Zara’s parent company, Inditex, just reached a monumental achievement.
Inditex’s valuation mark surpassed 100 billion euros (about $US109 billion) on Wednesday.
Shares have been up 36% in the last year.
This accomplishment makes Inditex the most valuable company in Spain.
Its achieved market value is only held by about 80 companies worldwide, according to The Business of Fashion.
Inditex’s founder Amancio Ortega is the second richest man in the world.
His company’s subsidiaries include Zara, Zara Home, Massimo Dutti and Bershka among others.
Zara is so successful because of its unique business strategy, which involves stocking very little and updating collections often.
The retailer is known for crafting pieces inspired directly from the runway. It often designs and releases new styles in as little as two weeks.
That strategy is successful for two reasons, according to Suzy Hansen at The New York Times.
It promotes loyalty among consumers as many people feel that they have to continue visiting the store to check for new inventory.
It also means that if the customer is looking to buy an item, he or she will feel more inclined to buy it out of fear that it will sell out as the store’s popular styles can go pretty fast.
Zara also tends to create its designer-inspired merchandise with cleaner designs than competitors like H&M and Forever 21.
Plus it does it a lot more often and sometimes releases the inspired looks before the designers they’re referencing for inspiration are even able to.
A report by Goldman Sachs perfectly sums up why Zara is challenging retail giants.
“Unlike fast-fashion retailers, which have buying teams sourcing current trending fashion from third-party vendors, traditional specialty retailers have design teams creating product they believe is going to be trending 12 months out,” the researchers write.
The risk of trying to predict fashion trends a year in advance is weighing on the success of retailers such as Gap, Abercrombie & Fitch, Ann Taylor, American Eagle, and others, according to Goldman Sachs.
If these retailers have a “fashion miss,” it means markdowns, which hurts profits.
Despite its tremendous, dominant global presence, Inditex is still growing its businesses.
At the beginning of the year it announced its plan to have a total of eight new locations in Manhattan by the end of 2015.
“It’s a great company, with a great concept and still growing nicely and the potential for further growth is still there,” Peter Braendle, a money manager at Swisscanto Asset Management AG, told Bloomberg Business.
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