For years, Inditex SA’s Zara trailed the luxury brands. Top names in fashion would send new styles down the runway, which the retailer would quickly interpret for a much lower price tag.

But as designer labels pushed up prices and the premium fashion sector got squeezed by the pandemic, mainstream stores have rushed in to fill the middle-tier void — and Zara’s leading the charge. It now sells luxurious party wear and real suede jackets to rival those in pricier boutiques.