.
Controlling all aspects of production gives Zara a flexibility that other competitors do not have.
But will this lead to increased costs?
Of course, Ortega knows that the price of textile raw materials in Asia is cheaper than in Europe, and the labor cost is also much cheaper than in Europe, but he believes that their fashion profits are not low. This is not such a serious problem.Adhering to "Made in Europe" can guarantee speed and enable the company to launch new fashions in the shortest time, thereby reducing sales cycle and inventory time, and reducing costs from channel circulation.
Because of this consideration, even if millions of pieces of clothing are sold worldwide every year, Ortega still guarantees the number of clothing he produces, and this self-control from production design to sales is considered by many critics to be the whole Anomalies in the international fashion industry - many big brands have already handed over their production to others.
Of course, some people think that Zara seems to be sacrificing quality for speed.If there's one complaint consumers have about Zara, it's that its fashions sometimes don't last. Zara offers trendy styles at low prices, but the quality is not necessarily good.If you want to buy fashionable styles that you will only wear for a while, you can choose Zara, which is cheap and trendy.
But what is fashion? Isn't fashion a race against time? Of course Ortega knows this better.
In Singapore, Zara sells $19 camisole tops to $26 long-sleeved tops, which is also quite cheap among mid-range fashion brands.Unlike some young women who spend a few months saving money to buy Louis Vuitton leather bags or Chanel fashion, Zara is a good choice if they can afford famous brands and want to keep up with the trend.
For almost 30 years, Ortega has always set up his headquarters in La Coruña. In 2003, his second logistics center in the city was officially put into operation. This center, which cost 100 million euros, covers an area of 123,000 square meters and has a distribution capacity of 80,000 pieces of clothing per hour.This is a railway and highway hub, and it is also very close to the international airport. The convenient transportation is the main reason for Zara's location.Using such a city as its headquarters and distribution center, Inditex's transportation costs can be imagined.In addition to these two logistics centers, Zara also has three relatively small distribution centers in Brazil, Argentina and Mexico to cope with the opposite seasons and long distances in the southern hemisphere and Europe, so as to reduce transportation costs.
The international clothing industry has made an incisive summary of Ortega's mode of operation in clothing brands, that is, first-class image, second-rate products, and third-rate prices.
Yes, Ortega's fashion concept is very inconsistent with well-known brands such as Arnault. When they all think that "fashion" products have more brand value in addition to their own high R & D and production costs, so , when it should and must be high value, Zara thinks differently.They think that no matter how good a product is, if it is not sold, it is just a pile of waste products that occupy the warehouse and stagnate funds. Instead of waiting for the price to be sold, it is better to quickly generate cash and promote secondary production. Zara allows more consumers to buy without hesitation as long as they look at a piece of clothing. Although the consumption price of each piece of clothing is not high, customers who spend multiple times can also keep more cash in their pockets. Inditex's major chain stores?
Who are the customers who buy Zara? A senior manager of Zara once described their customer base to the media in this way: whether it is Cindy Crawford or ordinary cleaning women, whether they live in London or Shanghai, people’s There may be a piece of Zara in the wardrobe. When they wear Zara, they feel the same fashion from Spain.
Buying a first-class brand at a third-rate price is exactly how Ortega created a miracle.
No one can conclusively say why Ortega has maintained such a speed advantage in an industry so traditional and easy to follow.
However, in the clothing industry with extremely low barriers to entry and increasingly fierce competition, Ortega has to face a lot of confusion.
How long can fashion fast food last?
Ortega's Zara and other brands are currently the most important clothing brands in Spain that still stick to the classic, refined and low-key style of European fashion. For several years, his slogan is-let us consume fashion like fast food, consume , consumption, consumption again!
"Fashion is interactive" - this is Zara's fashion philosophy. On average, Zara's stores put on new products twice a week. The perfect logistics distribution system ensures that more than 600 stores around the world have a near-synchronous delivery time, with a difference of only a few hours. With its popular design, relatively good quality and low price, Zara has become the first choice brand for European office workers.Similar brands include Mng, which operates in a similar way to Zara. It has 624 chain stores in 67 countries and is also a popular brand among women.
For decades, mass consumer brands represented by Zara and Mng have truly integrated fashion into the lives of ordinary people.Perhaps in the eyes of many people who love fashion art, Zara and Mng are not considered art like popular fast food, but they make you inseparable - fashion is ultimately for people to wear, and it is better to wear it than to look up, isn't it ?
