Journal of Economic Geography 8 (2008) pp.

2138
Advance Access Published on 23 October 2007

doi:10.1093/jeg/lbm035

Global sourcing: insights from the global clothing

industrythe case of Zara, a fast fashion retailer
Nebahat Tokatli*

Abstract

Keywords: clothing retailers, supply chains, global sourcing, fast fashion, Zara
JEL classifications: F23, D21, L14, L25, L67
Date submitted: 22 November 2006 Date accepted: 17 September 2007

1. Introduction
International retailers of clothing are believed to be the key drivers of the globalization
of the clothing industry (Gereffi, 2005a). They fuel globalization via global sourcing,
thereby contributing to the flight of manufacturing jobs from the West. However, in the
literature, the variety of ways in which retailers are becoming involved in global
sourcing has not yet been thoroughly explored. Berger (2005) observes a real diversity
among the companies trying to survive and prosper in different industries, but the
subject has not received sufficient attention specifically with regard to the clothing
retailersespecially when compared with, for example, the recent attention given to the
supply chain dynamics of food and general merchandise retailers (see Coe and Wrigley,
2007; Dawson, 2007 and the other articles of the recent special issue of this journal
entitled Transnational Retail, Supply Networks and the Global Economy). In this
article, I consider the extent to which Zara, a major international clothing retailer and
pioneer of fast fashion principles, provides evidence concerning the variety of ways
in which retailers source globally. The findings are somewhat contradictory. On the
*Milano the New School for Management and Urban Policy, The New School University, New York,
NY 10011, USA.
email5tokatlin@newschool.edu4

The Author (2007). Published by Oxford University Press. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org

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Until recently, Zara, a major international clothing retailer and pioneer of fast fashion
principles, kept almost half of its production in Spain and Portugal, earning the
reputation of being one of the exceptions to globalization. Since the 1980s, the
existence of such exceptions has been fueling an expectation that the production of
high-quality fashion garments and tailored suits would remain in the industrialized core.
Here I revisit this expectation in the light of the current seminal change in the culture of
fashion from ready-to-wear to fast fashion, and report that the increased variety and
fashionability associated with fast fashion, represented by Zara, have tilted the balance
of competitive advantage towards, rather than away from, firms in partially
industrialized countries. As a number of supplier firms in countries such as Morocco,
India and Turkey have gained the competence to manufacture intricately worked highquality garments with the required flexibility and speed, Zara has turned to sourcing
from these countries. It appears that instead of Zara changing the geography of jobs,
the geography of competencies and jobs has changed Zara.

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Tokatli

2. The change in the culture of fashion from haute couture and

ready-to-wear to fast fashion
Even though clothing retailers in the industrialized core have favored a strategy of
increased variety and fashionability since the 1980s, fast fashion principles have
recently reinforced that strategy even further. This is a consequential development,
essentially because the production presuppositions (such as lead times, minimum
production runs and rhythms) associated with fast fashion are different from those
associated with haute couture or designer ready-to-wear (Reinach, 2005; Dunford,
2006). Fast fashion dictates that retailers have five fingers touching the factory and five
fingers touching the customer (the founder of Zara cited in Ferdows et al., 2004).
Unlike the retailers of haute couture and ready-to-wear, fast fashion retailers do not
directly invest in design but instead are inspired by the most attractive and promising
1

The concept of fast fashion is centrally related to the quick response considerations of retailers whose
emergence was traced by Abernathy et al. (1999, 2006) to the mid-1980s. However, the quick response
demands were then essentially only revolving around replenishment dynamics. There are differences
between the quick response considerations revolving around replenishment dynamics and the quick
response considerations driven by fast fashion dynamics (where there is low or no replenishment). For a
further discussion of these differences and their theoretical and policy implications, see Tokatli and
Kzlgun (2008, in press).

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one hand, Zara, as part of a group called Industria de Diseno Textil (Inditex) that has
17 manufacturing subsidiaries in La Caruna and Barcelona, looks relatively unique
when compared with many other fast fashion retailers that do not own manufacturing
facilities and instead network with suppliersmostly located in partially industrialized
countries. On the other hand, the supply lines of Zaras production chain now extend
into many such countriesfrom Morocco to Vietnam, a development which provides
strong evidence for the effects on the retailer of what Berger (2005) calls the crossfertilization of business practices. As a result, Zara is now less of an exception to
globalizationa reputation that the retailer gained as a result of its business model,
which some believed had the potential to shape the future geography of jobs
(Newsweek, 2001, 36; see also New Yorker, 2000 and Christian Science Monitor, 2001).
This last point is important because the exceptions to globalization in the clothing
industry (the Italian Benetton being another) have been fueling an expectation, since the
1980s, that the production of high-quality fashion garments and tailored suits would
remain in the industrialized core. Here I revisit this expectation in the light of the
current seminal change in the culture of fashion from haute couture and ready-to-wear
to fast fashion, and report that the increased variety and fashionability associated with
fast fashion, represented by Zara, have tilted the balance of competitive advantage
towards, rather than away from, firms in partially industrialized countries.1 More
specifically, I explain how, as supplier firms in countries such as India, Morocco and
Turkey have gained the competence to manufacture intricately worked high-quality
garments with the required flexibility and at high speeds (competencies even including
design capabilities as suppliers have learned how to prepare collectionssee Tewari,
2006 and Tokatli and Kzlgun, 2008, in press), Zara has turned to sourcing from these
countries. It appears that instead of Zara changing the geography of jobs, the
geography of competencies and jobs has changed Zara.

