Inditex: a social phenomenon “From the Integrated Centre of Management of Arteixo, Telefonica carries out the centralized management of the services of voice and data for Inditex" By Mercedes Núñez

The company incarnates a unique commercial triumph that has reached the category of a social phenomenon. The company has grown from one store inaugurated in 1975, to more than 3.000 establishments open in more than 65 countries worldwide. The great part of this impressive expansion is with regard to the business model, with a philosophy which places a high priority on the customer combined with a high degree of vertical integration across all the fashion production process: the design, the manufacture, logistics and the sale. Underpinning the sustained growth are new technologies which drive continuous improvements of efficiency, explained Gabriel Moneo, Inditex Systems Director to Pulso. Telefonica as the technological partner of Inditex is deeply involved in this process, where the long term relationship has driven highly satisfactory results. What are the key success factors underpinning the spectacular growth of the Group? The most constant factor that has been with us since the opening of our first Zara store - the primary brand of the Group - is to respond quickly with appropriate products to our customer needs. They (our customers) are at the centre of our business model, and we ensure that the whole organisation is focused on customer insight and meeting their needs. The traditional process within the fashion industry means that collections are often designed months

ahead of launch and remain unchanged during a complete campaign. The innovation which Inditex has brought to this procedure has been to implement a continuous and efficient process of design and production. This process is informed by customer insight and supported by direct feeds from our real time in store equipment. This model of business also is characterized by a high degree of vertical integration.

This model of business also is characterized by a high degree of vertical integration. How do the new information technologies and the Communication (TIC) help optimising the vertical integration? Without doubt, the customer information is a key element in our business model. It is generated in our stores and is driven by the purchase decisions our customer make and in addition their opinions, their comments and overall demands. This key information must be constant and simply captured utilising our front-end store commercial equipment. In real-time this vital information generates new flows of information leveraged by our suppliers, production and logistic centres across the Group. Therefore, the efficient management of these channels of information has been of constant importance for Inditex, and for this reason we strived to have the most suitable, trustworthy and fast technology. What is the structure of companies within the Inditex Group and how do they interact? Inditex is the head of a Group formed by eight fashion distribution chains – which are commercial independent – Zara, Pull and Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home and Kiddy' s Class -, about ten textile production companies and a series of international subsidiaries manage our operations in the different markets where we have commercial presence, and in addition we have independent companies dedicated to the activity of logistics. Each one of the chains has an autonomous team managing design, commercials and store management etc, while the head of the Group negotiates and coordinates areas that drive synergies, such as finance, human resources, logistic design, our store estate and also information technologies. The model of management of Inditex has facilitated its rapid international expansion and the excellent reception of the different commercial concepts supported by the Group. What technology contributes to the improvement of innovation and the flexibility of this model? What is the TIC strategy of the company? The technology, across all areas of our business, has been understood since the beginning as a tool to achieve a key business objective: to respond with agility to the demands of the market. It has permitted us to be more efficient, achieve our objectives and to place the store - the environment where we interact with our customers - in the centre of this process. Therefore we are

able to leverage the technology and make our design, production and logistics increasingly more competent. In the case of information management, the use of data processing technologies and of advanced communication allows us to manage efficiently the information flow between our stores and the central services of our chains. In this sense, our TIC strategy is fundamentally orientated towards creating a technological backup that maintains the productive globalization of our business. To be clear its permits real time access to information at all points across our company and to thus organize a world network whereby we can circulate initiatives and customer insights. Telefonica has supplied its MacroLAN solution across 17 main headquarters in Spain, how has this solution contributed to your successful business model? The objectives of this network of communication are two fold: to facilitate the efficient and direct communication among workplaces located in different locations (corporate headquarters, headquarters of chains, logistic centres and international subsidiaries), both inside and outside of Spain, who all need to have agile systems for daily contact. To have technological network with these characteristics permits us to optimize the cost of these communications. The key item of the organization is the store, where the contact is produced and we receive feedback from our customers. In this environment, the company has relied on Telefonica to establish a virtual private IP network across 1,600 stores located throughout the country. What are your objectives and what data and applications do you utilise? We established this network due to the need to maintain online communication with all of our stores across the world, by means of a constant exchange and flow of information. Our stores have management terminals at point of sale through which they receive and transmit information to the central services functions. There are various services that make use of the network, including, the musical thread, our payment application, internal operating information, the shipment of photographs and of video...etc

The solution of private IP virtual network includes the wiring of the stores, the user terminals, overall management and the maintenance. Why did you choose an end to end integrated solution? It is quite simple: the primary target of the project is to simplify the management, something which is tremendously important in an organisation as extensive and complex as ours, in addition we can take advantage of the synergies that increase the operativity and reduce cost.

