Amancio Ortega: Chairman of Zara, Richest Person in Spain

Amancio Ortega, the Founding Chair of retail giant Inditex, the parent company of Zara, the largest global fashion retailer, is the wealthiest person in Spain and one of the wealthiest people in the world. Ortega built a retail empire as one of the earliest and most successful pioneers of fast fashion—a retail concept based on the rapid production and distribution of inexpensive versions of designs copied directly from fashion runways or pop culture icons.

Ortega, who dropped out of school at the age of 13, founded the company that grew into the retail giant Inditex as a workshop in his home in Spain in 1963. When he made the leap from production to retail with the launch of the first Zara store in 1975, the concept of getting garments from the idea stage to the sales floor within two weeks was so successful that it shook up the retail fashion industry. From that point on, the Zara brand launched Ortega on a trajectory that would make him the most successful fashion retailer in the world. New Zara stores opened across Spain in the 1980s, followed by the incorporation of Inditex in 1985, and a series of international store openings, brand expansions, and acquisitions throughout the 1990s.

In 2001, Inditex went public with a valuation of €9 billion, and Ortega became Chair and CEO of a massive holding company of distinct retail fashion brands that operate as a single company aligned on all elements of fashion production, from design and manufacture to distribution and retail. Within four decades, Ortega had grown Inditex from a small family workshop making women’s clothing into one of the largest fashion retailers in the world.

Key Takeaways

  • Amancio Ortega, the wealthiest person in Spain and one of the wealthiest people in the world, is the Founding Chair of retail giant Inditex, the parent company of Zara, the largest global fashion retailer.
  • Ortega built a retail empire as one of the earliest and most successful pioneers of fast fashion—a retail concept based on the rapid production and distribution of inexpensive versions of designs copied directly from fashion runways or pop culture icons.
  • In 1963, Ortega founded the company that grew into the retail giant Inditex as a small family workshop in his home in Spain—and within four decades, he grew the business into one of the largest fashion retailers in the world.
  • In 2001, when Inditex was listed on the Madrid Stock Exchange with a valuation of €9 billion, Ortega became a billionaire.

Ortega in Retirement

  • When Ortega retired as CEO of Inditex in 2005 and Executive Chair in 2011, he remained in charge of the product side of the business, including the direction of design, manufacturing, and sales. From the IPO in 2001 to his retirement in 2011, Inditex operating profits remained high, and sales quadrupled to €13.8 billion ($19.1 billion).
  • Since stepping down as Executive Chair in 2011, Ortega has retained 59.3% ownership and continues to serve as Official Advisor to the Board (as of April 2022).
  • He has also built the largest real estate portfolio of any billionaire in Europe, including the Torre Picasso (the tallest building in Madrid) as well as extensive commercial sites across the globe and historic properties in high-end areas of London, New York, Los Angeles, Miami, and Barcelona.
Amancio Ortega

Investopedia / Lara Antal

Education and Early Career

Amancio Ortega Gaona was born in a small village in northern Spain in 1936, at the start of the Spanish Civil War, and moved with his family to Galicia, a region in northwestern Spain, in 1949. His father was an itinerant railway worker, his mother worked as a maid, and the family lived in a row house on the railroad tracks.

According to the only authorized biography of Ortega, his lifelong drive for success was triggered by a traumatic incident that happened shortly after the family arrived in their new town. One evening, as he was walking home with his mother, he witnessed her pleading for credit to buy groceries and coming out of the store empty-handed because the store owner refused to extend her line. At that moment, Ortega was so humiliated that he decided he would drop out of school and start working—a decision that turned out to be the first step in one of the greatest retail careers in history.

In 1949, at the age of 13, Ortega went to work as an assistant to a luxury shirtmaker in his hometown of La Coruña, where he learned to make clothes by hand. Over the next 14 years, as he was promoted to Assistant Manager and Shop Manager, he had direct experience not only dealing with customers but also purchasing fabrics and other supplies to manufacture apparel.

The Principles of Fast Fashion

By the early 1960s, Ortega had already developed the core operating principles for the business model that would later be called fast fashion. Rather than do what his boss and every other retailer did—buy inventory and hope that customers would buy it—Ortega knew that he would make more money if he could learn exactly what people wanted, produce copies of those designs as quickly as possible using much cheaper materials, and sell them at much lower prices.

After getting permission from his employer to produce his own designs, Ortega, his future wife (Rosalia Mera), and his three siblings set up a workshop in their home to sew quilted bathrobes and lingerie based on designer brands and then sell them at budget prices to retailers. Since that first brainstorm, Ortega has never veered from the two core principles—customer preference and speed—that enabled him to build the retail conglomerate Inditex.

After launching their first company, Confecciones GOA (his initials reversed), in 1963, Ortega and Rosalia Mera spent the next decade expanding their client base and building their production capacity. Within ten years, their business had grown so rapidly that GOA had 500 hundred employees. A key driver of GOA’s strong growth throughout these early years was that Ortega eliminated middlemen and controlled manufacturing and the supply chain by organizing thousands of women into sewing cooperatives and trucking in textiles from Barcelona.