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trends spotted at fashion shows and by cues taken from mainstream consumers (Agins,
1999; Reinach, 2005). They then transform these trends into products that can be put
on the market almost immediately, freeing themselves and the consumers from the
seasonal collection trap, and in the process changing the conditions surrounding
production (Reinach, 2005, 48).
Fast fashion requires that, first, the retailers have rapidly increasing numbers of
stores worldwidepreferably directly owned and operated outlets in secure countries
and franchised outlets in risky onesso that they can reach more and more customers
around the globe. Second, there is the need to connect customers demand with the
upstream operations of design, procurement, production and distribution. This means
the development of an information infrastructure with highly responsive communication channels to ascertain better transfer of hard data and anecdotal information from
trend setters/spotters and customers to designers and production staff. Third, fast
fashion requires short development cycles, rapid prototyping, small batches and variety
so that customers are offered the latest designs in limited quantities that ensure a sort of
exclusivity. Fourth, a very fast and highly responsive supply chain (a super-responsive
or rapid-fire supply chain) is needed to make certain that deliveries are sufficiently
frequent (Ferdows et al., 2004; Reinach, 2005, 49; Dunford, 2006). Finally, because
most fast fashion retailers are publicly traded companies and their success is now
measured by stock performance, they are increasingly under pressure to perform well
on the stock markets. All this means that retailers channel significant parts of their
investments and creativity into the construction of information infrastructures and of
short, tight [and innovative] supply chains that are flexible and fundamentally
collaborative, and worry constantly about their stock market performance (DAvanzo
et al., 2004; Reinach, 2005).
There is now a race between a significant number of fast fashion retailers to increase
the number of their stores while maximizing the speed, synchronicity and responsiveness of their supply chains. The Spanish Zara, the Swedish Hennes & Mauritz (H&M)
and the US-based Gap now have around 1000, 1400 and 3000 stores, respectively. The
Italian Benetton retails its garments through over 5000 franchised stores. These, and
many others such as the Spanish Mango, the American Anthropologie and Forever 21
and the British Topshop, focus their energies on judging tens of thousands of new
designs every year, making smart selections, turning them into marketable products
with remarkable speed and sending them to their stores almost immediately (DAvanzo
et al., 2004; Reinach, 2005). Shipping fewer pieces, in a great variety of styles, more
often requires shorter lead times and high-level flexibility. As a consequence of offering
fewer pieces more often, fast fashion retailers collect larger percentages of the full price
and thus achieve higher net margins on sales. By doing so, they also replace values such
as exclusivity, glamour, originality, luxury and life style, which were once the fulcrum
of . . . fashion, with the values of trend, massclusivity and planned spontaneity
(Reinach, 2005; Trendwatching.com, 2006).
Maximizing the speed, synchronicity and responsiveness of the supply chain involves
maintaining a rhythm of flexibility, whereby budget interpretations of catwalk styles are
whisk[ed] into . . . stores with breathtaking speed (Tungate, 2005, 50). The idea is to
beat the high-fashion houses and ready-to-wear designers to the market (Ferdows et al.,
2004). This requires greater integration of the supply chain, a development which has
already had profound implications for the structure and geography of the clothing
industry, the distribution of value-added along the chain and the nature of the power

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Tokatli

relationships (Dunford, 2006). There are now implications for cities as well: for
example, New Yorks Fifth Avenue, once home to haute couture and designer stores
such as Gucci, Prada, Versace and Ferragamo is now becoming a street of fast fashion.2

3. Fast fashion retailers: some with factories, some without

See, for example, The new face of fifth: populist movement hits luxe street of retailers (WWD, 2004). The
retailers behind this movement are Abercrombie & Fitch, Zara, H&M, Liz Claiborne, Gap, Banana
Republic, Club Monaco and possibly Mango and American Eagle Outfitters. See also The New York
Times (2005).

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Fast fashion retailers can be divided into two categories: while some are retailers, in the
true sense of the term, with no manufacturing competencies of their own (represented
by Gap, H&M and Mango), others (represented by Benetton and Zara) are retailers
with factories. Retailers without factories obviously do not manufacture their own
clothes, but instead outsource them to other firms and increasingly to firms from
partially industrialized countries. Thus, they are the key drivers of the globalization of
the clothing industry (Gereffi, 2005a). They fuel globalization via global sourcing,
thereby contributing to the flight of manufacturing jobs from the West. For example,
H&M has 21 production offices (10 each in Europe and Asia, another in Africa) with a
total of more than 700 employees who are responsible for liaising with around 750
factories, 60% of which are in Asia, the rest being in Europe (Tungate, 2005, 46).
Another example is the US-based retailer Liz Claiborne which in 1999, sourced 93% of
its products from full-packaged manufacturers in a large number of partially
industrialized countries, ranging from Turkey to China (Collins, 2003, 119).
On the other hand, at least until very recently, retailers with factories have been
credited with keeping jobs in the West. For example, in the 1990s, the Italian Benetton
was seen as something of a home-sewn exception to globalization, and, during
20002001, the Spanish Zara also rose to prominence as an exception (Christian Science
Monitor, 2001). At a time when most retailers were outsourcing the bulk of their
manufacturing to partially industrialized countries, where labor is significantly cheaper,
Benetton and Zara, with their manufacturing facilities in Italy and Spain, respectively,
were considered to be flout[ing] much of the conventional wisdom regarding the global
economy (New Yorker, 2000, 74). As retailers with factories, they were defying the
supposedly inexorable force of globalization . . . demonstrating that market flexibility
and lean inventories may be more important than cheap labor, an insight that just
might reverse the long exodus of manufacturing jobs from the West (Newsweek,
2001, 36). This was regarded as evidence for the claim that succeeding in the world of
global competition was still a matter of choices, not a matter of searching for the unique
best way; and that faced with similar challenges, firms could still thrive or fail in
different ways (Berger, 2005). But to what extent do retailers with factories, such as
Benetton and Zara, contribute to reversing the balance of competitive advantages,
which has been tilting towards firms in partially industrialized countries? Before
considering this question in more detail, I will first explore the assumptions behind
the idea of this reversal in the light of the changing geography of the clothing industry,
and explain the extent to which these assumptions now seem less plausible.

