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 eema Kakkar has followed a simple routine for the past few weeks. At least
once a day, without fail, she makes sure she pops over to her Mecca, a glittering
new store that¶s opened next to hers. As the entrepreneur who launched Remanika,
a women¶s wear brand, Kakkar has modelled her entire business concept on Zara,
one of the most successful fashion retailers in the world, known for getting the latest
designs into the market before anyone else. More than five weeks ago, Zara opened
its first store in Delhi, followed s oon by Mumbai. The Mumbai store in the Palladium
mall is a few metres away from Kakkar¶s shop-in-shop outlet inside Pantaloon
department store in High Street Phoenix. The chance to observe Zara¶s has proved
hugely beneficial. ³I wanted to be an Indian Zara , so this is like a school for me,´
says Kakkar.

Kakkar¶s response isn¶t surprising. Zara is indeed the Coca -Cola of the fashion
world. Starting sometime in the mid -Seventies in Spain, Inditex, the Euro 11 billion
(revenue) company that owns Zara and some other labels, built a hugely successful
business model of taking the latest catwalk designs and converting them into
affordable high street fashion in a matter of three weeks. Zara focusses on rapid
product development and design and outsources the manufa cture in small batch
sizes to a network of dedicated suppliers. Its ability to bring changing fashion quickly
to market has meant that while customers in Europe visit other fashion stores just
three times a year, they visit Zara 17 times, according to one study.

Many entrepreneurs have tried imitating Zara, but none of them have been quite as
successful. For most part, Inditex remains notoriously secretive. It attends very few
industry conferences and is guarded in revealing too much about its business mo del.

Zara¶s track record on globalisation has been enviable. Its flexible, high -speed
business model has travelled from Spain to 77 markets around the world, including
China. It entered mainland China in 2006 and has close to 44 stores there. Pablo
Isla, the 46-year-old chief executive of Inditex, is now betting big on India. In earlier
media interactions, he has also made it known that it may well be among its most
challenging market entries yet.

Zara¶s global model will be tested in India on three cou nts. One, there aren¶t too
many seasonal variations. In most parts of the country, winter is non -existent or at
best lasts barely a couple of months. So driving new fashions every season isn¶t
easy. Two, there is the cultural issue: Although the new mall c ulture is inducing
buying habits to change, Indians still don¶t change their wardrobe that quickly. And it
is Zara¶s ability to get customers to visit and buy several times a year that enables it
to achieve scale. Three, as a concept, Western women¶s wear is still catching on.
For most part, traditional Indian wear tends to dominate the wardrobe. And there is a
strong preference for bright colours as opposed to the limited colour palette ² black,
white and browns ² in the West.

So far, Zara has cranked out all its designs from a hub near Madrid and airlifted the
finished product to its stores around the world twice a week. The added costs have
been defrayed by charging a higher price in each of these foreign markets. In India,
most foreign retailers have struggled to build a strong franchise based around
import-led premium pricing strategy.

This is why Isla is clear that he isn¶t hoping for a quick ramp -up in India. Apart from
the two stores in Mumbai and Delhi, Zara will in all likelihood add two more stor es in
Delhi and Bangalore ² and then learn from its experiments, before it begins
expanding. A 2002 study says Zara follows what it calls an ³oil stain´ strategy. It
means Zara opens its first few stores in a country to get an understanding of a
market and then uses that knowledge as it expands into that market. ³The most
important thing for us to enter a new market is the existence of potential customers:
People sensible to fashion phenomenon. And, in an operational sense, the
availability of suitable loca tions,´ says Inditex¶s official spokesperson via email.

Now let¶s look at its initial performance. The fact is that Zara has had an opening few
foreign brands have had in India. Through the opening weekend, there were long
queues outside its trial rooms a s women jostled to try out clothes. According to
industry sources (Zara itself is famously reticent about sharing numbers), it had sales
of close to Rs. 1.25 crore in the first weekend in Delhi and nearly the same in its
Mumbai store. Delhi¶s Select Citywa lk mall recorded 40 percent more footfalls than it
usually does and Mumbai¶s Palladium mall recorded close to 30 percent higher
footfalls.

³Any mall owner will want Zara now for free because it has an ability to bring more
people of a certain kind into th e mall,´ says Arjun Sharma, promoter of Delhi¶s Select
Citywalk mall.
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³Their opening has been far beyond expectations,´ says Govind Shrikhande, chief
executive of department store chain, Shoppers Stop. He credits the brand with
opening up the premium women¶s wear market in an unexpected way. Industry
executives such as him pin Zara¶s initial success to the fact that it faithfully brings its
famously international brand appeal and experience without having the higher pr ices
that foreign brands typically have in India on account of high duties.

At more than 16,000 sq ft, the stores look and feel exactly as they do internationally.
The merchandise is also the same as is available in international stores currently,
except that these stores have more of its ³Basic´ and casual wear collections rather
than the higher end ³Collection´ clothes and accessories.