What sustains the selection of Telefonica as your technological partner for this project? Inditex trusted Telefonica because it is a company that contributes its experience as global operator of telecommunications and guarantees an efficient service. The relationship between both companies has been developed over many years with very satisfactory results. Inditex has itself launched a project of IP Telephony. How do are you going to use it and what advantages do you expect to obtain? Likewise, what do they think in the company are the possibilities for the future of this technology, such as the use of advanced applications? At the moment we are establishing a MPLS network for the intercommunication of all our global workplaces. We expect the future development will enable us to drive greater efficiencies over time to our communications and, consequently, to the operation of our business. The scope of applications within our IP project will depend directly on the agreements in the matter of telephony at which we arrive with our technological partner, Telefonica. It is necessary to consider in this sense that the operator is developing in parallel new generation networks which will transform the classic concepts of telephony across Spain. From our part, we considered that IP Telephony is, without doubt, the technology of this new generation network and Inditex hopes to be one of the first Spanish companies to benefit from it. However, international voice communications is an area that we will centre our focus next. The implementation of a telephony system that takes advantage of the data IP network deployment will be crucial to drive the convergence of both networks, data and voice, and it will be economically sensible for any global company to address international voice calls in this context. A key piece of all this technological project is the Integrated Management Centre (CGI) delivered by Telefonica. Where is it situated and how does it participate in the process of management and of communication of the Group Inditex? The Integrated Management Centre is based in Arteixo -TO Coruña-, the same location as our central headquarters. Its responsibilities include the centralized management of our service and the resolution of incidents in the voice and data communication systems. In this way, we can respond with diligence to the all possible incidents that occur in the network, optimize the stores opening dynamics and to consolidate a platform of control across our network that maximizes the availability of all applications. Further to the above aforementioned information technology projects and the Communication (TIC) strategy do you anticipate focusing on as part of the vision of the future within the Inditex Group? At the moment, we are immersed in a great project of technological evolution for our systems of information that includes, the Sale Point Terminal services

located in our stores through to the corporate central systems that are going to guarantee the technical backup of all the company. With this ambitious project we seek to comply with our short and medium term objectives. These include an emphasis to guarantee and maintain growth of the Group and the advancement into new markets. In addition we will continue to build on the management and shipment of photos and video across the IP Technology. Further more, the mobility in our stores is a fundamental aspect that we are resolving with Bluetooth technologies and we intend to integrate this into the local network of each store in the future. This will allow the integration of dual Wifi/3G terminals in the network to achieve real mobility in and out of the stores. The global connection of Inditex Inditex pursues with its TIC strategy a backup to underpin productive globalization enabling all elements of its organization with immediate access to information. It relies on one of the largest Virtual Private IP Networks (RPV IP) in Spain, with 1,600 stores and MacroLAN technology in 17 main headquarters. At an international level Inditex has around 12,000 stores in more than 65 countries. This network facilitates the efficient and direct communication among workplaces located in different locations, with a clear need for great agility in the daily exchange of contact and information. The solution RPV IP, supplied by Telefonica, includes the Local Area Network of the stores, the terminals of user, management and the maintenance, creating one of the largest IP networks on a worldwide basis. The integrated solution allows Inditex to simplify the management and to take advantage of synergies that drive the enlargement of its operating capacity and effective cost reduction. It relies in addition on the Integrated Management Centre in Arteixo (TO Coruña) that carries out the centralized management of the services of voice and data. This service allows Inditex to respond with diligence to potential incidents, optimize the stores opening dynamics and to utilise a consolidated platform of control across its network that maximize the availability of its applications. Inditex, with the technological backup of Telefonica, has in motion many diverse projects. The textile company, for example, is immersed in a great project of technological evolution of its Information Systems that includes the Terminal Point of Sale through to the corporate central systems which guarantee the technical backup to the company. The shipment of photos and video on IP already is a reality within the group. Inditex is also working towards increased mobility via the integration of dual Wifi/3G terminals in the network. The expansion and the profit value of a great group A modest business that was born little more than three decades ago has been converted over the passage of time into a Spanish company with energetic international expansion and great economic success. In 2006, the Group Inditex registered sales revenues of 8,196 million euro and a net profit of 1,002 million, a 25% increase on the previous year. The expansion program has been key in obtaining these good results. In 2006 alone, Inditex

inaugurated 439 new stores and the number of employees increased to almost 70,000. One of the last stores opened was in Beijing, within the shopping mall The Tackle, this is of particular importance as it begins the growth strategy within the strategic market of China (Zara already has nine open stores in the Asian giant). Japan, with 28 establishments of Zara, is another of the large markets in expansion for Inditex. June 2007