From Knowledge at Wharton
Marcel Planellas, secretary general of the Esade business school, describes the Mango fashion retail chain, as "gazelle-like," because it has grown so quickly. The fashion retail chain opened its doors in 1984 when two brothers, Isaac and Nahman Andic launched the first Mango store in Barcelona. Less than 25 years later, there are 1,114 Mango stores on the leading shopping streets of big cities in more than 90 countries. It is now, according to Planellas, "one of the most valuable retail brands in the world." Interbrand, the international consulting firm, says that Mango's revenues amount to about 700 million euros. Esade has developed a case study of Mango, recently published in Expomanagement, the largest managerial forum of Spain's HSM management training firm.
In an interview with Universia-Knowledge(at)Wharton, Planellas notes that when he asks students to explain Mango's strategy, their first answer often focuses on the positioning of its shops in locations frequented by a specific market segment -- young women who like fashion. Beyond that, "some students go further, focusing on what goes on in the (company's) warehouses and how the company has structured its logistics chain, and the technology that it uses (for logistics). But very few pay attention to its corporate culture and practically no one has an overall global view (of Mango)."
Planellas believes there is something contradictory about Mango. "The chain is very well known at a popular level throughout the world but it is almost unknown from a managerial point of view." He poses this question: "How many people know that Mango manufactures none of the garments that it sells?"
"We have a very focused strategy," notes Enric Casi, Mango's chief executive. "We target women who want the latest in fashion trends. If we were aiming at the entire public, we would not be loyal to our true customers." Casi asserts that his target is "30 percent of the people who pass by our shops; we could not try to attract all 100 percent because we would lose our identity." Casi adds, "Our women don't go shopping; they go to Mango."
In addition to various promotional campaigns, the values of the brand are strengthened "by stylishness and design because we bring out four collections each year thanks to the teamwork of our more than 900 designers." He adds, "The shops aren't only for selling (garments) but also for getting information (about them)." According to Casi, when a customer chooses a garment to try on, it is because she likes the design, the material and the colors. So why not buy it? "With the feedback we get from our shops, we continue to improve our designs because our ultimate goal is to provide design and style at a good price," he adds.
"Although we are a chain, we want each of our shops to be a fashion boutique where everything is coordinated." This strategy involves looking for a balance between two variables, price and exclusivity, so that "just because something is cheap, that doesn't mean that it is something ordinary."
Consider the example of Paris, he suggests. "Years ago, going to the capital of France was something glamorous. But now, because of budget travel, no one thinks twice about going there to spend a weekend. It is something totally normal and within the reach of everyone (in Spain)." So, he concludes, Paris illustrates the importance of developing a brand that represents values such as exclusivity, but not at a prohibitive price. Nevertheless, says Planellas, Mango's greatest success "is rooted not only in those factors that you can see with the naked eye but also in what goes on behind the scenes; for example, such important factors as its logistics system." Says Casi: "Logistics is an integral factor in the story of Mango; logistics is viewed as a relay race in which each department passes the baton to the next so that things arrive on time." For the system to work correctly, there are three keys: velocity, information and technology. Technology is essential, especially in a logistics chain that is as complicated as any multinational's.
"We design and distribute the garments but we do not manufacture them," notes Casi. The company counts on more than 140 suppliers around the world, and each region specializes in one type of clothing that it can manufacture "at a competitive price." Actually, "logistics management pays off for the company" because its shops, unlike those of its competitors (including Zara) are managed through a franchising system. That has enabled Mango to expand rapidly in international markets as well as personalize each of its shops. Mango's shops have avoided an image of uniformity.
According to Casi, "When we begin to use a new supplier, we give them orders little by little, checking out their quality." The product is the property of Mango, and it is shipped to franchisee-owned shops, which pay the company according to how much they sell. The logistics system replenishes its stock every day in its European shops, and twice a week in its shops elsewhere around the world, says Casi. The company's main logistics center is in Barcelona, site of its corporate headquarters. Logistical support is provided in three other locations -- New Jersey, Hong Kong and Shanghai.
"The key is to minimize time and costs," asserts Casi. He says that "without the Internet, it would have been impossible to make a profit from a chain that has a traditional structure," nor to grow at such a rapid rate. Mango took about four years to develop a computer platform to manage its supply chain. It connects all its agents and partners (on one network), along with its suppliers. "This integration is one of the things that has cost us the most but now we can monitor everything and make decisions by using information" about, for example, the sorts of designs that are most popular in each region or the daily sales of each outlet.
Thanks to this system, Mango can manage its more than 7,000 direct employees as well as the additional 22,000 people who work for Mango indirectly. Although most of the shops in the chain are franchises, the Andic brothers also own their own establishments, so the company owns 40 percent of its shops. Casi says that 80 percent of the company's personnel are women; their average age is about 30. They are motivated by an internal promotion plan that provides the best employees with positions of greater responsibility.
Planellas believes that Mango's success comes from its "differentiation strategy, which is based on the way it segments its brand to the public." The company specializes not only in targeting women as a whole but on a very specific sort of woman. "What differentiates Mango from its competition is that it has done a very good job of identifying its core business (designing and distributing garments), and that it has outsourced everything that it is not interested in doing (manufacturing). This enables the company to be more efficient since the manufacturing part (of the supply chain) is one of the areas that uses the most manual labor."
Thanks to this system, Mango is also the sort of company that can ride out any type of crisis. Its business model enables it to be more flexible whenever there is a change in the pattern of demand. It can increase or reduce the number of its suppliers without incurring the cost of extra personnel or by increasing its inventory, says Planellas.
Casi believes that there are only four countries where economic conditions represent a "real crisis:" Spain, the United States, the United Kingdom and Ireland. The big advantage of having a presence in 90 countries is that one region can compensate for the poor performance of another. Even so, poor market conditions have forced companies in its sector to reduce their revenue forecasts. Casi says that sales are not dropping even in Spain, and that they will rise by at least 14 percent this year. His forecasts incorporate data from the first quarter of 2008.
Mango's 10-year goal is to have 3,000 shops around the world. That means opening about 200 new outlets each year. Once this psychological barrier has been overcome, notes Casi, Mango "will have to find new areas where it can do business if it is to continue to grow." One option the company is seriously considering is to expand its line-up of men's fashions. At the moment, men's clothing is sold in only 250 of its stores, "in order to test the market." However, sales of male clothing "are performing very well." For that reason, Mango cannot rule out a new insignia for this division in the future. Other options include expanding the range of fashion accessories.
Mango continues to be a family-owned company, still controlled by the Andic brothers. Because the company has achieved a significant international presence, it has no plans to issue any shares (on the stock market) even if that would expand its financial base. "The stock market is something wild and unpredictable," notes Casi.