Text | Haokan Business, author | Dong Xiaohua, editor | Anxin What will happen if Zara closes stores or withdraws from some cities? The answer to the hot search on Weibo is: "Sweeping goods". Recently, the entry "Zara's large number of fans are rushing to buy goods" has been on W

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text | Haokan Business, author | Dong Xiaohua, editor | Anxin

What will happen if Zara closes its stores or withdraws from some cities?

The answer to the hot search on Weibo is: "Sweeping goods".

Recently, the entry "Zara's large number of fans are rushing to buy goods" has been on the Weibo hot search. Previously, news of Zara's large-scale store closures in many places circulated on major social platforms. Many bloggers posted pictures, texts or short videos of Zara shopping for goods before the stores closed.

In response to this rumor, Zara officials recently stated that it has closed three stores in Huizhou, Dongguan and Shanghai Baoshan in the past two months, instead of closing 9 stores in 2 months as reported online.

In fact, if you look at it for a long time, Zara is indeed closing stores on a large scale. As of the end of January 2024, Zara has 96 stores in mainland China, 23 fewer than the same period last year; compared with the peak of 183 stores, Zara's stores in mainland China have been reduced by nearly half.

zara is the brand with the most stores under the Inditex Group and the largest revenue share (more than 70%). In 2023 alone, Inditex Group will close at least 50 stores in mainland China, leaving only 192 stores at the end of the year; in 2019, it had as many as 570 stores in mainland China, which is equivalent to 2/3 of the stores gone.

In July 2022, Zara’s sister brands, Bershka, Pull&Bear and Stradivarius under Inditex, completely withdrew from the Chinese market.

So, here comes the question: Is zara really dead? Is Zara’s parent company no longer good?

It turns out that this issue is a bit too much to worry about. The financial report of

shows that in the past three fiscal years (February 1st of the natural year - January 31st of the following year), the revenue of Inditex Group, the parent company of Zara, has continued to maintain double-digit growth. At the same time, Inditex's net profit has also continued to increase, reaching a seven-year high in 2023.

Stimulated by strong performance, Inditex's stock price has hit new highs one after another, with an increase of more than 150% in the past two years, and its current market value is 137.26 billion euros.

Text | Haokan Business, author | Dong Xiaohua, editor | Anxin What will happen if Zara closes stores or withdraws from some cities? The answer to the hot search on Weibo is: 'Sweeping goods'. Recently, the entry 'Zara's large number of fans are rushing to buy goods' has been on W - Lujuba

zara founder Amancio Ortega has also become one of the 10 billionaires with the largest wealth growth in 2023 announced by Forbes. His net worth has soared from US$64.2 billion a year ago to US$97.4 billion. He is also the only rich man from the fashion retail industry on the list.

Some consumers feel regretful, regretful and even sad about Zara closing its stores. A user in Dongguan said, "The fun is gone." A blogger in Guangdong said on Xiaohongshu, “There is no more good places to go in the future.” A user in Baoshan, Shanghai also expressed regret, “There is really no place to buy clothes now.”

In fact, young people don’t need to be too sad. After all, young people’s little money is becoming increasingly disdainful to Zara.

Embracing the rich with a clear-cut stance

On February 24, 2006, the intersection of Nanjing West Road and Shaanxi North Road was extremely lively, with a large number of enthusiastic young people lining up here. They are waiting for one thing - Zara's first store in mainland China officially opens to welcome customers.

is located in the most fashionable and prosperous neighborhood in Shanghai. With an area of ​​more than 2,000 square meters, a combination of black and white in the windows and a simple interior layout, Zara’s first store in China looks like something that “ordinary people cannot visit”. "Getting up" feeling. What

zara wants is this sense of contrast: it looks fashionable and high-end, but the price is affordable, starting at 100 yuan. A person in charge of Zara China told the media that many people think that buying clothes on Nanjing West Road will be expensive, but what Zara wants to do is to make it easy for young people to buy.

High-end fashion is popularized. This positioning is also the key for Zara to step out of Spain and capture the fashionable youth around the world. Zara founder Amancio Ortega once said, "It is unfair that only rich people can dress well. I want to solve this unfair social phenomenon."

But starting in 2018, Zara began to change. It tried to sell more High priced product.

That year, Zara launched a limited edition high-end series SRPLS, which applied military clothing to daily clothing. The highest price of a single product was more than 200 euros. In 2021, Zara launched the origins series using high-end fabrics and craftsmanship.

In addition to the original high-end line studio collection, the proportion of high-end products in Zara increased to 4.8% in 2021 from 4.1% in the previous year. At the same time, the use rate of high-end fabrics such as cashmere and leather in Zara products has also increased, with the use rate of cashmere increasing by 44% and leather increasing by 16%.

