Meet Amancio
Ortega: The third-richest man in the world
January 8, 2013: 5:00 AM ET
After Gates and Slim comes Amancio Ortega,
who built the world's largest fashion empire, Zara. He's difficult to know,
impossible to interview, and incredibly secretive. An exclusive portrait.
By Vivienne Walt, contributor
FORTUNE -- The motorbike roared
up to the traffic light in La Coruña in northern Spain and stopped alongside a
black Town Car. From inside, the passenger glanced out his window and saw the
young biker leaning over the handlebars, jean jacket decorated with appliquéd
patches, a throwback to the 1970s. The man in the car, decades older than the
biker, zoomed in on the jacket. The old man grabbed his cellphone and, as the
story goes, called an aide in his office. His eyes still fixed on the biker,
the man described the jacket's stitching, its shape and color, and signed off
with a single instruction: "¡Hácedla!" Make it.
The light turned green, the biker pulled
away; unbeknown to him, he and his jacket had just played a walk-on role in one
of the greatest retail stories of our time.
Amancio Ortega Gaona
-- the man inside the car -- is the third-richest man on earth. In this
provincial corner of Galicia, on Spain's windswept northwestern coastline, the
76-year-old founder of the Inditex Group has spent years secluded from
public view, all while living in the middle of La Coruña, a city of 246,000
people. Among
the millions of shoppers who patronize Inditex's flagship brand, Zara, and have
made Ortega unfathomably rich, few have even heard his name. Ortega has made
sure of that, shunning social appearances and refusing all interview requests
(including for this article). Until 1999 no photograph of Ortega had ever
been published.
And yet, a world away from the glitz of
Paris, Milan, and New York, Ortega has built a fashion empire that reaches
into more than 80 countries. Beginning 40 years ago, Ortega ripped up the
business model that had been refined over decades by Europe's fashion houses
and replaced it with one of the most brutally fast turnaround schedules the
industry had ever attempted. Decades later Zara is the world's biggest
fashion retailer.
Ortega built his empire on two basic rules:
Give customers what they want, and get it to them faster than anyone else.
The twin organizing principles have made the company (and Ortega) into an
unlikely iconoclast, more of an optimal supply chain than a traditional
retailer. They are also the secret to Inditex's astonishing success. "Very
few companies can challenge Inditex at this time. The company is in a race
with themselves rather than anything else,"
says Christodoulos Chaviaras, a retail analyst at Barclays Capital in London.
Tadashi Yanai, founder of clothing
retailer Uniqlo, has made it his stated goal in life to beat
Zara. And last August shares of the fashion company Esprit rose 28% on the
day it announced its new CEO, Inditex's former distribution and operations
manager.
Spain might be suffering through its worst recession
in generations, with 24% unemployment and crippling debt, but within Inditex,
the crisis might as well be happening on Mars. "They live in a
different world," says Modesto Lomba, president of the Spanish Association
of Fashion Designers. In December, CEO Pablo Isla announced that
revenue was up 17% year on year for the first three quarters of 2012 -- that
nine-month sales revenue amounts to $14.6 billion -- and net profits matched 2010's,
at $2.71 billion. So far, the growth shows no signs of slowing.
Inditex produced 835,000 garments in 2011. A new
Zara store opens every day, on average; Inditex's 6,000th store just launched
on London's Oxford Street. There are 46 Zara stores in the U.S., 347 in China,
and 1,938 in Spain.
Ortega controls more than 59% of the company's
shares, and last July he overtook Warren Buffett to become the world's
third-richest man, behind Carlos Slim Helú and Bill Gates. The
reclusive, enigmatic Spaniard, hunting for ideas from his car window on the
streets of his hometown, is now worth about $56 billion.
If such a fortune seems big, it is even
more astonishing when you consider the man himself. The youngest of four
children, Ortega was born in Busdongo de Arbas, a hamlet of 60 people in
northern Spain, in 1936, just as the Spanish Civil War was erupting. The
family scraped by on his father's railway job while his mother worked as a
housemaid. When Amancio was a small boy, the family moved to La
Coruña. There, home was a row house that abutted the train tracks and that
served, as it still does today, as the railway workers' quarters.