Is fashion going to change? If fashion is just fast food rather than a classic, a product thrown into the closet after two seasons, how many working-class people will accept it? With the acceleration of the world's cultural integration trend and a more personalized wear With the advent of the clothing era, does Ortega also need to consider the brand's derivatives?
In Spain 80% of people can afford Zara clothing, but in Mexico this figure may be less than 10%.Perhaps the most important reason why is the increasing integration of globalization and the economic level of different countries.But the problem is that Zara can guarantee the low price of its products in the European market, but in North America and Asia, you must know that Ortega still insists on putting most of the production work in Spain, and more than 50% of Zara's products Produced in-house, this ratio is higher than many of its competitors. Zara has 22 factories in Spain, 18 of which are located in and around the A Coruña region.Another 50% of products come from 400 suppliers, 70% of which are in Europe, while the remaining 30% are mainly in Asia.
Due to the different transportation costs, the prices of chain stores in various places will vary.Generally speaking, the price in Northern Europe is 40% higher than that in Spain, while in other parts of Europe it is 10% higher than in China, in the Americas it is 70% higher, and in Japan it is 100% higher.
Of course, higher prices abroad have also changed Zara's positioning. A senior executive of Zara pointed out that in Spain, 80% of people can afford Zara products.But the customer base in Mexico is much narrower, for cultural reasons, information reasons, and economic reasons: the per capita annual income in Mexico is $3,000, compared with $14,000 in Spain.So Zara's target customer group in Mexico is the upper middle class. People in this class often shop in Europe, New York or Miami. They know fashion, and there are about 14 million people.
In addition, Ortega's tradition is completely opposite to his fashion style. So far, his advertising expenses have only been 0.3% of sales. Insufficient.
Ortega, who insists on the characteristics of European fashion, also faces tremendous pressure from his main competitors. His biggest rival, the American fashion group Gap, began to change its strategy in 2000-no longer launching too fashionable products. products, and returned to the traditional basic style of products, reducing the number of retail stores.More importantly, after looking back this time, although the prices of Gap's brands are still higher than Zara, they are already close to Zara in the fashion field.
Among Zara's more than 600 chain stores all over the world, only a small part is operated through joint ventures and special distribution methods-in today's globalization, these two branch models seem to be able to better adapt to local conditions and ensure financial security , reduce risks, and can save a lot of energy from the head office.Benetton, which is constantly innovating in the business concept of chain stores, has made similar successful attempts: the company set up nearly 6,500 franchised dealerships in 120 countries in 2001, and the head office does not directly own these stores.So, as Zara further expands its scale, will it also adopt more models like its competitor Benetton? But will the increase of this special dealership and other changes affect the Zara headquarter has always been firmly established? What about the supply chain that is firmly in your hands? This supply chain has always been Zara's trump card to win over its opponents. Will it directly weaken the company's strength if it changes?
But if nothing changes and the head office still controls almost all the chain stores and supply chain, will the very successful model now work equally well when Zara grows to 2,000, 3,000 chain stores around the world with all these branches Can you still dance gracefully to the beat of the local market?
The low-keyness of Spanish companies is well-known in the world. The only things that impress us in this country are bullfighting, beauties, beaches and Barcelona, and of course the most famous team in the world-Real Madrid.But if you find that the famous "Big Bubble Gum" more than ten years ago and the "Golego" that frequently appeared on TV came from General Candy Company and Nudelesba Company in Spain, this low-key The feeling may be more prominent.
On July 12, 2004, the equally low-key Ortega reached the pinnacle of national honor when he was named honorary ambassador of "Spanish brands" at the "Spanish Brand Forum" held in Madrid.According to the media, he is the Real Madrid of football in the Spanish clothing industry-he has become the most famous Spaniard in the world.
The famous Ortega deserves more people's expectations.
After going public in 2001, Zara has developed at an average speed of opening a chain store every week.In 2003 alone, it opened 95 new stores around the world, bringing the total number of stores to 626, of which 65% of the sales stores are outside Spain.By the end of 2003, the total area of sales stores reached 686,000 square meters, and the average annual sales per square meter was 5,192 euros. In May 2004, Zara opened a chain store in Hong Kong. This is the 18th branch of Inditex Group in the Asia-Pacific region. It also marks that the group has 2,000 retail stores in 50 countries on four continents, Europe, America, Asia and Africa.
Ortega never thought of stopping, so how many more chains will he own? The harder it is for people, the better for us.