Spanish retail group Inditex, best known for its Zara stores in Europe reported 21 percent sales growth, to US $8.15 billion in 2005.
That puts Inditex ahead of H&M, which posted $7.87 billion in sales last year.
Zara moves fast with an in-house design team based in La Coruna, Spain, and a tightly controlled factory and distribution network.
Company can take a design from drawing board to store shelf in just two weeks letting it to introduce new items every week, which keeps customers coming back again and again to check out the latest styles.
Zara's success is all the more surprising because at least half its factories are in Europe, where wages are many times higher than in Asia and Africa.
To maintain its quick inventory turnover, the company reduces shipping time to a minimum.
The fast-fashion approach also helps Zara reduce its exposure to fashion faux pas.
Company produces batches of clothing in such small quantities that even if it brings out a design that no one will buy, it can cut its losses quickly and moves on to another trend.
H&M uses a slightly different strategy, as around one quarter of its stock is made up of fast-fashion items that are designed in-house and farmed out to independent factories.
At Zara, these items move quickly through the stores and are replaced often by fresh designs. But H&M also keeps a large inventory of basic, everyday items sourced from cheap Asian factories.
The Swedish retailer has also struck deals with high-fashion designers Stella McCartney and Karl Lagerfeld to create limited, one-time collections, which generally sell out within days.
H&M is also a strong financial performer, as its sales during the first three months of this year were up by 20 percent, after rising 14 percent in 2005.
marketing@alchempro.com