Global sourcingthe case of Zara

25

4. The changing geography of the clothing industry

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While it may now seem an implausible idea, in the 1980s many students of the clothing
industry assumed that the expertise necessary for high-quality items, such as fashion
garments and tailored suits, was possessed only by US and European firms and
workers. Therefore, it was believed that countries outside the United States and Europe
would grow their production volume in medium- and low-quality items, while highquality fashion items (especially those retaining many of the elements of tailoring)
would remain in the USA or Europe (Waldinger, 1986; Zeitlin and Totterdill, 1989;
Agins, 1999). In countries outside the USA and Europe, even the managers (not to
mention the workers) were thought to be disadvantaged because they had never
purchased high-quality garments themselves and consequently did not know how they
should look or feel (Abend, 2001 cited in Collins, 2004).
Supposedly, only firms in London, New York, Paris and Milan had the expertise
necessary to provide the design input and flexibility for high-end fashion items (Green,
1997, 2). Also, it was assumed that firms in partially industrialized countries had long
lead times, minimum production runs that were too large and poor quality control
(Waldinger, 1986; Zeitlin and Totterdill, 1989). Moreover, even though fabricating
technologies in clothing were notoriously archaic and remain[ed] essentially at
the rudimentary level of such simple mechanical devices as the cutting knife and
sewing machine (Scott, 1984, 4), partially industrialized countries were a little too
technologically backward; and it was not clear how they could improve. Newly
emerging technologies (such as sophisticated computer-aided design systems) were
probably too expensive for firms from these countries, as they were for small firms in
cities such as London (Zeitlin and Totterdill, 1989).
Therefore, when it was noticed in the late 1980s that retailers were changing their
strategy towards increased variety and fashionability across a number of market
segments, this was considered a new and potentially favorable opportunity for firms in
the industrialized core (Zeitlin and Totterdill, 1989,156). Some observers wondered
whether this might reverse the industrial decline in the USA and Europe (Zeitlin and
Totterdill, 1989). However, as retailers expanded their demand for better-quality, more
fashionable garments, the balance of competitive advantage continued to tilt towards,
rather than away from, low-wage suppliers in the partially industrialized countries. This
was basically due to two developments. First, especially in the 1990s, more and more
firms from countries such as China, Morocco and Turkey acquired (with the help of
technological developments which made possible the production of a variety of styles in
shorter runs) the competence to manufacture intricately worked, high-quality garments
with the required production flexibility. This became painfully obvious with the
proliferation of counterfeit versions of luxury goods, manufactured by Chinese and
other partially industrialized country firms, that were, at least to an untrained eye,
indistinguishable from the originals. Since then, the idea that the expertise necessary for
high-quality items is possessed only by US and European firms and workers have
become even more antiquated: some fakes are now called super fakesitems identical
to originals in quality (Tungate, 2005, 207).
Retailers are now increasingly noticing that countries such as India and Turkey are
exactly where quality is to be found, because of the availability of a large supply of
highly skilled tailors, who have only recently been pushed out of business by large
companies. For example, see The Wall Street Journal (2005) for an example of how a

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Tokatli

There may have been a time when fashion was constructed like a pyramid, with haute couture
at the apex, designer ready-to-wear just below, challenger brands in the middle, and a big slab
of mass retail at the base. This is no longer the case today . . . Consumers . . . rather than being
content to stay in their allotted sectors, scurry promiscuously from one to the other (Tungate,
2005).

On the one hand, Chanel, Dior, Gucci and other haute couture or ready-to-wear
designer brands have weathered the storm of the 1990s, which caused Agins (1999) to
write that fashion was finished: in fact, sales of these luxury brands have surged since
20022003. On the other hand, H&M, Zara and Mango all doubled their sales between
1998 and the end of 2002, despite slowing growth in the market (the market researcher
Mintel cited in Tungate, 2005). This is partly because consumers are now told to project
the message that they are intelligent people, in charge of their own imagenot dazzled
by marketing. This requires paying for a designer item, and then seeing no shame in
adding a trendy but inexpensive item from a fast fashion retailer, and completing them
with yet another item, say, from a young designer. This trend is supposed to turn
consumers into their own stylists and end the era of slavish brand worship.3 Partly
because of this, fast fashion is now gradually winning over consumers of all ages and
buying power throughout Europe, as indicated by the fact that fast fashion sales
increased by more than 45% between 2001 and 2005, compared with a market average
of 3% (Reinach, 2005, 55; analysts at Fashion Trak cited in The Observer, 2005).
Partially industrialized countries enter the picture of fast fashion not only as
manufacturing sites but also as important markets. For some time, Hong Kong has been
considered the most important emerging market for fashion brandsfast or not. Then
there are also Brazil, Russia, India and China (designated by the acronym BRIC) which
represent fashion industrys juiciest targets. China especially, with a population of 1.3
3

In the words of the marketing director of H&M, [y]ou can dress from head to toe in Gucci if you like
that proves youre rich, but it doesnt prove you have taste. Its more imaginative to wear your Gucci with
some H&M. Thats why Vogue readers are among our most loyal clients (Tungate, 2005, 45). Similarly, in
the words of the chairman and chief executive officer of Abercrombie & Fitch: The way people buy
fashion has changed. Theyll buy a Gucci jacket and Abercrombie & Fitch jeans. Thats why we think
were the perfect fit for Fifth Avenue. (WWD, 2004).

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US manufacturer of mens suits looks for these tailors in Turkey and employs them in
its Tennessee factory. In fact, the increasing competencies of suppliers in unlikely
countries, especially indicated by the involvement of these suppliers in design, have now
been acknowledged by others. For example, Bair (2006, 2237) has recently stated that
full-package manufacturers occasionally contribute to . . . the design of a particular
garment. Similarly, Gereffi (2005b) has recounted a change in the definition of full
package production in the Laguna region of Mexico, where some jeans-manufacturing
firms have started to depend on their own teams of designers. Also, in a recent article,
Tewari (2006, 2325) observes the striking emergence of design as a source of
comparative advantage in the Indian clothing industry.
Second, in the last five to six years, there has been a transformation in the consumer
market that put [f]ashion back in fashion (The Guardian, 2003). The new fashion
culture with its emphasis on trends, copying and speed is tilting the balance of
competitive advantage with respect to high-end products even further towards countries
such as Morocco, India and Turkey.

