Zara is one of the largest fashion retailers worldwide, and it is not surprising that investors are looking to invest in Zara stock. Although there is no Zara stock, this does not mean that there is no way to invest in Zara. In fact, Zara is owned by Inditex (MCE: ITX), the largest fashion retailer worldwide. Inditex is one of the largest companies in the world. It has over 7,300 locations worldwide, and it is present in 96 different countries.
For investors looking to invest in Zara stock, Inditex, the parent company is the best way to get exposure to this impressive brand. About 60% of Inditex’s sales are attributed to Zara
Inditex: Zara’s parent company
Inditex was founded in 1963 by Amancio Ortega, in Galicia. Who since then has become one of the wealthiest individuals in the world. Amancio’s vision was not necessary to completely reinvent the fashion retail industry. Instead, he saw a business opportunity in how most fashion retailers operated.
What Inditex and Zara do differently than most fashion retailers
One of the key differences that are often attributed as the growth driver for Inditex has been its quality control. Inditex does not operate in the same way as a normal fashion retailer. Most fashion retailers outsource production, and so does Inditex. But what sets the company apart is its rigorous quality control.
Inditex’s suppliers do not deliver directly to stores. Instead, all of the clothes are sent to Spain, where they undergo very rigorous quality control tests. Inditex will then ship the items to its over 7,300 locations across the globe. Not only does this process allow Inditex to control the quality of the products it sells, but it also helps the company efficiently manage its stock.
How Zara manages stock
Since the headquarters are able to analyze the data, of what item is selling the most in a particular location. They are then able to ship the right items, to the right store. At the same time, the company employs this data analysis to analyze other products - Allowing it to cross-sell.
Inditex also uses data analysis to understand consumer preferences. In terms of color, size, and style. Easily determining what items it should ship to each store, depending on the customer's choices. This is one of the reasons why you will often find extremely different items in Zara depending on the country you are in.
Stock management is one of the reasons for Zara’s success
The backbone of Inditex’s, and Zara’s success also relies on its extremely efficient logistics operations. The company is able to ship its inventory from Spain to anywhere in the world in just under 48 hours. This makes it easy to control stocks and reduces warehouse costs. Making the company one of the most capital-efficient allocators in the fashion retail space.
Zara, as well as Inditex, are then able to quickly and swiftly change the entire collection on a given store, due to the low inventory they hold. Another factor that sets Inditex apart is how they monitor sales.
A new item will often be tried out, and if it does not generate enough sales, Inditex will quickly put it in the bin. Conversely, when a particular item is selling a lot, Inditex tries to create similar items, instead of selling more of the same. This keeps their clothing line always new, and the company is able to create its own fashion trends.
Lefties and Zara
Lefties was founded in 1993, under very interesting circumstances. Inditex wanted to get rid of some of the outdated stock that was clogging their warehouses. This is one of the biggest challenges fashion retailers face.
As their inventory depreciates over time, as trends change. Inditex’s approach was something unseen before in the fashion retail industry. They decided to create a new retailer that could sell Zara’s outdated inventory. However, they did not want to create a Zara outlet. Since outlets are usually frowned upon due to selling old inventory. Instead, the company decided to create Lefties.
Inditex’s approach to growth has been to create new retail brands in order to cater to a specific target audience. This has been evident with their creation of Bershka, aimed at a younger target audience.
Can you invest in Zara stock?
Although investors are not able to solely buy Zara stock, they can invest in Inditex to get exposure to Zara. Since about 60% of Inditex’s total revenues are attributed to Zara. This does not necessarily mean that there will never be a Zara stock. This is certainly a possibility, however, the likelihood of it happening is relatively small.
One of these scenarios includes a spinoff of Zara. This is certainly possible to happen in the future, however, it is unlikely due to the importance of Zara to Inditex. There is also the possibility of antitrust laws affecting Inditex, and the company being forced to split up. This is also a very remote possibility, that would require Inditex to have some sort of monopolistic advantage over competitors, which in turn forces the company to be divided.
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