The increase in the proportion of high-end products has driven up the average price. A UBS report stated that in the fourth quarter of 2021, the average selling price of Zara products increased by 23%.

At the end of 2021, Inditex Group officially announced a major event: 39-year-old Marta Ortega, the youngest daughter of founder Amancio Ortega, will succeed Pablo Isla, who has been in office for ten years, and become the new chairman in April 2022. At the same time, Oscar Garcia Maceiras was appointed as the new CEO of the group, effective immediately.

After the coaching change, Zara has become more determined and more intensive on the road to high-end development.

Co-branding with luxury brands, well-known fashion brands, and designer brands has become one of Zara's high-end strategies. In 2022, the list of joint brands with Zara includes not only the Dutch luxury goods group Kassl Editions and the new Korean fashion brand Ader Error, but also the Chinese designer brand Susan Fang, the British actress Charlotte Gainsbourg, the supermodel Kate Moss and so on.

At the end of 2023, Zara will also launch a new ski series Zara Ski. The products cover almost all types of shoes and clothing needed for skiing, with prices ranging from 169 yuan to 1,599 yuan.

It can be said that after the new management took office, Zara stopped pretending at all-it clearly embraced the rich. Group CEO Oscar Maceiras generously told the media that Chairman Marta Otega has been focusing on redefining Zara's brand and product strategy and has targeted the "affluent class."

Image source: zara Tmall flagship store

A very important reason behind Zara’s efforts to become high-end is that fast fashion products are increasingly unsaleable. It hopes to adjust its positioning and increase the average price to achieve continued growth.

From 2017 to 2019, Zara’s revenue only achieved single-digit growth. In 2018, its revenue only increased by 3.3% year-on-year, and in 2020 it dropped by 27.8% year-on-year due to the epidemic and other reasons.

Text | Haokan Business, author | Dong Xiaohua, editor | Anxin What will happen if Zara closes stores or withdraws from some cities? The answer to the hot search on Weibo is: 'Sweeping goods'. Recently, the entry 'Zara's large number of fans are rushing to buy goods' has been on W - Lujuba

In the Chinese market, Tmall Double 11 is a barometer for observing the sales of women's clothing brands. Zara officially entered Tmall in 2014. In 2017, Zara entered the top five in Tmall’s women’s clothing sales rankings for the first time. This is also Zara’s best result in Tmall Double 11.

From 2018 to 2020, Zara barely retained its top 10 position in Tmall’s Double 11 women’s clothing sales rankings, hovering in the tenth and ninth places. But by Tmall Double 11 in 2022, Zara can no longer be found on the top 20 list.

In order to cope with factors such as rising raw material prices, after Marta Ortega took office, price increases have become the norm for Zara. She tried to pass on the increased costs to consumers through price increases.

An analysis report by Union Bank of Switzerland stated that since January 2022, the starting price of Zara has increased by more than 10% every month compared with the same period last year. Zara has become the brand with the fastest price increase among similar fast fashion brands.

Under the path of high-endization + price increase, Zara and its parent company have regained double-digit growth. From fiscal year 2021 to 2023, Zara’s revenue increased by 39%, 21% and 10% year-on-year respectively. Inditex Group's revenue has also continued to hit new highs, with year-on-year increases of 36%, 17.5% and 10.4% respectively.

Text | Haokan Business, author | Dong Xiaohua, editor | Anxin What will happen if Zara closes stores or withdraws from some cities? The answer to the hot search on Weibo is: 'Sweeping goods'. Recently, the entry 'Zara's large number of fans are rushing to buy goods' has been on W - Lujuba

zara not only regained its growth momentum, but also maintained its gross profit. In fiscal year 2023, Inditex Group achieved a gross profit of 20.8 billion euros and hit a multi-year high with a gross profit margin of 57.8%; its gross profit margin has remained above 57% in the past three fiscal years.

Text | Haokan Business, author | Dong Xiaohua, editor | Anxin What will happen if Zara closes stores or withdraws from some cities? The answer to the hot search on Weibo is: 'Sweeping goods'. Recently, the entry 'Zara's large number of fans are rushing to buy goods' has been on W - Lujuba

close stores in exchange for growth?

If Zara achieved its golden decade in China by continuously opening stores in the first ten years, then in recent years Zara has entered into a growth model by continuously closing stores.

Since 2011, Zara has maintained an expansion rate of nearly 20 net stores per year in mainland China for five consecutive years. As of January 31, 2018, its number of stores reached its peak - 183. After

Text | Haokan Business, author | Dong Xiaohua, editor | Anxin What will happen if Zara closes stores or withdraws from some cities? The answer to the hot search on Weibo is: 'Sweeping goods'. Recently, the entry 'Zara's large number of fans are rushing to buy goods' has been on W - Lujuba

, Zara entered a state where the number of stores was decreasing year by year. As of January 2024, the number of Zara stores in China has been reduced to 96, which is nearly half less than the peak of 183 stores.

