Inditex Case Study

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Register to read the introduction… It plans expansion of a similar scope over the next year. The fi rst Zara store opened in 1975 in La Coru.a, a port town near Arteixo in a remote corner of northern Spain. Its two key traits were an eye for customer tastes and a production process that started with the final price and worked backward to the most- efficient production. In the mid-1980s, local business-school professor Jos¨¦ Maria Castellano, a technophile, joined Inditex as right-hand man to founder Amancio Ortega Gaona, and the company became a world-class logistical outfit, peddling ¡°fast fashion.¡±
The first foreign store, in Portugal, opened in 1989, followed by New York. In 2001, Mr. Ortega took Inditex public and its stores are now on prime shopping streets around the world.

Stores are stocked with new designs twice a week. Collections are small and often sell out, creating an air of exclusivity and cutting down on the need for markdowns. The company ships clothes straight from the factory to stores. Unlike competitors who manufacture most of their wares in Asia, Inditex makes two-thirds of
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¡°The Internet is becoming a more and more relevant channel, so it would be logical to continue expanding online with the other formats,¡± he said. Neither H&M nor
Inditex disclose what proportion of sales comes from their online outfits. U.S. rival Gap Inc. generated about 8 percent of its Gap- branded sales in the U.S. on the Web.
For the first half ended July 31, Inditex¡¯s net profit dropped to
375 million ($550.4 million) from 406 million a year earlier, while sales were up 6.6 percent at 4.86 billion. Sales in stores open at least a year, however, shrank by an annual 2 percent in the fi scal first half, compared with a decline of .7 percent in second half, and operating costs grew 8 percent as Inditex continued to expand its empire. The retailer opened 166 new stores in the fi rst half, down from 249 a year earlier. Inditex¡¯s gross margin fell to

55.3 percent of sales from 56.4 percent a year earlier. Analysts attributed the decline to a stronger dollar, which is making it more costly to source materials, and pricing pressures in the company¡¯s main market, Spain.
The retailer gave a resilient trading outlook, saying sales
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¡°It¡¯s a market where Internet sales are very important, and it¡¯s a way of accessing all those clients that are interested in Zara,¡±

Cases 3 Assessing Global Market Opportunities

said Isla. The App allows shoppers to check out what¡¯s new in the
Zara collection, and to find the nearest shop.

Inditex, based in La Coruna, northwestern Spain, last year soared past Gap Inc. to become the most-selling fashion retailer in the world, with more than 4,600 stores. Zara, which is present in 76 countries, will roll out its online store first later this year in six European countries, and then progressively add the remaining countries where Zara operates. Inditex entered the United States early, in 1994, but has expanded rather slowly, focusing store openings in large cities like New York, Miami and Los Angeles.
It currently has 48 stores there. Isla said Inditex plans to grow
¡°selectively¡± there in the coming three years.

¡°We have to prioritize at every step, and ours are twofold:
Growing in Europe and in Asia,¡± Isla said. Inditex is opening almost all of its new stores outside its Spanish home market,

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