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Zara founder richer than Buffett

You may not have heard of Spaniard Amancio Ortega, the founder of fashion retailer Zara, but his personal wealth grew by $20 billion to $57 billion last year.

That catapulted the 76 year old into third place of Forbes magazine’s richest list, behind only Mexican telecommunications baron Carlos Slim and Microsoft founder Bill Gates, and ahead of investment guru Warren Buffett.

Mr Ortega is the major shareholder in Zara, a fashion retailer founded in 1975, and described by some as the “most innovative and devastating retailer in the world.” Zara now has 1,700 stores globally, and bases its model on super-fast turnover at its stores, with new stock estimated to arrive in its stores every two to three weeks. The current best retailers might have new stock in store every four weeks, leading some commentators to describe Zara’s philosophy as “fast fashion”.

Zara’s success has been attributed to editing the latest designs from premium fashion houses on the catwalks of the world. Edwina McCann, editor of Vogue has told the Sydney Morning Herald (SMH) that ”Some of the pieces are very closely referenced to what we see on the runway in terms of design. So obviously the ethics behind that are a bit questionable. It’s not successful because it’s a unique offering, they’re just very good at editing what others have done, and they deliver the consumer trend at a very affordable price and very quickly.”

The SMH reports that Zara has also streamlined its manufacturing process, modelling it on Toyota, allowing it to hit a two-week turnaround.

With six stores in Australia, and two new stores opening in March, Zara is taking it to our traditional retailers like David Jones Limited (ASX: DJS), Myer Holdings (ASX: MYR), Specialty Fashion (ASX: SFH), and Premier Investments (ASX: PMV).

Foolish takeaway

Australian retailers will need to lift their game to compete with Zara, and a whole host of retailers coming into the country. Customer loyalty only goes so far.

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The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool writer/analyst Mike King owns shares in David Jones.

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