Amancio might have joined the rail service
too, had it not been for one fateful evening when he was just 13. Walking
home from his school, he and his mother stopped at a local store, where he
stood by as his mother pleaded for credit. "He heard someone say, 'Señora,
I cannot give this to you. You have to pay for it,'" says Covadonga
O'Shea, a longtime friend of Ortega's who runs a fashion business school at the
University of Navarra in Madrid and wrote the sole authorized biography of
him, The Man From Zara. "He
felt so humiliated, he decided he would never go back to school."
Barely in his teens, Ortega found a job
as a shop hand for a local shirtmaker called Gala, which still sits on the
same corner in downtown La Coruña. Today the store feels frozen in time: plaid
shirts, fishermen's caps, and woolen cardigans. "Can you believe it?"
says Xabier R. Blanco, a local journalist who tracks Ortega's career. "They
still sell the same stuff, and Amancio is Mr. World." That painful
irony is not lost on Gala's owner, José Martínez, 76, who inherited the store
from his father. He befriended young Amancio when they were both 14. The boys
spent their afternoons folding shirts at Gala and riding bikes around town.
Martínez does not relish his current role as counterpoint to his childhood
friend. "No one ever comes in here to buy anything," he says.
"They just want to know about Amancio."
By 16, Ortega had concluded that the real money
could be made giving customers exactly what they wanted, quickly, rather than
buying up inventory in the hopes it would sell. To
do that, he needed to figure out what people were looking for, then make it. He
would need to control the supply chain. Ortega had the ideal environment: Galicia.
With few job opportunities, thousands of men worked at sea, leaving their women
to struggle alone back home. "The women would do anything for a little
money, and they were really good at sewing," says Blanco, who co-wrote a
book called Amancio Ortega: From Zero to Zara. Ortega
began organizing thousands of women into sewing cooperatives. He oversaw a
thriving production of quilted bathrobes for his first company, GOA. Mercedes
López was 14 when she went to work for Ortega and says most women were thrilled
to be hired. "The conditions were really pretty good," says López,
now 52, who is the textile union representative at Inditex. "We
knew Amancio well. He was very close to the workers." It was a family business: Ortega ran design, his
brother Antonio headed the commercial side, and his sister Josefa was the
bookkeeper. The company trucked in textiles from Barcelona, cutting
out the middlemen.
With enough cash, Ortega opened his
first storefront in 1975, two blocks from his teenage job at Gala. He named it
Zara, because his preferred name, Zorba, was taken. From
the outset, Ortega made speed the driving force. Decades later it still
is. Zara
stores refresh their stock twice a week and receive orders within 48 hours,
tops. Ortega imposed the 48-hour rule in the
1970s, forcing him to open the first Zara stores near La Coruña. Many lined the
well-traveled truck route to Barcelona's textile factories. Even as the company
grew, Ortega stuck to his two rules.
It took Ortega 10 years to found the holding
company, Inditex, and open his first international store in Portugal -- whose
labor force, cheaper than Spain's, made it the next obvious place to produce;
New York and Paris followed in the late 1980s. While Zara proliferated
across Europe through the 1990s, much of the production was kept close to home.
"Our
roots have always been in manufacturing," says Jesús Echevarria Hernández,
Inditex's spokesman, sitting in the company's sprawling headquarters in
Arteixo, outside La Coruña, with floor-to-ceiling windows overlooking farmland.
"When we come here, we always refer to it as 'going to the factory.'"
The factory is part sci-fi machine, part
old-fashioned retail -- a well-oiled operation organized around Ortega's twin
principles. It is restocking continually at top speed. Inside, its high-gloss,
white, minimalist interiors resemble a humongous Zara store. Along two arteries
down the main floor, hundreds of designers and sales analysts work at long
white counters in a vast open space, grouped around regions of Zara's empire. The
pace is frantic: Designers create about three items a day, and patternmakers
cut one sample from each. Seated alongside them are commercial-sales
specialists, each with regional expertise, who dissect tastes and customer
habits using sales reports from Zara store managers to see what's selling and
(more telling) what customers are looking for. Staffers say inspiration comes
from the streets, clubs, bars, and restaurants. Each is trained to keep an eye
on what people are wearing, just as Ortega has done for decades.
