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Zara – a reputation made, a reputation squandered?

In some of my past blog posts I discussed the significant value a good reputation has by example of Switzerland’s repute as a high-quality producer of products and services. I showed that there is concrete evidence that a good reputation and the trust that it engenders in potential customers is not only an exercise for “doing good for goodness sake”, but also translates into hard cash and profits (see my recent blog entry on "Dismantling of a Swiss Holy Cow" ). Many corporations, due either to considerable competitive pressure or simply due to the myopic imperative of maximizing profitability, take short-cuts or systematically exploit the vulnerable. So it seems to be the case with Zara, the fashion house of the Inditex Group.

When I first read about the story of Inditex’ success, I was struck by its ingenious business model of just-in-time fashion delivery and a no-advertisement strategy. I also was touched by how the business was started from nothing by Amancio Ortega, a shop hand at a small shirt maker, and Rosalia Mera, a seamstress, in a remote part of Spain called A Coruña. Hard work and a shrewd business sense built one of the biggest clothing conglomerates in the world and Ortega was ranked as the third richest person in the world in 2013 by Forbes Magazine. Now, a wealth created out of nothing demands respect – provided it was created by virtue of ingenuity and hard work. If, however, this wealth was created on the backs of the vulnerable, it justifiably vaporizes and a foul after-taste takes its place.

Is the latter the case with Zara? I do not know, the jury is still out. Nevertheless, walking a few days ago along the pricey “Bahnhofstrasse” in Zurich, a verdant avenue filled with high-end retailers, I was struck by the construction site for a new Zara department store, surrounded by a number of UNIA (a Swiss labor union) members handing out flyers. Engaged into a conversation, I was explained that workers were working up to 15 hours per day, but paid for only 8, and that at significantly less than industry standard – and in Switzerland legal – wages (between 900 and 2000 Euro vs. 4,500 Euros). These then are, for Swiss standards, dumping salaries, practically (but not legally) possible due to the (still) open borders of Switzerland (see the last blog post on the vote on mass immigration) for workers from the EU. But even if one were to argue that these workers from Spain ought not to have to be paid the high Swiss salaries, it sheds a dubious light on Inditex’ business practices when Spanish workers explained that they were instructed in Spain to say that they get paid regular Swiss wages upon arrival in Switzerland, when in fact they were not. Such instructions to obfuscate the truth are not exactly conducive for trust that Zara is a company that strives for transparency, integrity and a favorable image.

I have since written to Inditex asking them to explain their behavior, lest I (or I should say, my teenage daughter) will boycott any further purchases from their stores. Moreover, I asked them to send me a list of action items so as to remedy these dubious business practices (provided they are indeed true). I will keep you posted pertaining their reply, so check back here. Better yet, however, write to them yourself and demand a response. It is a very easy gesture of citizen-activism in view of greater transparency and a more humane world. You can do so directly here: http://www.zara.com/ch/en/contact-us-c11113.html

Manuel Dawson