Will Zara Zap The Gap?

I’m willing to bet that everyone reading this post has shopped at or — at the very least — knows The Gap, that ubiquitous chain of 3,000-plus stores that has underwhelmed the retail world for years now. But how many readers are familiar with Spain’s Inditex, the parent company of the cheap-chic apparel chain Zara?

With only about 40 stores in America, Zara is much better known outside the US, especially in Europe where there are more than 1,100 Zara and Zara Kids shops. Zara is one of seven chains in the Inditex family. The others –  which you also have probably never heard of and will find it hard to pronounce —  include: Oysho, Massimo Dutti, Pull and Bear, Bershka, Stradivarius, Zara Home, and newly-launched Uterqüe.

Zara was founded by Amancio Ortega Gaona, Spain’s wealthiest man, in 1975 (six years after Don and Doris Fisher opened the first Gap store in San Francisco.) The chain’s competitive advantage is its speed at getting new designs to its stores. It does so in just about two weeks, compared with an industry average of about nine months. The rapid response time allows Zara to avoid loss-making markdowns, something most retailers are struggling with in today’s dismal retail market.

Indeed, Inditex appears to be defying the global recession, posting an overall net sales increase of 12% last year (read here). Sales were up in all its markets, including the US where Zara is capturing sales from budget minded shoppers. Inditex’s revenue hit $14 billion in the fiscal year ended in January, compared to Gap’s $14.5 billion (down from $15.8 billion the previous year). If these trends continue, Inditex is poised to topple Gap from its position as the world’s leading apparel vendor.