Global sourcingthe case of Zara

27

5. Zara and fast fashion

Zaras first store was opened in 1975 in La Caruna, Spain and the chain grew steadily
throughout the 1980s. In 1985, the retailer was reorganized as part of a group called
Industria de Diseno Textil (Inditex), and in 1988 opened a store in Porto, Portugal. This
was followed by store openings in New York and Paris in 1989 and 1990, respectively.
In the 1980s, taking advantage of its position as a relative latecomer to the market,
Zara was able to harness the latest information technology without having to scrape old
technologies. For old companies such as Gap and H&M, heavy capital investment
is one consideration, but implementation of a new information system while the
business is running on the old one is probably a more important issue (Lo et al., 2004).
4

For partially industrialized country firms, manufacturing own brands (at least for the domestic market)
simultaneously with manufacturing on order for others is now so common that the term CM (contract
manufacturer) needs to be re-defined [see Tewari (2006) for the Indian case]. Berger (2005) still gives the
following definition: a company that manufactures on order for a lead or brand firm but has no brands of
its own (xiii).

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billion and an ever-growing middle class, makes retailers pulses quicken and their palms
sweat (Tungate, 2005, 198). Pierre Cardin organized its first fashion show in Beijing in
1993. Hugo Boss opened its first store in China in 1994 and now has more than 60 outlets
there (Tungate, 2005), while Ermenegildo Zegna has over 30 sales points (mostly wholly
owned and some franchised) with a turnover of around $25 million in 2001 (Verga, 2003
cited in Reinach, 2005). Benetton, Ferragamo, Max Mara, Furla, Prada, Armani, Bruno
Magli, Gucci and Versace also have stores in China (Reinach, 2005).
These countries quicken pulses as manufacturing sites as well. The Italians have
been setting up production networks in the Jiangsu and Zhejiand provinces of China for
the last 30 years. More interestingly, according to Reinach (2005), several of the most
prestigious made in Italy brands are, in reality, entirely manufactured in China. China
has already mastered copying in an extremely subtle and competent manner (Reinach,
2005). The same is true for Turkey that gained experience in copying thanks to the
illegal trade opportunities with Russia that followed the dissolution of the Soviet Union
in 1991 [and approached an annual volume of US $10 billion in the mid-1990s]
(Yukseker, 2007; Tokatli and Kzlgun, 2004).
Mastering the development of trends is still difficult, but the firms from these
countries are working hard towards this goal. Chinese companies whose core business
had been manufacturing others brands have started setting up their own brands
(in what is sometimes called parallel production), examples of which include
Elegant.Prosper [one word] and Li-Ning, Nikes greatest rival in China, which sells
$200 million of sports shoes a year (Reinach, 2005; Tungate, 2005). There are also a
handful of Turkish firms which have set up their own brands (Tokatli and Kzlgun,
2004).4 According to Reinach (2005, 48), once the Chinese firms master trend spotting,
the game will be over.
Recently, more and more students of the industry have been discussing this question
of when the game will be over. This is interesting because as recently as the 1990s, the
expectations (looking from the perspective of Europe and the USA) were much more
optimistic. The following case study of Zara should help us understand why this
optimism is now fading.

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Tokatli

During this period, retailers and brand-owners from Germany, France and Britain had
already outsourced production to cheaper countries and some had even paid costs as
pioneers. It had become clear that what mattered was not just labor costs but rather
unit labor costs. For example, when Ermenegildo Zegna (Zegna), the Italian retailer of
mens tailored suits, opened a factory in Greece in 1975, this turned out to be a mistake:
We believed that Greece with its very low labor cost would provide . . . advantages . . . But we
hit many problems, the main one being that during harvest times the women working in the
factory just walked out and we literally had no workers for weeks! We realized that this just
would not work and that we had to be realistic and cut our losses. After two years we closed
the operations. (Angelo Zegna cited in Schwass, 2000).5

5
6

Ermenegildo Zegna now has manufacturing facilities in Turkey.

See http://www.forbes.com/global/2001/0528/024, 56.

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In the 1980s, the unit labor costs in Spain and Portugal were low enoughand, in
fact, stayed so until recently. For example, as recently as 2001, Forbes Magazine wrote
that Zaras Spanish and Portuguese suppliers were employing some 11,000 grayeconomy workers (mothers, grandmothers and teenage girls looking to supplement
their household incomes in the hardscrabble towns and villages of Galicia and northern
Portugal) and warned about a possible EU crack down on Europes informal
economies.6 Also, Zara and other similar Spanish businesses such as Mango were
forced early on into vertical integration, that is control of production, distribution and
sales, because the existing channels to Spanish consumers were insufficient and a
recession had left many wholesalers bankrupt (International Herald Tribune, 2005). We
developed late, and that was an advantage . . . Now you have more action in Spain
because of a local assembly line that works and concepts that are less stale than the rest
of the EU (a Spanish marketer cited in International Herald Tribune, 2005, 9).
While Inditex adopted a multi-brand approach by developing other brands (including
Pull and Bear) and purchasing shares in others (such as Massimo Dutti), Zara remained
the flagship brand. The secret of Zaras appeal was that, although shopping at Zara was
relatively inexpensive, it did not feel cheap. Zara stores were large, swish and centrally
located, the clothes as well as customers were given room to breathe, and garments
were presented as if they were upscale (Tungate, 2005, 50; International Herald Tribune,
2005). In this regard, there is a visible difference between the stores of H&M and Zara,
with Zaras stores actually resembling the upper scale stores of Esprit (Germany) and
Club Monaco (owned by the US-based Polo Ralph Lauren). In fact, some observers
cannot even see a difference between a Zara and an Armani window (International
Herald Tribune, 2005).
Zara sold [and continues to sell] trendy items that could be mixed with expensive,
classic pieces. This worked especially well after 2001 when, as I explained earlier,
fashion magazines started discouraging consumers from being decked from head to toe
in clothes from the same source, and instead encouraged them to buy designer, fast
fashion, and vintage items all at once and throw them together in a style that was
uniquely personal (Tungate, 2005, 228).
Zara stores with their upscale air are refitted every four or five years with special
attention to facades, interiors and window displays (a press officer of Inditex cited

Global sourcingthe case of Zara

29

Styles, colors, fabricswe dont guess any of these things. We are a business catering to
demand, and weve never made any secret of that. But we need to know what the trends are, so
we follow them through magazines, fashion shows, movies and city streets. We use trendtrackers and forecasting companies. We keep our eyes open (a press officer of Inditex cited in
Tungate, 2005, 52).

