Thursday, January 20

Sustainable fashion and ‘online’ in the new era of Zara

From Marta Ortega Continuing leadership is expected at the head of Inditex, a reaffirmation of the business model with which his father, Amancio Ortega, and Pablo Isla, still president, managed to convert a textile company born in A Coruña in the 70s in the first group in its sector worldwide. The founder’s daughter takes the reins at a time when the company boasts of solidity, reinforced after the blow of the pandemic. The COVID crisis has led to the acceleration of two processes that were already underway and on whose development the success of the new president will depend: the bet for the sustainability and digital integration. They are the two great challenges to maintain the leadership position of the group. Marta Ortega will also have to decide on the dimension of the store network, relocation of factories by the crisis in the supply chain or the formula to maintain the profit margin.

To be sustainable or not to be. Isla informed Inditex shareholders at its last meeting that the company has accelerated the fulfillment of its sustainability objectives, after having surpassed all the marks proposed for 2020. Now, the company marks the challenge to achieve emissions net zero by 2040 (ten years ahead of schedule before the pandemic) and the use of 100% renewable energy by 2022. By 2023, all garments that come from vegetable cellulose fibers will be 100% sustainable. In 2020 the company eliminated plastic bags. Sustainability is a strategic pillar for Inditex, a paradigm that it is implementing throughout its value chain to optimize packaging, shipment loads, the use of clean energy and the recovery of waste from its facilities. It is a question of commitment, image and costs. Of competitiveness, after all. The Dow Jones World Sustainability Index 2021 has once again highlighted Inditex as one of the most sustainable Spanish companies.

The integrated model, the ‘sourdough’ of Zara’s success. Pablo Isla was convinced yesterday that his successor will continue to bet on Inditex’s current business model. “Of course,” he replied with an uncommon bluntness for him. The ingredients in that recipe, he listed, are: a “very strong” integration between design, manufacturing and logistics, to which are added “values ​​of teamwork and humility.” Integration is the keyword in the textile company. Inditex bases its success in recent years on its integrated store and online model, a system that it will have to deepen in the coming years to maintain the leadership position of Zara and the rest of the chains in the face of the threat of large groups that They operate in the digital sector.

The Inditex Open Platform proprietary platform allows prepare online orders in the stores themselves thanks to the integrated stock. The company optimizes inventory control and utilization, while saving time and costs. The barriers of the physical and online world are blurred, but the network has more and more weight. Inditex’s strategic plan includes an investment of one billion over three years to reinforce digitization, with the goal of reaching 25% of online sales by 2022. In the last decade, investment in digital transformation reached 11 billion.

Factories in Asia or proximity, the challenges of the supply chain. Economists estimate that the supply crisis will put the world in check at least until 2023. Bottlenecks in supply chains due to sudden recovery in demand and limited production cause a global shortage against which Inditex has shielded itself by increasing proximity production. China continues to be the main manufacturing center of the multinational A Coruña, but in 2020 for the first time the number of suppliers from the Asian country was reduced and production was diverted to Turkey. Inditex describes almost half (49.42%) of its manufacturing as “proximity production”, which minimizes your exposure to the crisis compared to your competitors, which depend between 60% and 80% on Asia and suffer to a greater extent from delivery problems.

Maintain leadership and courage, the goal. Staying is an ambitious enough goal when it comes to company with more value than Spanish stock market (87,000 million) and the world leader in its sector. But Inditex is never satisfied: “The results invite optimism, we have a lot of capacity to grow “Pablo Isla warned this summer. The company and its president will grow together in the new era that opens in 2022.

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