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Companies can learn a retail lesson from Zara

R etailers aren't having an easy time of it. Climbing unemployment, dwindling disposable income and high costs are forcing most to discount heavily and some to kiss goodbye to profit margins.

Not so for clothes retailer Zara, a company which has become the darling of the industry and a shining beacon of hope in the bleak economy of its native Spain.

Inditex, Zara's owner, saw its profits jump a massive 32% in the first six months of the year to £758m, a figure which is pretty impressive on its own but amazing in the current climate.

So what can our own retailers learn from Zara's business model?

In a word: speed. In three words: speed to market.

Zara depends on getting the fashions its designers see on the catwalks of Paris and Milan into its high street stores as quickly as possible after the fashion shows have ended - in most cases within 30 days.

That compares to many other clothing retailers who might try to forecast what customers will buy and then have to wait four to 12 months before they are in their shops.

That's mostly down to outsourcing to cheaper manufacturing regions such as China which, although saving costs, take a long time to ship.

Zara on the other hand makes many of its clothes lines in Spain so can cut down on lead time to market, a model which proves successful and helps the indigenous economy.

After last week's news of job losses at FG Wilson, it's good to hear of a company doing well by keeping its production local to its home country.