Editor’s note: This article was first published in June 2012, on 13 June 2012, the day Inditex published its first-quarter 2012 results. The record share price, the 11.57% rise that day, the 30% sales growth and the forecast of another 15% all refer to that moment; Pablo Isla left Inditex in 2022.
While most listed companies have been sinking to all-time lows on the stock market, Inditex has hit record highs, to the point that the company is now being called the Spanish Apple. And if we look at the strategies that Amancio Ortega’s company has followed over the years, we find they can be applied to any kind of business, whatever its size.
In the middle of the crisis, Inditex has managed to grow its sales by 30%, and the leading firms predict it could grow another 15% this year. At a time of volatility and mistrust in the markets, investors have bet heavily on the company, sending its shares up 11.57% today after it released strong results. What is Inditex’s secret for weathering the crisis? What can we learn from this great company and apply to our own business?
1. Quality and price in perfect balance
Inditex has stuck to its quality/price formula, which is why it has survived even in Spain, a country where the textile sector is not going through its best moment. Amancio Ortega keeps to his policy of not buying “big-budget” advertising space, putting the money that would go on advertising into lower prices for his products instead.
The company would seem to prove the saying that a good product doesn’t need advertising. “High quality, good design and better prices for our customers”: that is how they have defined the secret of their success.
2. Cost control
Pablo Isla, the company’s chief executive, has explained that they gave their business model a bit of an overhaul, cutting costs as far as possible and improving efficiency. Along the same lines, Inditex set up its online store, which operates from Spain but pays its taxes in Ireland, where it saves close to 10%.
3. New markets
Much of the growth in sales comes from the company’s move into emerging markets and its bet on online sales. Both have paid off: the online store alone brought in more than 900 million euros.
4. The stores
Getting premises in a strategic location is key to success. And if your competitor is another brand you own, so much the better. Much of Inditex’s financial strength also lies in its low debt, since most of its stores are leased. This has several advantages. First, when the crisis hit, its property assets were not hurt by the fall in real estate values. The second is even clearer: if a store doesn’t work, you close it, end of story.
5. Outsourcing
Outsourcing some departments is very important in times of crisis. Inditex chose to outsource much of its production, which lets it save on costs and offer better prices in its stores.
6. Hire slowly, but fire fast
You have to be careful when you hire someone. They should be professional, present themselves well and bring something of value to the company. Don’t be in a hurry to hire until you find what you’re looking for. Of course, if an employee causes problems, don’t think twice: let them go quickly before they tarnish your company’s image.
7. The number two
Every great business owner needs a number two in the company: someone to lean on, a trusted person who can handle things in your absence just as you would. In Amancio Ortega’s case, he found Pablo Isla, a born strategist who deserves much of the credit for the company’s recent growth.
Further reading
- The secret of business, according to Donald Trump
- The 10 Chinese commandments for entrepreneurs
- The 10 commandments for failing in business, guaranteed
Featured image: Nemigo, Public domain, via Wikimedia Commons.