Spotting trends and copying the whim of the day are now easier thanks to digital
photography and websites such as Firstview.com that post photos of new couture
minutes after being shown on the catwalk to be downloaded by subscribed members
(Financial Times, 2004; International Herald Tribune, 2005).
In the 1990s, long-term sales forecasts were already becoming difficultone music
video was sometimes enough to generate a sudden wave of fashion. Thus, instead of
investing in influencing trends and forecasting sales, Zara invested in, first, an
information infrastructure with highly responsive communication channels, and
second, a short, tight, flexible and innovative supply chain, that some called the
rapid- fire supply chain or the vertically-integrated dash (Ferdows et al., 2004; The
Observer, 2005; tdctrade.com, 2001).
Trend spotters constantly traveled the world or surfed the Internet in search of
trends and ideas, and Zaras store managers instantly sent customer feedback via
handheld devices, keeping Zaras in-house designers abreast of fast-changing trends.
Stores were not only sales points but also Zaras eyes and ears [I]f enough shoppers
7

The French organization representing haute couture and ready to wear designers has for sometime been
calling for a crackdown to stop the designers fall and spring collections being imitated by fast fashion
retailers and presented in shops within days of fashion shows (Financial Times, 2004).

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in Tungate, 2005, 51). Full-size store windows set up in the Inditex headquarters
building, complete with display platforms with variable lighting, show what Zaras
actual store windows all around the world would look like at night and on dim days
and bright (Forbes.com, 2001). Actual window presentations are exactly like the
presentations created in La Caruna, but different Zara stores in different cities still
manage not to stock precisely the same products. The clothes are supposed to encourage
individuality and reflect the profile of specific groups of customers at specific places.
More importantly, Zara is whisking budget interpretations of catwalk styles into its
stores with breathtaking speed (Tungate, 2005, 50). A designer dress photographed on
a model during fashion week does not arrive in department stores for monthsbut
something very like it can be spotted hanging in Zara in a couple of weeks (Tungate,
2005). This infuriates the designers, not only for the obvious reasons but also because
championing individuality in this way seems, in practice, to be encouraging
homogeneity in fashion: While all fashion is to some extent derivative to start with,
fast fashion retailers take this to a different level as they ignore the differences between
the designer collections, concentrate on the similarities and select only the most
marketable trends before go[ing] off and cop[ying] them (Financial Times, 2004).
In the process, they receive help from fashion journalists, who also prefer to ignore the
differences between designers and concentrate on similarities, as they look for themes
and the chance to say that this seasons look is . . . (Financial Times, 2004). More
importantly, what infuriates designers delights customers who cannot afford the
originals, or no longer see the point of trying (Tungate, 2005).7

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Tokatli

8
9
10

11

One innovation being the acquisition of fabrics via its own buying office in Beijing in only four colors
and postponing dying and printing until close to manufacture at Zaras own facilities in Spain.
Zara is reported to collect 85% of the full ticket price while the industry average is 6070 %.
Receiving and displaying new clothing items twice a week is still impressive today, even though there are
now many other fast fashion retailers in the market. For example, the stores of the US-based
Anthropologie (a Philadelphia-based retailer with other brands called Urban Outfitters and Free People)
receive and display new clothing items every day of the week except for the weekend. (This information
was provided to me by an Anthropologie manager in New York in April 2006. A few days later, a sales
person confirmed that shipments were indeed received every morning during weekdays: you should see
what a mad house the store becomes every single morning before we open the doors to customers.)
Similarly, the German Esprit (originally from San Francisco) considers over 20,000 designs a year before
selecting the most marketable ones, a number not as large as that of Zara perhaps but comparable.
The Swedish H&M has already taken the idea of fast fashion to the next level: disposable fashionthe
practice of selling low-quality versions of the latest designs (so that some of the items become ripped as
customers try them on) somehow manages to make H&M even more profitable than Zara. The BBC
credits journalist Hilary Alexander for the phrase disposable fashion. This was also my independent
observation when, one afternoon in April 2006, I entered an H&M store in midtown Manhattan: the first
dress I touched was already ripped at the shoulder.

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ask[ed] for a top or shirt in coral rather than the available turquoise, Zara [could] often
have that color in stores in less than two weeks (tdctrade.com). The tight and
innovative supply chain made this possible and helped Zara cull less desirable
merchandise.8 After receiving real time information, Zaras 200 plus designers were able
to decide on the designs very quickly, finalize the choice of fabrics, and send out dyed
and cut fabrics for sewing and finishing to 400 near-by suppliers in Spain and Portugal,
where labor costs were lowest in Europe.
By means of this process, Zara was able to judge almost 30,000 designs each year, from
which 11,000 items (in five to six colors and 57 sizes) were selected (which translated
into 1216 collections), dwarfing the traditional fall and spring collections of high
fashion designers. In fact, Zaras performance eclipsed those of other fast fashion
retailers (for example, H&M and Gap introduced 2,0004,000 new items each year).
Moreover, Zara did so with a three- to six-week lead time and with costs that were
markedly lower than those of its competitors. This was despite the fact that, in 2001,
Zara spent 15 % more to produce garments in Spain and Portugal than its rivals spent in
China, mainly due to labor costs. Relatively higher labor costs were clearly more than
compensated for by reduced advertising and inventory costs (0.3% of Zaras costs were
due to advertising as opposed to 34% of traditional retailers) and by shorter lead times
(Ferdows et al., 2004; Newsweek, 2001). Shorter lead times led to more accurate shortterm forecasts about what and how much would sell. As a rule of thumb, marketers
believe that by reducing the lead time by half, the forecasting error is reduced by roughly
the same amount (Stalk and Hout, 1990 cited in Lo et al., 2004). Short lead times not
only dealt with inventory obsolescence, thereby lowering sale mark-downs, but also
made possible the postponement of fabric dying, ultimately contributing to larger profit
margins.9 Shorter lead times also enabled Zara to deliver new items to stores twice a
week, a rate of delivery which might have been common in the grocery business,
but . . . was unheard of in fashion retailing (New Yorker, 2000, 74; Ferdows et al.,
2004).10 Store managers in Spain and southern Europe placed orders twice weekly, by
3:00 pm Wednesday and 6:00 pm Saturday. The rest of Zaras stores did the same by
3:00 pm Tuesday and 6:00 pm Friday, and received shipments twice a week. Twiceweekly deliveries made Zara as much as 12 times faster than the competition and thus a
pioneer for the fast fashion idea (Newsweek, 2001, 36).11

