In Spain, a home-sewn exception to globalization

Maria Naranjo is no casual shopper at Zara clothing store. The teenager times her fashion foraging to Zara's delivery schedule: The truck arrives twice a week with the latest goods, prized by those on fashion's cutting edge.

"They always have something new," says the Spanish teenager, eyeing blue pants and a purple shirt on a store rack. "I've been shopping here for as long as I can remember. My mom dressed me in Zara when I was a kid."

This kind of customer devotion is something Zara's competitors yearn for. In a slowing economy, and in an era when the use of cheap foreign labor is considered essential for profits, Zara stands out as a well-dressed anomaly. By producing its goods near company headquarters in northwestern Spain, Zara keeps a competitive edge and is one of the fastest-growing clothing retailers in the world.

"This is not a moral stance," says a company spokesman, explaining the decision to use more-expensive European workers. "To reduce lead time, we need to produce closer, not cheaper."

The company may be sidestepping the debate between all-growth-is-good globalists and the only-in-my-backyard isolationists, but the bottom line is that an estimated 12,000 textile workers in northwest Spain have jobs that haven't moved to Asia.

Local production allows the company to have new designs in stores within two weeks, instead of the five or six months that are standard for the industry.

While design, fabric cutting, and finishing is handled in-house, Zara's parent company, Intidex, uses a network of independent workshops clustered around northwest Spain and Portugal to sew the clothes together.

But some critics charge that Zara is underpaying the factory workers.

"Inditex pays only per piece of clothing sewn," says Juan Fernandez, head of the local textile union, which represents some of the workers. In many of the shops, workers earn $500 a month, about half the average industrial wage. "And they don't care about the conditions inside the factories," he adds.

Yet, Inditex insists that it keeps a close eye on the workshops. "We have a very close relationship with our suppliers," says Raul Estradera, a company representative, "and we check that they fulfill the legal minimums in terms of salaries, social security, health benefits, and working conditions."

Even Mr. Fernandez considers Inditex to be beneficial, on the whole. "They're one of the largest employers in the region," he adds. "We need them here."

Intidex has 1,148 stores in 33 countries - 80 percent of which are Zara stores - which earned $2.3 billion in sales last year. The company is opening new stores at a rate of about one every other day.

When Intidex went public in May, it was initially valued at $8 billion, and after a frenzied first day of trading, stocks shot up 22 percent. And this at a time when market conditions were so poor that Italian fashion giant Prada was forced to cancel plans for its initial public offering.

Many other established clothing companies are facing hard times. In the US, Gap Inc. recently announced store closings and job cuts.

In Europe, German clothier C&A has pulled out of the British market following disastrous losses, and British staple Marks & Spencer pulled out of the entire mainland Europe for the same reasons.

Because production happens in Zara's backyard, it can afford to discontinue unpopular fashions and replace them almost overnight.

Most companies must guess what the world will want to wear six months out, and, if they are wrong, endure a season of bad sales.

"Having up-to-the-minute sales data is not unusual these days," says Richard Hyman, Chairman of Verdict Research. "What makes Zara different is that they can do something about it."

Could Zara's success prove useful to clothing companies who are uneasy about manufacturing in the developing world? It's unlikely, says Mr. Hyman, as the world of fashion is a uniquely fickle market. In slower-moving clothing segments, or in housewares, for example, the additional speed gained by producing locally is not worth the cost.

But at least in the fashion world, some competitors are starting to adopt Zara's practices. "Whenever Zara enters a new market, they take business from existing suppliers," Hyman says. "That concentrates the mind of existing players."

(c) Copyright 2001. The Christian Science Monitor

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