At one end of the Zara design floor is a
small team that manages Zara.com. There, flat-screen monitors linked by webcam
to offices in Shanghai, Tokyo, and New York act as trendspotters, since
countries and cities are not monolithic: Tokyo's Ginza district, for example,
resembles SoHo in Manhattan more than Tokyo's business district. The
obsession for spotting new tastes is pure Ortega. "We never go to fashion
shows,"
says Loreta García, who joined Inditex 23 years ago, straight out of design
school, and now heads Zara Woman's trends department. "We
track bloggers and listen to customers, but we change our opinions all the
time," she says. "What
seems great today, in two weeks is the worst idea ever."
What keeps this machine ticking is the
logistics department -- "the essence of the company,"
says Echevarria, who credits the system for such turnaround speeds in places as
far-flung as Baku and Melbourne. At 400,000 square feet, the logistics
building is more than three times the size of headquarters across the street,
and is organized around a Rube Goldberg-style labyrinth of conveyer belts
extending five stories high. It delivers customized orders to every Zara store
on the planet. There is a firm 24-hour turnaround deadline for Europe, the Middle
East, and much of the U.S., and 48 hours for Asia and Latin America.
The unusual arrangement is pure Ortega.
Though he officially handed the reins to Pablo Isla in July 2011, Ortega
remains the company's muse, inspiration, and biggest shareholder. Astonishingly,
Ortega has never had an office. Even now, the world's third-richest man sits at
a desk at the end of Zara Woman's open workspace. Ortega
prefers touching fabrics to reading memos. "It's as though there are no
computers," García says. "The directors are like that
too now," she says. "We all started here young and have grown up with
Ortega." Newer staff members say they are astonished at how often
Ortega discusses colors and trends with them. "You can ask Ortega, 'What
do you think of this?' It's very flexible," says García. "You don't
have to fix an appointment."
Asked what Ortega's legacy will be at
Inditex, Isla, the CEO, answered similarly: "The
entrepreneurial spirit, the self-criticism, the culture: The company is
completely flat."
Ortega's insistence on staying close to
home and his ability to connect with even low-level employees raise an
intriguing question: Would his executive style have been more hierarchical and
conventional -- and perhaps less successful -- had he emerged from a privileged
family and with an MBA, rather than from dire poverty with little education? "Poverty clearly
made him who he is," says Blanco, who wrote
his unauthorized biography. "There was a hunger. Show me any great boxer who
didn't come from this kind of background."
In semiretirement, Ortega now lives in a
five-story sea-facing house in La Coruña, on a busy city street, with little
evident security. He eats breakfast every morning (eggs and fries, say friends)
with acquaintances at La Coruña's businessmen's club, and retreats on weekends
to his country house, where he raises chickens and goats and gathers his grown
children. A creature of habit, Ortega devotes weeks a year to hiking
pilgrimage routes in Galicia, and his lifelong aversion to flying keeps him
from traveling much. Antonio Grandío Dopico, economics
professor at the University of La Coruña, who has known Ortega since Inditex
began, says his old friend's life philosophy is "absolute
normality." Yet these are not normal times in Spain. Youths
in their twenties -- Zara's key market -- suffer unemployment rates of about
50%, double the national average. The country's economic pain is clear walking
through La Coruña. The commercial artery has dozens of
boarded-up storefronts. The one bright spot is a renovated building on a prized
corner near the port, lit up and humming with action: the city's premier Zara
store.
How long can Zara maintain its relentless
expansion? With Europe's slowdown, the company expanded in the U.S. and Asia,
with a splashy opening on Fifth Avenue last year, and in September launched
Zara.com in China. As Zara expands farther from La Coruña, Ortega's rules might
collide with the reality of shipping hundreds of thousands of garments a year
back to Galicia for distribution.
Zara may change, but the man who built this
retail giant will always be, deep down, a small-town hero. Once,
when traveling to a store opening in Manhattan, Ortega watched as shoppers
poured through the doors. He was so overcome he shut himself in a bathroom and
wept. "No one could see the tears streaming down my face," he told
O'Shea. "Can you imagine how I thought of my parents then? How proud they
would have been of their son who had, so to speak, discovered America, starting
from a little town lost in the sticks of northern Spain!"
This story is from the January 14, 2013 issue
of Fortune.