Global sourcingthe case of Zara

31

6. The changing sourcing strategies of Zara

In the early 2000s, Zara received unusual press coverage partly because of the
companys rapid expansion into international markets and partly because of its unique
business model which ostensibly prevented the retailer from becoming entangled in a
plethora of different suppliers (Sunday Business, 2002, 1). It was reported that Zara
bought 40% of its fabric from another Inditex firm Comditel (Inditex accounted for
almost 90% of Comditels total sales); and manufactured complicated products
in-house (tolerating lower capacity utilization if necessary) and outsourced the simple
ones such as sweaters in classic colors (Ferdows et al., 2004). By keeping some of its
production capabilities in Spain, Zara was also less subject to the criticism of exploiting
low-cost labor in emerging economies (Quelch cited in Newsweek, 2001). The decision
makers of Zara believed that it made sense to produce closer, not cheaper: Even if you
save a couple of bucks an hour by shipping the stuff off to the Third World, you end up
paying more in the end, because it destroys your flexibility (a management consultant
cited in New Yorker, 2000, 74). By producing closer, Zara could quickly cancel lines that
did not sell, and avoid the inventory backlogs and clearance sales that were a regular
drain on the profit of rivals, particularly in seasons of imminent recession (Newsweek,
2001, 36). Zaras approach excited those who believed that while the pressures of
globalization forced virtually all actors to transform their activities, they did not
necessarily dictate a single best way of doing business. Zara demonstrated that there
may be a real diversity of successful approaches to decisions about outsourcing and
peeling of manufacturing (Berger, 2005). Some even expected Zara to defy the

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Behind the unusually quick rate of delivery was Zaras centralized distribution center,
where products were inspected and immediately shipped in accordance with time zones
using a logistics system whose software was designed by the companys own teams. The
time between receiving an order at the distribution center and the delivery of the goods
to the store was, on average, 24 hours for European shops and a maximum of 48 hours
for American and Asian stores. Moreover, Zara shipments were 98.9% accurate with
less than 0.5% shrinkage, partly due to the practice of having all items prepriced and
tagged. Also, most items were shipped hung on racks so that store managers could put
them on display the moment they were delivered, without having to first iron them
(Ferdows et al., 2004).
Zaras practises of sending a half-empty truck across Europe, paying for airfreight
twice a week to ship coats on hangers to Japan, or running factories for only one shift
went against the usual principles of efficiency, but Zaras management clearly valued
global responsiveness more than efficiency (Ferdows et al., 2004). This strict rhythm
made Zara stores look endlessly fresh and original. Here, the primary objective was not
only to cater to demand as soon as it appeared but also to stimulate it by constantly
delivering new styles or teasing the customer (a director at Adolfo Dominquez cited in
International Herald Tribune, 2005, 9). In addition, Zaras runs were limited and its
inventories were strictly controlled. This created a climate of scarcity, the message being
that if you dont buy it now, you will lose your opportunity. This message enabled
Zara to sell more items at full price. For example, in 2000, it was reported that the
inventories-to-sales ratio was 7 for Zara, and 12 and 14 for its competitors H&M and
Gap, respectively (The Economist, 2001).

32

Tokatli

12
13
14

15

One source reports that as early as 2000, 56% of production of Inditex was done externally, not in
house53% of which being in Asia, in countries neighboring Europe and rest of the world (Fraiman
et al., 2002).
See http://www.forbes.com/global/2001/0528/024, 4.
The order of the first 40 countries is interesting (Cyprus was entered long before Italy, Mexico was
entered long before Switzerland). The following is the order of country entries after Spain, Portugal,
USA and France: Mexico (1992), Greece (1993), Belgium and Sweden (1994), Malta (1995), Cyprus
(1996), Norway, Turkey, Japan and Israel (1997), Argentina, UK, Venezuela, Lebanon, United Arab
Emirates and Kuwait (1998), The Netherlands, Germany, Poland, Saudi Arabia, Bahrain, Canada,
Brazil, Chile and Uruguay (1999), Andorra, Qatar, Austria and Denmark (2000) and Puerto Rico,
Jordan, Eire, Iceland, Luxemburg, Czech Republic and Italy (2001). Zara stores are mostly owned by
Inditex and only franchised in risky countries.
Because I have no inside information concerning the circumstances which surrounded the companys
IPO decision in 2001 [partly because, as Newsweek (2001) puts it, Inditex is a secretive company], I need
to point out the somewhat speculative nature of my interpretation here.

