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text by:

Meghan Hart

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from the August 2008 Issue

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Zara Overtakes Gap to Become Top Fashion Retailer

Zara has become the Number 1 retailer in the world overcoming perennial leader Gap. The Spain based retailer’s parent company Inditex known for it’s fast fashion has seen a 9% increase in sales to €2.22bn (£1.7bn) in the first quarter of the financial year. What also helped the switch from Number 2 to Number 1 was the fact that Gap saw revenues fall by 10% and recorded sales of €2.17bn. Inditex surpasses H&M 3 years ago in Europe and has expanded at a furious pace. The group has nearly 3900 stores in 70 countries. The secret behind Zara’s success is Inditex’s “oil stain” strategy. Inditex opens one “insignia store” that builds awareness in a new location and then sets up smaller stores to create economies of scale and boost profit margins.

This strategy is in stark contrast with Gap’s of late which expanded into with it’s Piper Lime shoe stores, the Banana Republic Monogram stores and the recently closed Forth & Towne stores whose brand catered to women ages 35 and older.

Inditex saw profits rise by 25% to €1.25bn. Zara remains Inditex most important brand with sales of €6.26bn in 2007.