Zara: "The combination of innovation and destructiveness"

Introduction: LVMH is famous for playing games like mergers and acquisitions.

For many years, Parisians used to go shopping in La Samartitain department stores, whether they were buying lingerie, household appliances or scraps of hardware. Today, the 130-year-old department store was acquired by LVMH Group for a transaction value of US$200 million. Like Fendi, Dior, and Givenchy, La Samaritain became a mark owned by LVMH.

Why does the world's largest luxury goods group need an old, outdated department store? LVMH now seems to be obsessed with building a retail empire. On September 10th, the LVMH and Gucci Group continued for the entire two years of the war to compete for the largest controlling share of the Paris Spring Department Store (PPR). Gucci won 53.2% of PPR shares and Gucci won this time. Bernard Anault, chairman of LVMH, admitted that the reason was that the current economic downturn had caused him to rethink whether he would stick with Gucci. This is only a small part of the LVMH M&A game. If the plan is successful, LVMH will acquire the entire Gucci Group for $8 billion next year.

Just as fashion enthusiasts rushed into the Louis Vuitton store in Champs-Elysees for heroic purchases, LVMH seems to be undergoing an unbridled carnival. BusinessWeek Magazine lists LVMH as one of the most valuable brands in Europe, but for Harvard Business School, another Spanish fashion company Zara is even more valuable.

There is a saying in the fashion industry: Why did the four major fashion weeks carry out the next year’s fashion release eight months in advance? For most fashion companies, it will take at least 8 months for them to turn the design into a finished product. The working procedures are as follows: Purchasing fabrics in country A, printing and dyeing in country B, and making a fine embroidery in country C, and finally producing a skirt in country D.

This complicated program can hardly imagine Zara. Most of Zara's garments are made in Spain and Portugal, and the finished products are shipped to stores every week. The Zara designer's design will not take more than two weeks from the finished product to the Zara store in Paris and Tokyo. The trend in the fashion world is likely to be determined by last week’s US blockbusters and Madonna’s latest MTV influence, but Zara’s skill in mastering speed is unmatched by its giant competitors. According to the diversity of design styles, Zara can divide clothing products into many small parts: many designs and small quantities. Zara, an unpopular product, was quickly phased out to avoid overstocking and had to be sold.

Armengo Ortega, 60, is the founder of Zara. He never accepts media interviews. People know little about him. Ortega was born poor and had little education. At the age of 13, he began to be an apprentice at a tailor's shop in Barcelona. Maybe this prompted him to adopt an ancient, simple and yet effective method to manage the company. In fact, Zara went to the front. . With $6 billion in personal assets, Ortega is one of the wealthiest people in Spain and second only to LVMH's Bernard Anault in fashion.

Needless to say, Zara's model is a challenge to globalization. After the 1970s, the manufacturing industry in the western world was based on the cheap labor of the third world. Colombia, Sri Lanka and other regions have become a paradise for Western factories. In 1992, Nike paid Jordan $20 million in advertising fees. This is more than the total wages paid by Nike to the entire 30,000 workers in Malaysia that year. need more. In the anti-globalization parade in Seattle last year, Nike was one of the targets of protests by the demonstrators. Nike had to hire heavily armed riot police to protect it. Manufacturers focus on seeking the cheapest labor to reduce costs. This industrial model creates deep-rooted dependence and fear: otherwise they will be defeated by their opponents.

But for Zara, it is more important to closely connect manufacturing with sales, while reducing inventory and avoiding company branches that are more expensive than seeking cheap labor. Zara is looking for a relatively cheap labor force in Europe. This is a reversed direction of Exodus. People move from the east to the west. According to the Harvard Business School and the IESE Institute in Spain, Zara’s anti-trend is the new company model in the future. It has been “several years” ahead of competitors such as the US Gap, Swedish H&M, and Benetton. These companies find it difficult to catch up with Zara under the pressure of their own creation.

For traditional manufacturing export countries, especially Asian countries, Zara's model is a potential threat. Its business model may make a geographical re-division for future manufacturing. Zara has achieved success in northern Spain and Portugal, where the labor force is higher than in Asia, but lower than the average level of the entire Western world. Eastern Europe has quickly grown into the European Union’s new cheap labor base, and Mexico has started to manufacture more and more garments since the 1993 North American Free Trade Agreement.

Even in this age of globalization, the speed of production and transportation also means that geographical location has become more and more important. Zara insists on "Made in Europe" to ensure speed. Zara has a total of 1,160 stores, accounting for 80% in Europe; Latin America has only 70 stores; the Middle East has 65 stores; 6 stores in the United States, and all in New York; 15 stores in Japan, all in Tokyo. Zara cautiously avoids infinite expansion into a monster.

Many Zara stores do not have a warehouse at all. Zara replenishes its products twice a week. The volume is very low. This gives Zara a unique style and allows customers who like Zara to come and see what's new.

The London Times listed Zara as one of the 25 hottest trendsetters. Even more plausible is that it is from LVMH. LVMH not only discreetly referred to Zara as "both innovative and destructive."