Looking around the world, after 2018, the stores of Zara and Inditex Group began to shrink, and the trend of store closures continues to this day.

For Inditex, this is not called closing stores, it is called "optimization". It is closing small stores and opening larger stores, and increasing investment in flagship stores in prime locations.

inditex Group CEO Oscar Garcia Maceiras once said bluntly that one of the reasons for the group's performance to hit new highs is to optimize stores. He said, “In the past few years, we have been accelerating the process of store optimization and we are still on track.We will continue to identify stores that do not fully fit our large space retail concept and need to be closed. "

Indeed, as Inditex expands and renovates its stores, store efficiency is improving. Taking 2023 as an example, Inditex store sales revenue increased by 7.9% year-on-year, while the sales area only increased by 4.5% year-on-year, and the number of stores decreased The growth rate of sales revenue is significantly faster than the growth rate of sales area, indicating that the revenue per square meter is increasing.

Text | Haokan Business, author | Dong Xiaohua, editor | Anxin What will happen if Zara closes stores or withdraws from some cities? The answer to the hot search on Weibo is: 'Sweeping goods'. Recently, the entry 'Zara's large number of fans are rushing to buy goods' has been on W - Lujuba

In addition to improving store efficiency, another source of confidence to support the large number of inditex store closures comes from the growth of online sales. Revenue proportion expanded. In the 2023 fiscal year, Inditex Group’s online revenue was 9.1 billion euros, accounting for 25.35% of total revenue.

Text | Haokan Business, author | Dong Xiaohua, editor | Anxin What will happen if Zara closes stores or withdraws from some cities? The answer to the hot search on Weibo is: 'Sweeping goods'. Recently, the entry 'Zara's large number of fans are rushing to buy goods' has been on W - Lujuba

In China, in addition to its official website, app, and Tmall flagship store, Zara is currently also Actively using WeChat mini programs and Douyin live broadcast rooms.

In 2023, Zara began to carry goods on Douyin live broadcast on November 17 last year, led by supermodel You Tianyi, with multi-camera shots. Follow the models and anchors through multiple scenes, combining fittings, explanations and catwalks to show the audience a variety of Zara's new autumn and winter products. The audience can simultaneously place orders at the Zara Douyin official flagship store.

The accumulated views of this live broadcast. Approaching 1 million, netizens called "Advanced" "a new level of sales".

inditex also placed its hope for future growth on social media. Inditex already has more than 251 million fans on social media, and the platform has received visits throughout the year. More than 6.5 billion, with an average daily visit volume of 18 million.

Inditex Group CEO Scar García Maceiras said that they will continue to explore adventures and look for future growth opportunities.

It is worth mentioning that although the total number of stores of Inditex and Zara is constantly shrinking, There are differences in the distribution in different regions around the world, and there is even a trend of "growing in the east and growing in the west"

Text | Haokan Business, author | Dong Xiaohua, editor | Anxin What will happen if Zara closes stores or withdraws from some cities? The answer to the hot search on Weibo is: 'Sweeping goods'. Recently, the entry 'Zara's large number of fans are rushing to buy goods' has been on W - Lujuba

In the 2023 fiscal year, the share of Asia and other markets in Inditex's total revenue has dropped from 23.2% in 2018 to 6 years ago. A new low - 16.9%. The revenue share of the US market has increased from 13.5% in 2020 to 20% in 2022, and will reach 19.6% in 2023. As early as last year's performance meeting, the group CEO Scar García Maceiras made it clear. Mentioned that the company has seen very strong growth opportunities in the U.S. market. Zara plans to open 30 new stores from 2023 to 2025, including opening larger stores in New York, Chicago and other places; at the same time, the company will take more measures to improve its presence in the U.S. market. America’s online sales capabilities.

Who revolutionized fast fashion?

2008-2018 is the golden decade for fast fashion to make rapid progress in the Chinese market.

According to data from Guojin Securities, in the ten years from 2008 to 2018, in the Chinese market, the number of Inditex stores increased by 41 times; Uniqlo increased by 48 times; H&M increased by 40 times; GAP Asian stores increased by 1.84 times.

Not only are foreign fast fashion brands expanding crazily, but a number of local fast fashion brands that call themselves the "Chinese version of Zara" have also emerged. Metersbonwe and La Chapelle are typical examples.

Around 2018, fast fashion brands were unable to grow and suffered negative growth. In 2018, Zara’s revenue increased only 3.3% year-on-year. H&M's Chinese business fell by 3% year-on-year, and GAP's Asian business revenue fell by 18.2% year-on-year. The revenue of local Meibang Apparel has been unable to rise in 2017, with a slight decrease of 0.72%.