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inexorable force of globalization, and reverse the long exodus of manufacturing jobs
from the West (Newsweek, 2001, 36).
In retrospect, it is possible to argue that Zara, regarded as a possible exception, was
less impressive than it initially appeared in the early 2000s. This was not just because
only approximately half of the garments sold at Zara stores were actually manufactured
at home (either in Inditexs own vertically integrated facilities in Galicia in northwestern
Spain or by a large number of near-by suppliers located in Spain and Portugal12), but
also because this practice was not necessarily a moral stance (a company spokesman
cited in Christian Science Monitor, 2001, 8). The decision makers of Zara were simply
following a business model which required Zara to take only a few weeks to
manufacture clothes so that frequent deliveries to stores became a possibility.
Moreover, producing closer not cheaper, was possible partly because the Galician
and Portuguese labor force was cheap enough: the Spanish and Portuguese suppliers
employed seamstresses who received something less than half the average industrial
wage, maybe $500 a month, according to a Forbes Magazine estimate, if they were
lucky; and nobody knew whether or not these suppliers paid the social security
premiums and taxes to the state.13
It is possible that Zaras reputation of being somewhat exceptional played a role in
the unusually successful initial public offering of stock by Inditex in May 2001, which
followed the widespread positive press and analyst coverage during 2000 and 2001. By
the time of the initial public offering, Zaras growth and international expansion were
already impressive: By 2001, Zara stores were already available in 40 countries, with
52% of its sales being abroad.14 (Zaras parent company Inditex entered into one or
two countries a year between 1992 and 1997 and at least four countries a year between
1997 and 2001.) The global expansion of the firm accelerated even further after Zara
became a publicly traded companythe further expansion probably had something to
do with the pressure of having to maintain steady and predictable growth for its
shareholders.15 In fact, eight months after the initial public offering, and soon after the
press started reporting that the multiple Spanish public stock listings demanded greater
urgency for growth, the chief executive officer of Inditex announced in New York that
Zaras percentage of global sourcing would grow, initially to 60%, to take advantage of
partially industrialized countries, principally China (Fraiman et al., 2002). The group
set up three low profile companies in Hong Kong (Inditex Asia, Vastgoet Asia,
and Zara Asia) with a strategy that encompasses buying and intelligence gathering,

Global sourcingthe case of Zara

33

16

17

The countries that were added after 2001 are El Salvador, Finland, Dominican Republic, Singapore and
Switzerland (2002), Russia, Malaysia, Slovenia and Slovakia (2003), Hong Kong, Morocco, Estonia,
Latvia, Hungary, Romania, Lithuania and Panama (2004), Costa Rica and Indonesia (2005) and China,
Serbia, Sweden and Tunisia (2006). Inditexs other brands included Pull and Bear (since 1991), Massimo
Dutti (since 1991), Bershka (since 1998), Stradivarius (since 1999), Oysho (2001), Zara Home (2003) and
Kiddys Class (whose name was changed to Skhuaban in 2006 before the brand was launched in Greece).
Inditexs first South Korean store will be opened by the end of the current financial year through a joint
venture with the local retail giant Lotte (see Inditexs web site as well as various articles in Forbes.com).
The latest financial information about Inditex include 6.74 billion Euros revenue in 2006, 11.86% net
profit margins, 15.99% operating margins, 18.08% return on average assets, 29.52% return on averaging
equity, and 59,793 employees (source: Forbes.com, 2006).

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and also signed an agreement with a Hong Kong garment supply agency called Bigi,
which basically meant that designs would originate in Japan, South Korea, Malaysia,
Indonesia and the IndoChinese peninsula with manufacturing on the Chinese
mainland (cited in tdctrade.com, 2001). [S]uits from the Asian and especially China
markets [were already] the most appreciated among Spanish shoppers (tdctrade.com,
2001). We do not know whether the Forbes Magazines warning about a possible crackdown of EU bureaucrats on Europes informal economies played a role in these
changing sourcing strategies; but it is likely that it did.
The retailer now has more than 1000 stores in 64 countries, the latest store opening in
Guatemala in 2007. The total number of stores belonging to the parent company
Inditex is currently 3200 in 65 countries, with Zara contributing the largest number
followed by three other Inditex brands (Push and Bear, Massimo Dutti and Bershka).16
By 2009, Inditex expects to open an additional 1500 new shops, a rhythm of more than
one a day, and to invest $250 million to bolster its distribution centers (International
Herald Tribune, 2005, 9).
However, Zaras rate of growth worries some analysts: a few years ago, a warm fall
season and some fashion misses led to disappointing sales and lower profit margins,
harming Inditexs share price (Financial Times, 2005a, 2005b). A new distribution
center at Zaragoza, in central Spain, had problems with logistics software. For a
company that prides itself on the seamless flow of information, the mistakes were a
reality check (Financial Times, 2005a, 2005b). Meanwhile, the International Herald
Tribune (2005, 9) wrote that stock turnover has slowed in recent years in Inditex,
probably because of the expansion of non-Zara brands and the increased proportion of
goods produced in Asia. Credit Suisse First Boston downgraded Inditex to underperform from neutral as a rise in costs outstripped growth in sales. It is faster fashion,
not quite fast fashion. I cant overstate how complicated it is to open a store a day
(an analyst at Credit Suisse first Boston cited in International Herald Tribune, 2005, 9).
In 2006, the reports on the company were mixed. On the one hand, it was reported
that Zaras sales reached $5.6 billion in 2005 with the third-quarter gross margins
reaching 58.3% compared with an average of around 50% for US specialty retailers
(Daily News Record, 2006). On the other hand, a 30-year Inditex executive, someone
who was closely identified with the creation of the global brand Zara, resigned
unexpectedly, and Inditex has replaced its heads of IT systems, human resources,
communications and investors relations. The new team insists that the Inditex business
model is scalable and will not lose its fast-fashion reflexes when it stocks 5,000 stores
around the globe.17 Some of the indicators are positive: for example, Inditex shares
recently gained 1.04 Euros to 31.44 after the group gave a positive outlook for 2006

34

Tokatli

18
19
20

Inditexs 2005 Annual Report lists 17 manufacturing subsidiaries (mostly textile-design and finishing
operations with some in-house apparel production) in Spain and one manufacturing subsidiary in
Lithuania.
In 2002, Benetton still procured 70% of its production in Italy, 30% of which was made in-house
(Berger, 2005). Three years later, in 2005, Benetton opened an office in Hong Kong partly in order to
monitor the Chinese suppliers upon which it increasingly relied (The Economist, 2006, 73).
On an afternoon in April 2006, I checked many labels in a New York Zara store which had three
departments: Basic, Womans and Mens. The manager told me that new shipments were displayed every
Tuesday and Friday. The pieces made in Spain and Portugal did not constitute the majority of the
garments in the store. In fact, the most elegant and relatively more expensive ($129$149, as opposed to
Zaras usual $59$79 range) womens garments (silk and linen jackets and dresses) were all made in
Morocco. There were also denim garments from Turkey, leather jackets from Pakistan and embroidered
garments from India, Indonesia, Sri Lanka and China. In the mens department, there were suits from
Turkey, Portugal, Morocco, and Lithuania, shirts from these countries as well as Romania and Brazil,
knitted sweaters from Bulgaria and swimwear from Morocco. The sales person who offered me help was
surprised to see the Made in Bulgaria label on a knitted sweater: after reading the label, he quickly
explained thats Europe maam, and then added the brand is Spanish, you know that.

