Here at our blog Relative Value, we try to apply good risk/reward thinking to everything, not just investments! Clothes are fair target too because some are cheap and some are expensive. And working in finance puts a dent in your wardrobe because sadly in certain situations appearances matter. All in all, it's not easy to fit into a workplace where the Europeans are wearing vests underneath suits (that's right, these vest-sporting guys are in a financial firm, not at bar serving shots).
Now, let's focus on a store called Zara. Last year, the founder Amancio Ortego made headlines by supplanting Buffett on Forbes list of Wealthiest Billionaires:
The Bloomberg article above actually gives some decent background on the company's strategy. The whole idea behind Zara is amazing, they basically wait and see what are the fashion trends. Then when specific apparel become in fashion, Zara copies the styles which are in vogue for quick mass production. Hence you have very trendy clothing at reasonable prices. Zara also has a much milder and humble cousin, named H&M. Together, they bring cool to the masses. Fashion itself is a very interesting industry because there are no trademarks, patents, or proprietary information. Pharma companies patent their drugs to prevent competition, hedge funds attempt to maintain secrecy on their strategies to avoid sharing their pie with others. But in fashion, who's stopping someone from creating a similar product cheaper? So before you buy that cool shirt at Saks for $300, be sure to stop by Zara to see if there is a similar product. Of course, there are the exceptions like the Birkin Bag, which no one else could sell even if they could produce cheaply.
Please note that Zara has a large sale, once a year in the summer (I'm not familiar with retail, so maybe everyone and their mom is having a sale in the summer). Like any risk manager who puts on size when the price is too compelling, be ready to stock up during the sales!
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