Not paying factory workers for over a year is not a good look for a fashion brand.
If you’ve been following recent news about the fast fashion retailer Zara, you’re aware that the brand has recently been in the spotlight after shoppers in an Istanbul store found little tags attached to clothes that read like desperate SOS notes. “I made this item you are going to buy, but I didn’t get paid for it,” the tags read.
It turns out, those messages were left by workers at an outsourced factory who lost their jobs when the factory abruptly closed more than a year ago. Zara has been slow to respond to their demands for payment, saying only that it has fulfilled its legal obligations with the factory itself. Now Zara’s parent company, Inditex, is facing a growing backlash from consumers who want to know why it’s not dealing more urgently with the workers’ plight. And if it doesn’t take action, the fast-fashion retailer—which is typically well liked by consumers—may risk expending some of its brand equity.
Sebastian Buck, an expert on mission-driven brands, believes the situation could have dire consequences for Zara and Inditex. “Brands exist based on the perception of them,” he says. “Inditex’s lawyers probably think that, legally, they have satisfied their requirements, [but] from a brand perception point of view, they’re probably in real risk.”
Buck should know. He’s the architect of the World Value Index, which measures brands based on how ethical they are.
Zara is by no means the only brand with an ethically questionable supply chain. More than 75 million people around the world work in the apparel business, and wage theft is a common problem. It happens in Gap factories in Cambodia, Nike factories in Vietnam, and even factories in downtown Los Angeles that make clothes for Macy’s, JCPenney, and Kohl’s.
It is only when incidents gain attention in the media—like the notes in the Zara store—that people seem to notice or care, but these moments can have a massive impact on a brand.
Some companies are quicker than others to respond to problems, but Zara has allowed this labor dispute in Turkey to drag on for over a year. In July 2016, the owner of a Turkish factory that Zara used disappeared, stealing all the workers’ wages. Inditex, Zara’s parent company–together with other European fast-fashion labels that made products in the factory, including Mango and Next–said it would compensate the workers. But a year and four months later, no money has yet passed from the company to the workers, a Zara spokesperson confirmed to Fast Company.
A Small Price To Pay
The workers are asking for 2,739,281.30 Turkish lira, which amounts to less than 0.01% of Inditex’s net sales for only the first quarter of 2017. Buck makes the case that this is a pittance compared to the damage that could ensue to the company’s bottom line if customers begin to boycott.
And boycotting is a very real and damaging prospect to brands: Consider the #GrabYourWallet movement founded by Shannon Coulter, which has enlisted thousands of consumers to boycott Ivanka Trump’s brand, prompting retailers to drop products bearing her name.
After the notes were found attached to Zara clothes, social media has been ablaze with customers wanting answers.
@ZARA_Care Hello, could you please tell me what is the official update from ZARA regarding the issue of factory workers not getting paid in Istanbul and their subsequent protest. As a customer, I would like to know what was the truth and what has been done if there was injustice.
— Alfred Godfrey (@alfred_godfrey) November 12, 2017
— Ze_Isabelle ???????????????? (@IsabelScigliano) November 10, 2017
So what could explain Zara’s reluctance to sort this mess out quickly? Buck points out that there might be internal division at a company like Zara. Some at the company, he says, may not be thinking about the broader narrative surrounding the brand, but are instead focused exclusively on whether Inditex has followed the letter of the law—which in this case meant paying the factory, not necessarily the individual workers.
“What gets lost in those kinds of situations is a voice of somebody who is looking out for the long-term brand’s reputation,” Buck says.
Another possible reason that Inditex isn’t taking more aggressive action to resolve this–even for the sake of its own image–is because it is currently doing very well. Inditex is the largest fashion retailer in the world by sales, with 7,292 stores around the globe. In 2016, it generated 23.3 billion euros ($27 billion) in revenue, and $5 billion euros ($5.8 billion) in profits.
Doing the Right Thing Pays
Inditex might believe that it is immune to bad press. But Buck says that it doesn’t take long for public perception of a brand to change, and for customers to choose to shop elsewhere. Take Nike, another massive company. The sportswear giant’s sales began to slow when news of its sweatshops got out.
But the Nike example also shows that companies can turn themselves around. For decades, Nike has worked hard to change its image. It is now seen as an ethical brand, and even ranks #40 in Buck’s World Value Index. Recently, Fast Company reported about protests around the United States by college students who claimed that Nike wasn’t allowing independent investigators into its factories. Nike quickly worked to resolve the situation, creating a new protocol that allows Worker Rights Consortium to enter factories.
“When people realize that the clothes that they are literally putting on their back may represent a value set that is different from their own, brands are at real risk,” Buck says. “When Zara and Inditex put their names on clothes that have come from people experiencing real hardship, it’s very damaging. For a company that is valued at 90-something billion dollars, the risk to their brand over resolving this issue doesn’t make sense.”
There are many fashion brands in the world with problematic supply chains, but thanks to these desperate notes, the entire world is focused on Zara right now. How quickly and effectively the brand resolves the problem has enormous ramifications for its future.
It is not too late for it to intervene, but according to Buck, time is quickly running out. “Marketing and public affairs leaders at the company spend an inordinate amount of time and money building a brand that people trust and value,” Buck says. “Those kinds of people know that an issue like this, when it gets into the media, can undo a lot of that work.”