The story goes that a motor bike roars up to a red traffic light in La Coruna in Northern Spain. It stops alongside a black town car. From inside, the passenger glances out and sees the young biker leaning over the handlebars. His jean jacket has appliqued patches… a throwback to the 1970s. The old man grabs his phone and calls an aide in the office. Without taking his eyes off the jacket, he describes the jacket’s stitching, its shape and color. He finished the call with a single instruction – ¡Hacedlo!” – Make it.
Forty years ago, Amancio Ortega founded Zara on two key principles: give the customers what they want and give it to them faster than anyone else. As the story illustrates even today, those two key principles are at the heart of Zara, the world’s biggest fashion retailer.
Zara stores refresh their stock twice a week and receive orders in 48 hours or less. That has required some key organizational and supply chain decisions. “We never go to fashion shows,” says Loreta Garcia, a 23-year Zara veteran who heads up Zara Woman’s trends department. “We track bloggers and listen to customers, but we change our opinions all the time,” she says. “What seems great today, in two weeks is the worst idea ever.”
The old man in the car was the reclusive founder of Zara, a Spaniard who is now the third richest man in the world, worth over $56 billion. The empire he’s built has revenues of nearly $20 billions and stores in 80 countries.
At a time where Spain has 24% unemployment and crippling debt, Zara announced revenue was up 17% YOY for the first three quarters. And that growth shows no sign of slowing.
There can be no better proof of the importance of speed to market, or the Two-Second Advantage as TIBCO’s CEO Vivek Ranadive describes it in his latest book: The Two-Second Advantage – How We Succeed by Anticipating the Future – Just Enough. But combine that with driving great customer experience and the results can be stunning, which is why the acquisition by TIBCO of LoyaltyLab has been so critical.
The story of Ortega, from 14 years old folding shirts in the local Gala store to leader of arguably the most successful fashion retailer is compelling. If you want to understand the whole story, read the excellent Fortune article, Meet Amancio Ortega: The third-richest man in the world, which inspired this blog.
So, 40 years ago with a small chain of shops in Northern Spain you can probably understand how Ortega achieved his objectives. But, how can he still with a huge business spread over multiple continents and global online competition?
The secret is the effective use of technology everywhere, but nowhere more so than in logistics. The 400,000-square-foot logistics building is organized around a labyrinth of conveyor belts extending up five stories. From here, customized orders are delivered to Zara stores around the world with an SLA of 24 hours for Europe and Middle East, and 48 hours for the rest of the world.
But to make the company function so effectively is the culture – an “entrepreneurial, self-critical, completely flat organization.” Ortega has an uncanny ability to connect with employees at every level. Perhaps this is borne out of his upbringing, which was dire poverty with little education.
This is another story of a fantastically successful business founded on some strong customer-centric philosophies which has exploited technology to stay ahead in a globally connected world.