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(more bullish than its peer H&M) following its 2005 results (see Forbes.com, 2006).
However, some observers are skeptical: the question of whether it will be trickier to
cater for instant fashion whims, as Inditex moves further from home, is now being
openly asked. In fact, some wonder how many more million dollars Zara will make
before getting into the cemetery of European retailers (International Herald Tribune,
2005, 9). Behind this concern is the idea that Zara was until recently unusually
profitable because of the success of its managers at not only adjusting to quixotic
consumer demands but also at resisting management fads and ever-shifting industry
practices (Ferdows et al., 2004, 107). In the words of a Spanish management
consultant, Zara did not achieve its success by imitating the business practices of other
successful retailers, but rather by being contrarian to industry norms (cited in juststyle.com, 2004). This quality seems now to be fading.
According to Inditex, in 2006, 64% of the groups production was carried out in
Europe and neighboring countries, while 34% was carried out in Asia (Inditex Press
Dossier on the web, 2007). Products with a greater fashion component were
manufactured in the groups own factories18 or by suppliers whose processes are
significantly integrated with the groups dynamics (Inditex Annual Report, 2005, 18).
It is not clear how many of the external suppliers of Inditex (over 1000) are considered
significantly integrated with the group or where these suppliers are located.
Information specifically related to Zara is even scarcer. China seems to account for
12.5% of Zaras production, less than that of its rivals perhaps (including the other
exception to globalization: Benetton19), but still considerable for a firm with the
reputation of being an anomaly to globalization (The Economist, 2005). Today Zara
stores are full of garments made in India, Pakistan, Bangladesh, Sri Lanka and
Indonesia. And, the supply chains of Zara also include Morocco, Bulgaria, Lithuania
and Turkey.20
The literature contains no information on the partially industrialized country
suppliers of Zara; and our knowledge is also limited. In August 2006, during field
research in which we were interviewing Turkish suppliers of the British Marks and
Spencer (M&S), we met a Turkish manufacturer of childrens jeans, trousers and skirts,
30% of whose production is devoted to Zara. According to this manufacturer, Zara, a
low-price buyer, which insists on short lead-times (34 weeks) but is more tolerant than
other European buyers about justifiable delays and quality problems, works with 2030

Global sourcingthe case of Zara

35

7. Conclusion
This investigation of Zara, a major international clothing retailer and pioneer of fast
fashion principles, has resulted in somewhat contradictory findings. On the one hand,
Zara, as part of a group called Industria de Diseno Textil (Inditex), which has 17
manufacturing subsidiaries in La Caruna and Barcelona, indeed still looks relatively
unique when compared with many other fast fashion retailers, which do not own
manufacturing facilities and instead network with suppliersmostly located in partially
industrialized countries. On the other hand, the supply lines of Zaras production chain
now extend into many such countriesfrom Morocco to Vietnam, a development
which provides strong evidence for the effects on the retailer of what Berger (2005) calls
the cross-fertilization of business practices. As a result, Zara is now less of an
exception to globalizationa reputation that the retailer gained as a result of its
business model, which some believed had the potential to shape the future geography
of jobs.
Today even the complicated and highly tailored fast fashion items of Zara are
sourced from firms in close-by Morocco, Bulgaria and Turkey, and the relatively
faster items from firms in far away places such as China, Sri Lanka, India, Pakistan,
Vietnam and Indonesia. What still differentiates Zara from other fast fashion retailers is
its relatively small dependency on China. But even this might be changing thanks to
Inditexs recently established purchasing subsidiaries, Inditex Asia in Hong Kong and
Zara Asia in China.
21

The idea also lingers in popular and less scholarly outlets. For example, the popular Internet site
Wikipedia introduces Inditex as the group [which] designs and manufactures almost everything by itself
(see http://wikicompany.org/wiki/Inditex).

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agent firms in Turkey that mediate between the buyer and its hundreds of Turkish
contractors and sub-contractors. The manufacturer reports that they visit Zara in Spain
every 34 weeks presenting collections of 2030 items each time and, upon receiving
orders, manufacture for Zara with the understanding that second-quality items will also
be bought by Zara to be sold at Zaras Lefties store.
The fact that Zaras supply chains now extend to Turkey and similar countries has
received almost no attention in the literature, partly because of the manner in which
Inditex, Zaras parent company, presents its information. The groups web-page is
vague about what is meant by Europe and its neighboring countries, which
presumably includes Morocco, Turkey and the Eastern and Central European
countries. The companys desire to appear committed to Europes manufacturing
base is clear, but this commitment is now becoming less convincing. Consider, for
example, the following: In April 2005, 79 workers were killed when a Bangladeshi
garment factory collapsed . . . [bodies were found] in a grave of fragmented concrete,
crushed bobbins, childrens red pullovers ordered by the Spanish textile chain Zara . . .
(Spiegel Magazine, 2005). Similarly, see the Financial Times (2006) article on Vietnams
Vinatex whose buyers not only include Nike, Liz Claiborne and M&S but also Zara.
In fact, it is somewhat surprising that the retailer is still known for manufacturing a
large proportion of its garments in its own factories in Spain (Berger, 2005, 49the
italics are mine).21

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Tokatli

Acknowledgements
I am grateful to Robert Beauregard, Susan Christopherson, Neil Wrigley and Henry Yeung who
read an earlier version of this article and made many helpful comments. I am also grateful to
Omur Kzlgun, who kept Zara in mind when she was interviewing a number of Turkish
suppliers, during 20042006, for a larger project partially financed by the Scientific and Technical
_
Research Council of Turkey (TUBITAK).

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