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DESIGN TEMPLATE Remanika's Seema Kakkar wants to be an Indian Zara

Industry sources say price points are mostly below its international competitors in India, including Mango, Guess, Esprit, an d
French Connection. They are also in line with Zara prices in other markets including Singapore, Dubai and some European
markets. This has come as a surprise to customers because international brands have tended to price above Singapore and
Dubai prices because Indian duties could add 30-40 percent on retail prices, while duties in these countries are much lower.
Devangshu Dutta, managing director of Third Eyesight, a retail consultancy based in the capital, reckons that Inditex may be
taking a long-term view of the Indian market and relying on strategic pricing.

The attention to detail was telling. Its shop windows were elegantly laid out and the shop attendants were well -groomed and
sophisticated. To keep its loyal customers hooked, the stores in Delhi and Mumbai had different merchandise every few days
after it opened its doors. Store and mall staff worked through the night to repl enish stores before their early opening at 10 a.m.
To keep up this constant churn in merchandise, Zara stuck to its unique model of every store manager communicating their
store needs to the design team in Spain. Accordingly, twice a week the design team f lies down a consignment for every store.

However, the initial euphoria may not last forever. Pankaj Ghemawat, professor of global strategy at Spain¶s IESE Business
School, says it may be too early to judge how the stores will do over the longer term. In f act, expanding in Asia, and India, could
force Inditex to confront some of the issues that face its centralised model that has brought it much success.

While designs are all made and shipped out of Spain, it is the interaction between store managers and designers that leads to
some degree of localisation in store merchandise. For instance, Asian stores may get smaller sizes and more cotton clothes
than stores in Europe. But as the chain gets larger, this could prove harder to do and add expenses to Zara¶s supply chain,
says Kasra Ferdows, co-director of programs for global logistics at Georgetown University¶s McDonough School of Business.

This is because clothes manufactured across the world, including India, Bangladesh, Sri Lanka, Turkey, Spain and Indonesia,
are shipped to Spain and then sent to stores according to the specifications of the design team and store managers. This coul d
well add to costs as Zara seeks to expand in Asia. At the end of fiscal year 2009, Zara had 1,608 stores worldwide, of which
219 stores were in Asia. More stores have opened since, but merchandise comes in from Spain. So, for instance, there are
clothes in the Indian store that are made in India, Bangladesh and Sri Lanka, presumably shipped to Spain and then sent back
to the store here.

Zara started expanding internationally with a store in Portugal, as early as 1980, to access larger markets and soon opened
stores in New York and Paris to establish its positioning as a fashion forward retailer. It has expanded very quickly over the last
more than a decade and India is the 77th country it is in. Still, more than 61 percent of its stores are in Europe, says
Ghemawat, who has written a well known case study on Zara.
³If they are to make a serious play in the Asian market they will need a second hub there,´ he says. But given that the Spani sh
design team works with each store manager to localise the merchandise, moving the business model away from this will not be
easy, he says. Although Inditex runs several labels, Zara contributed 63.8 percent of its Euro 11 billion revenues for the fi scal
year 2009.

In fact, several international retailers, including Marks and Spencer and Benetton, have started to source Indian products for
their Indian stores to meet Indian demand for quality and value as they see the potential for growth in the Indian market.
³Supply is creating demand and the market is getting created for women¶s Western wea r now,´ says Shital Mehta, COO of
premium men¶s and women¶s wear label, Van Heusen.

Even till a couple of years ago, there were few women¶s Western wear brands. Technopak, a leading retail consulting firm,
estimates that Western wear accounts for just Rs. 3,000 crore of the Rs. 49,000 crore women¶s wear market, which includes
ethnic wear, woollens, intimates, etc. But now, the entry of Indian and international brands is helping drive change. The
segment is growing at a faster rate than the overall market. Van Heusen¶s women¶s wear sales growth has been double that of
men¶s wear in the last few months, albeit on a smaller base, he says.

Other international wear brands faltered earlier because either they were too expensive or the Indian franchisees did not invest
in growing the brand, says Arvind Singhal, Technopak¶s chief executive. He thinks Zara could well look at earning revenues of
$500 million in India over the next 10 years or so. But to fully realise the potential of the Indian market, it may have t o source
locally. For that, Zara will need to have at least 100 stores in India, says Ferdows, who co -wrote another well known case study
of the Zara business model. ³Otherwise it is too much of a hassle and expense for a few stores,´ he says.

Even as Zara settles in, the rest of the Indian fashion retail sector is hoping for an immediate rub -off. Third Eyesight¶s Dutta
reckons a lot of smaller players will now be encouraged to work harder, be more customer focussed and look at things which
they may have overlooked earlier.

On her part, Kakkar is hoping that Zara¶s coming will create a market for different styles and more frequent shopping. In the
past, whenever she tried to drive the market by offering several new styles, customers saw it as too experime ntal. But, she
says, a brand such as Zara will make it acceptable to experiment and wear different styles. ³I feel Indian customers want to
experience great shopping and Zara will make people buy more.´ That¶s something Isla would be hoping for too.

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