This polka-dot dress from Zara has become the fashion hit of the summer.
A $69.90 polka-dot dress from Zara has become the fashion hit of the summer. Despite little email or social media promotion from the chain, the flowy, flattering mid-length frock has become so ubiquitous that someone has createdto collect sightings of it out in the fashion wilds — including several that appear to show multiple women wearing it to the same event.
There is no doubt that Inditex’s business model has served it handsomely for more than four decades. But its approach must prove its mettle now more than ever. Otherwise, its advantages risk being gradually whittled away, along with the group’s industry-leading profitability. Social media makes it easier for all retailers to see what’s hot. Just take those polka dots: Even Topshop, now widely regarded as a bit of a fashion has-been, also managed to produce a stand-out spotty dress.
Despite all its advantages, Inditex’s operating margin has been shrinking for the last six years. Consequently, the group is opening fewer, larger stores, and it plans to increase space in prime locations by 5% to 6% this year. This is the right strategy, but it means that the company won’t be able to count on large-scale store openings to boost revenue growth.
And while Zara counts on technology, such as by using radio frequency identification to know exactly where every organza halter-neck top and utility boiler suit is, much of its dominance is actually due to something more old-school: It knows how to make clothes that people want — even before people know they want them.
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