The Genius Behind Zara’s Billion-Dollar Business Model

Here's the genius of Zara's business. So number one, the percentage of revenue for ad spend, what do you think it is?

For Zara?

Uh-huh.

1%?

Exactly 1%, right? 1%. Now they also buy, they don't buy real estate. They look to rent prime real estate because they can't buy everything. Like if there's a big shopping mall popping up, their prime real estate, that's their marketing channel, right? Because if you're in a big mall, for example, at like Century City or whatever big malls out there, If you're in prime real estate, people are going to talk about you, they're gonna see you all the time. And they're like, they're gonna know it's Zara, right? The other thing is, it's customer-driven products. So instead of most stores that you go to, maybe you have to wait a long time, maybe one quarter for the next drop. They're always talking to customers, and they're changing things by the week. So you have to buy it like that week, right? So there's built-in scarcity there, which is smart, because scarcity works in marketing. The other thing that I really like, which we kind of talked about earlier, is that the founder Ortega— so here's what happened when he was a kid. His mom was holding his hand, you know, they're going to the grocery store. And basically he couldn't see the counter, right? But over the counter, he could overhear the person saying, hey, um, Miss, Miss, let's just call her Miss Ortega. Miss Ortega, I can't loan you any money anymore. So she was buying groceries off credit. And after that, he was like, I'll never let that happen to my mom again. And all he wants to do is just work, right? He's very humble. He doesn't want to be seen anywhere. His whole thing is privacy. He wants to be anonymous. and just do what he loves doing. That's why Zara, I think that group is a multi-billion dollar thing. I think it's over $169 million or something like that.

$126 billion.

Yep, there you go. And he just kept going. And by the way, he started doing, I think he did manufacturing for clothes, or I don't know if you call it, what do you call it for clothes? But he did that for about 10 years or so. It wasn't until he was 39 years old that he decided that he needed to build his own store. So he opened his first store when he was 39. So it just goes to show you that you're never too— you're never too old. 39 is not that old at all. But like, people might think, oh my God, I'm in my early 40s, late 30s, I can't start something. You absolutely can. Because even Colonel Sanders started KFC when he was like 60-something.

Yeah. And if you look at Ortega, who's the Zara owner, in 2023, he was worth $77 billion. And in real-time net worth, he's worth $126 billion. It's not double, but yep, It's getting up there.

Yeah. So look, time in market matters. And I think the more you can be anonymous, the better.

And speaking of Zara, this is one of the hardest marketing lessons and business lessons I've learned over the years. The reason someone like Zara is able to grow in net worth so fast is because they're in a big total addressable market where there's a ton of money being spent in things like clothing. There's a ton of money being spent in things like marketing. There's a ton of money being spent in things like CRM. And what I learned the hard way as an entrepreneur If you pick small niche markets, it's extremely hard to build a big business and it's almost the same amount of effort to market in these niches as it is in a big business.

That sounds hung broad over here.

Yeah. So just go after something that's really large or else you're not going to make as much money and your net worth is not going to grow that fast over time.

If you're an agency owner and you want to grow faster, check out the Agency Owners Association that's hosted by my podcast co-host Neil Patel and myself. And we have other agency owners that are doing 8 figures a year. They were doing 9 figures a year. They sold their business for hundreds of millions of dollars and they're going to share their experiences with you. There's a whole host of other benefits. And the cool thing is that there's a 7-day free trial and you should check it out now because we're going to take the prices up. So just go to marketingschool.io/agency to learn more and we'll see you inside.

And the other day someone asked me, he's like, your agency is really big. And I'm like, no, it's really small. They're like, what do you mean? I'm like, well, some of my competitors do like $18-ish billion a year in revenue. And they're like, oh. And I'm like, yeah, this is why it's still possible to grow at 20, 30, 40%, even at my size, because we're tiny. In the grand scheme of things. And if you pick big enough markets, you can still grow and make quite a bit of money. You just got to pick really massive TAMs. And I think that's a big mistake most marketers and entrepreneurs make, especially early on.

Yep. Eventually they'll learn. And that's, you know, I'm grateful that I just kind of stuck in for a while and then realized, oh, this is actually a great business.

Yes.

Yep.

But even you and I went through our learnings. I think earlier in my career, I tried doing too many things. I eventually learned. And over the last few years, you also learned that, hey, I should stop trying to do, you know, like this—

Most people can't—

Outdoor websites or retirement home type of businesses, and I should focus on—

The thing is, we see this with younger entrepreneurs all the time. You see the same mistakes and it's like, you know what, I'm not even going to tell you, like you have to just go get punched in the face a couple of times and then you'll stop.

Yes.

Yeah. That is it for today. Go to marketingschool.io/agency. By the way, that price keeps going up. It just doubled last yesterday, actually. So yeah, go check it out and we'll see you tomorrow.