The Rupp Report: Spanish Fashion On The Way To The Top

While Spain’s economy is leaving its financial crisis with a lot of problems, the fashion industry is permanently recording new success stories. In 2013, the Spanish apparel industry exported products and services worth nearly 20 billion euros, representing an increase of 47 percent since the beginning of the crisis in 2008. Shops bearing the labels Zara, Mango and Desigual have conquered the top league of fashion around the globe.
Zara As A Pioneer
It was the Inditex daughter company Zara that showed the Spaniards the way. The textile giant has emphasized export markets for a long time. The international conquest started in 1988 in Porto, Portugal, where the first Zara store was opened beyond Spanish borders. Today, 26 years later, the group has 6,300 shops in 87 countries and a global turnover of 16.7 billion euros. Meanwhile, Inditex earns only 19 percent of its revenue in Spain; ten years ago, it was 46 percent.
However, for the first time since going public in 2001, Inditex — the world’s largest apparel group — couldn’t increase its operating profit in the last fiscal year. With 3.9 billion euros, the operating profit stagnated. Also, the currency collapse in key emerging markets continued to be alarming to the company, which for the first time ever netted more turnover in Asia than in Spain. In total, revenues grew by 5 percent to 16.7 billion euros.
Inditex knows how to detect trends, to produce — and copy — chic catwalk fashion, and bring it to market quickly and at moderate prices. More than half of all garments are made in Spain, Morocco or Portugal. This is a more expensive approach; however, it allows great flexibility and lowers transport costs and ways. Zara and other Inditex brands work almost without any traditional advertising. They rely mainly on stores in prime locations around the globe.
Mango, the second-largest textile giant in the country, is more global than Zara. The internationally recognized company is engaged in the design, manufacture and sale of garments and accessories for men and women. Based in Barcelona, the company is present in 107 countries and operates more than 2,415 stores. In 2013, Mango recorded nearly 1.8 billion euros in turnover, of which only 17 percent was generated in Spain.
Mango made a quick and steep path to the top: The first shop was opened in 1984 in Barcelona, and the next, one year later in Valencia. By 2000, Mango had become the second-largest Spanish textile exporter. It entered the North American market in 2006 with the first stores in Costa Mesa, Los Angeles, San Francisco and Santa Monica, Calif.; Dallas; Chicago; McLean, Va.; and Orlando, Fla. Today, the company has more than 11,200 employees, of whom 1,800 work at its Hangar Design Centre and its headquarters.
Quality Management
The expansion into future markets is still going on. Among the latest openings were shops in important cities such as Tokyo; Xiamen, China; Erlangen, Germany; and Verona, Italy. The fashion concept is said to be a combination of a quality product and original design and results “in a coherent and consistent brand image.”
In order to develop further to another level, Mango assigns the inventory to its franchisers. In 2000, the company inaugurated a logistics system specially designed to enable the handling and distribution of 30,000 garments per hour.
Last year, Mango opened its new Dynamic Distribution Centre (CDD) in Barcelona. This 24,000-square-meter warehouse specializes in the distribution of folded garments. From now on, the head office is only responsible for hanging garments. In CDD, all loading, storage, handling and shipping processes are automated. In this way, the cost of labor is considerably reduced and employee performance is optimized. Mango claims that its system is the most efficient one in the sector and five to seven times faster than its competitors’ systems.
The high-tech logistics system is characterized by high speed and a large flow of information, and can serve each branch worldwide at any time, subject to demands. Through the production and distribution of 90 million pieces per year, a constant renewal of inventories and the respective production rhythm is guaranteed, based on both the quantity and the variety of items.
Barcelona-based Desigual, with its colorful patchwork fabrics, has grown very strongly in recent years. “Desigual” in Spanish means unequal, different. In 2012, Desigual, which was founded in 1984 by Swiss designer Thomas Meyer, sold more than 22 million items through its retail channels in more than 100 countries — including more than 330 of its own stores, 9,000 multi-brand stores and 2,200 concessions in department stores. The company employs 3,800 people from 85 different nationalities.
Desigual’s slogan is “La Vida es Chula,” which means “Life is Cool, Chic and Bold” in English. As the company states, “This is the brand’s battle cry, an enthusiastic, stimulating, positive, optimistic slogan and a true declaration of intent.” And it is committed to seven values: recognition, positivity, tolerance, respect, commitment, fun and — last but not least — constant improvement.
The brand is widely available in stores in Japan, the United Kingdom, Hong Kong, Korea, Australia, Germany, France, Italy and Scandinavia. In the last year, new stores opened in cities including Vienna, Antwerp, Paris, Los Angeles and Rome.
Desigual is among the fastest-growing fashion groups in the world. In 2012, CEO Manel Adell predicted the company would reach a turnover of 1 billion euros within two years. From 2001 to 2011, its turnover grew from 8 million to 560 million euros. In 2013, the group netted a turnover of 828 million euros, an increase of 18 percent, compared to 2012. Only 23 percent of the revenues were generated in Spain and in Portugal. This year, Desigual wants to push ahead with its international expansion and is already aiming for a result beyond 1 billion euros.
Desigual wants to be represented with its own stores in the 1,000 main shopping streets of the world. “But currently we have only 300 stores,” Adell said recently. Asia and America are especially in the company’s focus. The intention is to be more independent from Europe in order to spread the risk. According to Desigual, Europe currently has a share of 85 percent, but the target is 30 percent.
Be Fast
Spain has a long tradition in the production of textiles. This know-how is also used by foreign world brands, which had returned to Spain for some years to manufacture a big portion of their products. The trend of producing apparel only in Asia is reverting to producing in Spain. Bangladesh as a production site is less attractive anyway, and not only for moral reasons due to the catastrophic working conditions. Producing in Spain is also important for the fashion industry, and this is old common sense, to be as close as possible to the demand in order to respond rapidly to any change. This trend could leave some Asian countries in the long run with sleepless nights.
May 6, 2014