Next comes a bunch of bad news that is worse than not being able to rise - some people are closing stores and shrinking, and some people are simply getting off the poker table and withdrawing from the Chinese market.

In 2018, British high street brands Topshop and Newlook announced their withdrawal from the Chinese market. In 2019, Forever 21 stopped playing. In 2020, C&A and Esprit waved goodbye; in 2022, Zara’s sister brands Bershka, Pull&Bear and Stradivarius closed offline physical stores in China and Online shopping entrance.

In 2018, La Chapelle closed more than 1,000 stores; from 2019 to 2021, Meibang closed 1,871 stores.

Why is fast fashion collectively sluggish? Who revolutionized their lives?

Obviously, "fast fashion" must not only be fashionable, but also fast and low-priced. Zara is the originator of fast fashion. The reason why it was successful at the time was that it combined these three points to the extreme.

There is a saying in the fashion industry: Zara designers travel to major high-end shows, and a week later the popular styles from the high-end shows will appear in Zara stores. Of course, Zara has been accused of plagiarism by big brands along the way.

not only needs to keep up with popular elements, but also needs to make quick responses to test whether the product design meets user needs. Pablo Isla, the previous CEO of Inditex Group, once said, “Instead of completing the design early before each season and then understanding how customers like it, it is better to try to figure out what customers need first, and then design and produce.” The reason why

can respond quickly is due to Zara's supply chain layout. Most of Inditex's production factories are located in Spain or neighboring countries, and 45% of its clothing production is within a very small area surrounding the Spanish headquarters. This allows Zara's clothing to be put on the shelves for sale from design to just 14 days, while the average clothing company's new goods shelf cycle once took as long as about 6 months. The birth and rise of a number of European fast fashion brands such as

zara benefited from the great development of the textile industry brought about by the first industrial revolution. The five countries that took the lead in completing the industrial revolution, including Germany, the United Kingdom, France, Italy and Spain, have not only become important global textile and apparel consumer markets, but also global textile and apparel trade centers, as well as high-end fashion design, manufacturing and release centers.

But as times change, Zara’s killer skills back then are gradually being learned and surpassed by a group of emerging Chinese local fast fashion brands/enterprises.

For example, Shein, a fast fashion e-commerce company that has risen rapidly in recent years, has challenged Zara in many markets around the world.

Text | Haokan Business, author | Dong Xiaohua, editor | Anxin What will happen if Zara closes stores or withdraws from some cities? The answer to the hot search on Weibo is: 'Sweeping goods'. Recently, the entry 'Zara's large number of fans are rushing to buy goods' has been on W - Lujuba

zara launches about 10,000 new products every year, and Shein can launch 6,000 SKUs every day. Shein is more extreme than Zara in terms of "small single and quick reaction".

According to media reports, one of Shein's clothes can be produced in at least 100 pieces at a time. If the test is successful, mass production will be added. From design to product launch, Shein can complete it within 3 days at the fastest, which is much faster than Zara.

In terms of price, Shein can be cheaper. It is also a piece of clothing that imitates a big brand. Shein's price may be only half of Zara's.

According to "latepost", shein's sales will increase by 46% year-on-year in 2022, exceeding US$29 billion; its scale has surpassed zara (23.76 billion euros).

In addition to Shein, there are also a number of national fashion brands trying to use Zara’s magic to catch up with Zara. ur is also a rapidly rising local fast fashion brand. It can go from design and production to product launch in 6 days at the fastest; it can design more than 10,000 new products every year, and its annual revenue exceeds 5 billion yuan.

In 2023, ur became the first in the sales list of women's clothing on the three major e-commerce platforms of Tmall, JD.com and Douyin.

Behind the rise of emerging local fast fashion brands, they also benefit from the advantages of Chinese manufacturing in the clothing supply chain.

For example, Guangzhou’s rich and complete supply chain has given birth to local fast fashion brands such as shein. In the early days of Shein's development, 60%-80% of factories, large and small, in Jiangnan Village, Panyu District, Guangzhou, were more or less involved in Shein's industrial chain.

Therefore, it is not surprising that the old fast fashion brands that have evolved slowly are gradually declining.

In the financial report as of November 30, 2022, H&M Group's sales increased by 12% year-on-year to 223.553 billion Swedish kronor, and net profit fell by 68% year-on-year to 3.566 billion Swedish kronor. In fiscal year 2022, gap sales fell 6% year-on-year to US$15.6 billion, with a net loss of US$202 million.

Local brands are even worse. Today, La Chapelle has entered a state of bankruptcy and reorganization, while Meiban is still struggling in the quagmire of huge losses and has to sell its properties to survive.

Compared with those lagging fast fashion brands, Zara’s high-end transformation has achieved a phased success. But it’s hard to say how long this high-growth momentum can be maintained. After all, the signs of continued slowdown in revenue growth over the past three years are obvious.

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