From Manufacturing to Retail: The First Zara Store (1975)

By 1975, Ortega and his wife were ready to step up to the next level: direct sales to customers. The first Zara boutique, one of the most successful retail formats in history, opened that year in La Coruña—and it was a huge hit from the start.

Over the next ten years, Ortega took the business through a rapid series of expansion milestones. In 1977, company headquarters and Zara’s first garment factories were established on the outskirts of La Coruña. By 1983, there were nine Zara stores thriving in shopping districts across cities in Spain; in 1984, the first logistics center opened in that same central hub outside La Coruña. In 1985, as Ortega was preparing to launch the Zara brand internationally, Inditex was officially incorporated as the parent company for Zara. The first Zara store outside of Spain opened in Portugal in 1988, followed quickly by New York (1989); Paris (1990); Mexico City (1992); Athens (1993); Belgium and Sweden (1994); Malta (1995); Cypriot (1996); Norway and Israel (1997).

In 1991, in addition to geographic expansion, Ortega began to expand Inditex’s retail portfolio beyond the flagship Zara format, with the launch of Pull&Bear (an urban fashion chain) and the acquisition of 65% of Massimo Dutti (an upscale men's and women's fashion store). (The remaining 35% of Massimo Dutti was acquired in 1994.) In 1998, Ortega introduced Bershka, another entirely new retail format targeting the young female market.

IPO on Madrid Stock Exchange (2001)

At the turn of the 21st century, as Ortega approached retirement, he decided that taking his family-owned business to the public market was the best path forward. When Inditex listed on the Madrid Stock Exchange at a valuation of €9 billion—one of the most successful initial public offerings (IPOs) of 2001—Ortega's sale of over 20% of his stake made him the wealthiest man in Spain, with a fortune estimated at over €4.6 billion.

Over the next decade, as Chair, CEO, and majority shareholder of the new public company, Ortega pursued an aggressive retail expansion and acquisition program, adding new formats and new chains at such a rapid pace that Inditex doubled the store count between 1999 and 2004 alone. Highlights included the 1999 acquisition of Stradivarius (a youth fashion chain), the 2001 launch of Oysho (a lingerie format), and the 2003 launch of Zara Home (a home furnishings line)—the company’s first business line outside the apparel industry.

Computerized Design and Distribution System

In the early 1980s, Ortega was one of the first fashion retailers to implement a computerized design and distribution system—and this system overcame his biggest hurdle: the traditional production processes of the clothing industry, which took up to six months from the design stage to retail delivery. Other manufacturers, stuck in this old model, could never respond quickly to emerging trends, which often left retailers saddled with unsold inventory.

By freeing Inditex from those six-month lead times, which would have limited collection launches to two or three a year, Ortega’s computerized system not only shortened the design-to-distribution process to a maximum of two weeks but also enabled Inditex’s in-house team of designers to respond immediately to any shift in consumer taste.

Fast fashion—the massively successful business model that Ortega had first developed in the 1960s—was off and running.

In addition to state-of-the-art design and production, the computerized inventory systems that linked stores to factories prevented unnecessary capital expenditure by removing the need for large warehouse inventories. For example, once each Zara store was linked to the factory system, not only was all sales information automatically sent back to headquarters in Spain, but the on-site staff also constantly monitored the stock. If any style or color failed to sell, production was halted immediately. If a style or color was selling well, new colors or patterns were added to existing designs.

The Ortega Business Model

Ortega’s business model for Inditex has been so successful for so long that fashion insiders from competitors to industry analysts study his strategies carefully—and then just ask: “How do they do it?” The Economist quoted a Gap executive, who said: “I would love to organize our business like Inditex, but I would have to knock the company down and rebuild it from scratch.” An executive from Benetton—a competitor that poaches Inditex executives—was quoted as saying, “My main task…is to replicate Inditex's obsessive focus on its products and its shop.”

According to The Wall Street Journal, one obvious explanation is simply that “while (a luxury item) from Chanel might be $8,550, one with similar vim from Zara sells for around $120” and that “a luxury-world counterpart, such as Giorgio Armani,…had…consolidated net revenue of $1.9 billion in 2020…(and) Zara’s consolidated net revenue (in 2020) was $16.7 billion.”

However, analysis of “Zara’s famously well-honed system” frequently cites certain key operational drivers of Ortega's success: stock rotation, minimal advertising, and a short supply chain.

Complete Stock Rotation Every 2 Weeks

The fact that Ortega’s fast-fashion model requires that the retail stock be completely rotated every two weeks not only encourages customers to make quick purchase decisions (because any item that catches their eye won’t be around for long), but it also prompts them to visit the stores frequently—especially every two weeks on delivery day.

