Retailer Zara has avoided outsourcing to China, and that's a huge reason it's been so successful.
The brand is owned by Spanish company Inditex SA, which is one of the world's largest clothing brands next to its competitor H&M. The company's profits grew by 12 percent to $2.68 billion last year.
According to the Economist:
The Inditex model, celebrated in many a case study, goes like this. Other fashion firms have their clothes made in China. This is cheap, but managing a long supply chain is hard. By the time a boat has sailed halfway round the world, hemlines may have risen an inch and its cargo will be as popular as geriatric haddock.
Inditex, by contrast, sources just over half of its products from Spain, Portugal and Morocco. This costs more. But because its supply chain is short, Inditex can react quickly to new trends. Instead of betting on tomorrow’s hot look, Zara can wait to see what customers are actually buying—and make that. While others are stuck with unwanted stock, Inditex sells at full prices.
Zara is also a solid international brand because it designs clothing specifically for different markets, reports Lydia Dishman at Forbes, and choses the best locations for its stores, like Fifth Avenue in New York City.
The company has huge expansion plans, and now that it's making headway in China, its chairman Pablo Isla said it will eventually make sense to move some production over there.