ZARA: Trend Setter Turned Down

Zara, the flagship company of Inditex Group based in Spain has the famed story of successfully replicating the hot trends of the fashion industry and reaching the wardrobes of its customers in just 15 days. It is not an innovator which believes in creating fashion rather it is an early adopters. It prides itself in manufacturing 11,000 distinct SKU’s annually in about 4-5 weeks against the industry average of 6 months and bravely discontinuing it, if it fails to become the “HOT SELLING ITEM” in the pilot week.

“Government rejects Zara’s holding position in single brand retail” screamed a national daily, which stated the Indian government rejecting its proposal to set up a joint venture company holding 51% stake with foreign equity participation for single-brand retail trading of Massimo Dutti brand which incidentally is a subsidiary of the Inditex group. The reason given was the violation of a rule framed by the Department of Industrial Policy and Promotion (DIPP) under which an investor must own the brand it proposes to bring to India.

The news is surely giving sleepless nights to not only Zara officials, but also IKEA’s top management which is all buckled up to inject 10,500 crores INR in “Third world” countries like India. Can this mayhem be blamed on blurred policies of the Indian government, not only concerning FDI norms but multi layered taxes and nuclear policies as well? In the 2012 Union Budget, Pranab Mukherjee stated that foreign single brand and multi brand retailers have to source 30% and 75% respectively of their goods locally. But the Foreign Investment Promotion Board (FIPB) fails to realise that it is the policies of these globally renowned companies which have made them efficient. Zara buys its fabric in advance in prediction of forecasting trends. Much of its fabric is in greige form which is printed or colored to the desired effect, as when it’s needed. In a country where the lead time for the fabric to reach its factories is 30-60 days, it takes another 10-30 days to create the desired garment which would ultimately defeat Zara’s 15 day theory. Again, it has quality standards to adhere to for which Zara has a vertically integrated organisational structure.

The Indian government should clearly convey to these foreign companies that they have to change their vision, mission and corporate strategies to suit the Indian scenarios if it cannot change or clarify the policies it comes up with. But there is still a flicker of hope that Zara can convince the Indian government to bend its policies and continue to stick to its image of “THE TREND SETTER”.

The world retail industry is counting on it.