Minimal Advertising

In addition to industry-leading design-to-store turnaround speed, another strategy of Ortega’s that sets Inditex apart from competitors is that almost all advertising spending has been eliminated.

The reason Inditex stores like Zara can succeed in such a highly competitive industry with minimal advertising is baked into Ortega’s original fast-fashion business model: manufacture only what will sell and maintain low stock inventory so that everything sells and nothing needs to be discounted.

Also, since Zara is fast with styles—but not first—almost identical styles have already been widely advertised by the original designer that Zara copied. (Zara's advertising spend is 0.3%; most retailers like the Gap and H&M spend 3.5%.)

Short Supply Chain

Inditex’s low advertising spending has also allowed the company to avoid outsourcing production to third-party producers. Even when Zara began to expand internationally in the 1990s, Ortega kept most of the production local, which gave the company ownership of a short supply chain—another secret of Inditex’s exceptionally rapid design-production-delivery turnaround time. In 2021, over half of the factories were still located fairly close to corporate headquarters, either in Spain or Portugal, Turkey, or Morocco.

In the fast-fashion model that Ortega built, Inditex spends more initially to keep production close to home, but their short supply chain means that the entire design-production-delivery team can keep their fingers on the pulse of emerging trends and produce only what will sell. Rather than cutting costs by outsourcing to China and waiting months for delivery like their competitors, Inditex drives profit by selling at full price and rarely getting stuck with unwanted stock.

Real Estate Investment Arm: Pontegadea Inmobiliaria

When Inditex went public in 2001, Ortega established a family office, Pontegadea Inversiones, as the vehicle through which the Ortega family operates as majority shareholders of Inditex. The family office in turn channels most investments through Ortega’s real estate investment arm, Pontegadea Inmobiliaria, one of the biggest property companies in Spain.

Since stepping down from an active operating role at Inditex, Ortega has focused on preserving his fortune by expanding his real estate holdings, which Bloomberg valued at €15.2 billion ($17.2 billion) in 2020—the largest real estate portfolio among European billionaires.

Landmark properties in Ortega’s portfolio range from huge commercial complexes to historic buildings, including the tallest skyscraper in Spain (the Torre Picasso in Madrid), the historic E.V. Haughwout Building in Manhattan, an entire block of prime property in Miami Beach, and an office block in London's Mayfair neighborhood.

Of note, Ortega’s commercial real estate holdings make him landlord to several impressive tenants: tech giants Amazon and Facebook as well as Inditex competitors H&M and the Gap.

Inditex Brands & Markets

  • As of April 2022, Inditex is the holding company for seven retail brands (Zara, Pull&Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, and Zara Home) with 6,477 stores in 95 markets and an online presence in 215 markets.
  • According to Bloomberg, Inditex had a market capitalization of $64.016 billion on April 14, 2022.

Which Celebrities Wear Zara Clothes?

The most famous Zara fan is likely Kate Middleton, the Duchess of Cambridge, but Zara has a long list of celebrity admirers, including Bella Hadid, Kendall Jenner, and Olivia Palermo.

What Is the Secret of Ortega’s Business Model?

A former Inditex executive said that the genius of Ortega's business model is that "it picks up on every season's trends and is never associated with any one style, which could fall out of fashion.” Also, Inditex is the only fashion company that does not advertise. “Instead, it relies on chic locations and shop-window displays.”

Why Does Ortega Keep a Low Profile?

Ortega protects his privacy so fiercely that, when he made his first public appearance in 2000, in advance of the Inditex IPO, it made headlines in the Spanish financial press. Until 1999, no photograph of Ortega had ever been published—and he has granted interviews to only three journalists throughout his entire career.

What Is Ortega’s Net Worth?

As of April 12, 2022, Ortega had a net worth of $46.9 billion, which made him the 25th richest person in the world, according to the Bloomberg Billionaires Index.

What Are Ortega’s Charitable Causes?

In 2001, Ortega founded the Amancio Ortega Foundation, a charitable organization focused on education and social welfare. Donations have included $344 million to Spanish public hospitals to fund the latest technology for breast cancer screening and treatment (2017) and €20 million to Cáritas, an international Roman Catholic charity, to provide food, medicine, housing, and school supplies to Spain's neediest people (2012).

The Bottom Line

In the early 1960s, Ortega developed the business model that would later be called fast fashion—and when the first Zara boutique opened in 1975, it revolutionized the retail fashion industry.

Since that first brainstorm, Ortega has never veered from the two core principles (customer preference and speed) that enabled him to build the retail conglomerate Inditex.

Ortega was one of the first fashion retailers to implement a computerized design and distribution system to dramatically shorten the design-production-delivery process and to enable Inditex designers to respond immediately to shifts in consumer taste.

Since stepping down from an active role at Inditex, Ortega has focused on expanding his real estate holdings, valued at $17.2 billion in 2020—the largest real estate portfolio among European billionaires.

Article Sources
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