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Zara, a Spanish success * story
June 15, 2001 Posted: 4:37 AM EDT (0837 GMT)
Your Business Your World Success without sweatshops
• Zara does things
LONDON, England (CNN) -- In an era when clothing retailers outsource much of their manufacturing to developing countries, one Spanish company is having enormous success doing things differently.
• Founder makes a mint
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While retailers concentrate their money and efforts on building a brand image through advertising campaigns, their lack of control over sub-contractors has left many open to accusations of using sweatshop labour when unacceptable practices are uncovered at factories producing their merchandise. Many campaigners against sweatshop labour question the economics of outsourcing production and point to the likes of Spanish fashion chain Zara as an example of how things could be done. "Control over production facilities was Possibly the most given up by major American firms innovative and devastating coincident with the shift of most shoe and retailer in the world apparel production to authoritarian LVMH fashion director Daniel countries. Most consumers are now aware Piette on Zara of the untoward results of this major change," Jeffrey Ballinger, a Harvard researcher and director of pressure group Press for Change told CNN. "Zara, on the other hand, has turned control over garment factories into a competitive advantage," said Ballinger. The Spanish firm not only sells clothes but also designs and makes them. It has never run an advertising campaign, yet has more than 1,000 shops worldwide. As it makes the clothes itself, it can react quickly to changing market trends. While others, including rivals Gap and H&M, take up to nine months to get new lines into their shops, Zara takes just two to three weeks. Its success has led to it being described as "possibly the most innovative and devastating retailer in the world," by LVMH fashion director Daniel Piette. "It's really quite exciting to see a new model like this -- one that actually breaks all the rules of the apparel industry as it has developed over the last two decades: contract out all production and spend obscene amounts to advertise your brand," added Ballinger.
So what is Zara's secret?
The company's success lies in it having total control of every part of the business. It designs, produces and distributes itself.
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CNN.com - Zara, a Spanish success story - June 15 2001
Everything is co-ordinated from its headquarters on an industrial estate in Sabon-Arteixo, outside La Coruna in Spain. By controlling the entire process from factory to shop floor, Zara can react quickly to changing fashion trends and customers' tastes, providing a "newness" that has taken Europe by storm. It designs, picks and cuts the cloth before Sales in 2000 sending it to workshops and co-operatives in northern Portugal and the surrounding • Inditex $2.43 billion area of Galicia for sewing. • H&M $3.2 billion The clothes are finished off at La Coruna before being shipped out twice a week to all its shops. • Gap $13.6 billion
"Investment banks used to say that this model did not work, but we have...