While closing a large number of stores and opening stores cautiously, Zara is looking for the best solution in the Chinese market. Following the closure of two stores in Huizhou and Dongguan at the end of March, Zara closed its store in Baoshan, Shanghai again in early April. On the other hand, Zara has also opened larger stores in the golden section of various places. Between the closes and the openings, Zara's own considerations are hidden. From entering the Chinese market at the top end to becoming a mass brand and now repositioning at the top end, Zara seems to have lost all the advantages it once relied on. When fast fashion can't get up, in the complex and changeable market competition, how should Zara survive.
On April 9, entries such as "Zara responded to withdraw from the Chinese market" and "Zara has a large number of fans sweeping goods" have appeared on Weibo hot searches, and for a while, the news that Zara is going to withdraw from the Chinese market is very loud.
The speculation about Zara on the Internet mainly comes from Zara's frequent store closures. At the beginning of April, Zara closed one store in Baoshan, Shanghai, and on March 31, Zara closed two stores in Huizhou and Dongguan in succession.
According to media reports, Zara currently has 87 stores in normal operation and has closed nine stores in two months. However, the Beijing Business Daily reporter found from Zara's official mini program that there are currently only 57 stores left in Zara's Chinese mainland market, and Zara's customer service staff responded that "Zara store information can be seen on the mini program, and if there are 57 stores on the mini program, there are currently 57 stores in the country."
According to the financial report information disclosed by Zara's parent company, Inditex Group, as of January 31, 2024, Zara has opened 1,811 stores around the world. China is the country with the largest number of stores outside of Spain (261), with 118 stores. Among them, the number of stores in mainland China is 96. If the content of Zara's official mini program is accurate, then it also means that Zara has closed 39 stores in two months.
In order to obtain more accurate information, a reporter from Beijing Business Daily interviewed Inditex Group for verification, but did not receive a response as of press time. Zara's official customer service staff said that it was impossible to find out the specific number of stores closed, and denied the statement that stores were closed in large numbers and batches. "They were all closed one after another, and there were no large-scale closures of shops. The customer service agent said. Regarding whether to withdraw from the Chinese market, the customer service staff made it clear that "there is no relevant notice to withdraw from the Chinese mainland market."
However, it is reported that in its response to the media, Inditex Group denied the claim that it had closed nine stores in two months, and only confirmed the closure of three stores in Huizhou, Dongguan and Baoshan, Shanghai.
Since Zara has not responded, the specific number of stores has not yet been able to have specific data, but the continuous closure of stores has become an established fact. According to the financial report data, the number of Zara stores in the Chinese market peaked around 2018. As of 31 January 2018, there were 183 stores in the mainland market alone. If you look at the current number of stores that can be queried on Zara's official mini program, this number has closed two-thirds of the stores compared with 183 in 2018, which is probably not expected by Zara itself.
Looking at the entire market, it is not only Zara that is staging a wave of store closures, but H&M has also been closing a large number of stores in the past two years. According to the financial report, the number of H&M Group stores decreased from 5,076 at the end of fiscal 2019 to 4,369 at the end of fiscal 2023. H&M's plans to close stores continue. In FY2024, H&M Group expects to open 100 new stores and close 160 stores, further reducing the total number of stores worldwide by about 60. According to public data, at the end of February 2019, the number of H&M stores in China reached 535, and by the end of November 2021, the number of H&M Group stores in China dropped to 445.
Cheng Weixiong, a senior brand management expert and founder of Shanghai Liangqi Brand Management Co., Ltd., believes that whether it is Zara or H&M, there is a common reason for closing stores - the attraction of stores to consumers has weakened or even losses. "When the location is not ideal and the ability to attract consumers is not enough, some stores will have poor operation or even losses. In this case, it is a feasible strategy for Zara or H&M to close the poorly run stores and rearrange them. ”
In stark contrast to today's store closures, a decade ago, Zara was at the top of China's fast-fashion market.
In 2006, Zara entered the Chinese mainland market, targeting the middle and high-end urban white-collar groups. At that time, Zara once occupied the head market of China's fast fashion market with its novel styles and extremely fast new speed.
At that time, Zara hit the world with the word "fast". According to public information, compared with the 6-month shelf cycle of ordinary clothing companies and about 3 months for international high-end brands, Zara's clothing only takes about 12 days from design to sale, and it takes as little as one week. At that time, there was also a saying in the industry: "Zara designers traveled around the high-end shows, and a week later, the popular styles of the high-end shows appeared in the Zara store." ”
This speed allowed Zara to quickly seize the Chinese market for a long time after 2012. According to public data, from 2012 to 2015, Zara's parent company, Inditex Group, opened more than 110 stores in China at an astonishing expansion rate, including 44 new stores in 2014 alone. In 2018, Zara's growth in the Chinese market reached its peak, with 183 stores.
Zara's "fast" is not a secret, and naturally it is not a secret to winning, when "fast" has gradually become the standard configuration of local fast fashion brands, the "fast" that Zara was proud of in the past has also slowed down.
It is understood that the local fast fashion brand UR can achieve a cycle of 6 days at the earliest from design and production to launch and put on the shelves. Peacebird has launched its own strategy for creating explosive products, positioning fashion trends and consumer needs through operational data analysis, feeding back product development, and then accelerating the turnover rate of new products through a quick response mechanism linked to the supply chain. According to the research report of Guojin Securities, the new cycle of Peacebird women's clothing is only about 1.3 weeks. Another local fast fashion brand, SHEIN, has a faster speed of new products, and can complete the process from design to shelves within 3 days at the earliest, maintaining the rhythm of 1,000-2,000 new SKUs on the shelves every day.
In addition to the difficulty of having the advantage of new speed, Zara has gradually become a mass brand from the initial positioning of the mid-to-high-end urban white-collar group. In first-tier cities, many netizens said that the only one who can afford to visit in the mall is Zara. In third- and fourth-tier cities, Zara has slowly changed from affordable for young people in small towns to a mass brand that has been gradually "abandoned".
Zara, which has become a mass brand, is hardly cost-effective in the eyes of consumers. It is understood that the biggest feature of SHEIN is that in addition to being fast, it is low price. According to information on SHEIN's official website, $3 T-shirts, $7 pants, $13 dresses and suits abound. Catch up with the clearance, there are products for 1, 2 dollars or even a few cents. In addition, UR is mainly targeting young consumer groups, the price is 30% lower than Zara, and there will be a season-end promotion at the end of June and December, generally around 5% off.
For a variety of reasons, Zara is disappearing from the top of the fast fashion sales charts. According to public data, in 2019's "Double 11", Zara ranked 9th in the TOP 10 list of Tmall women's clothing brand sales rankings, and during the "6.18" period in 2022, UR ranked first in the women's clothing category, and Zara ranked 12th. Tmall 2022 "Double 11" women's clothing ranking Zara fell out of the top 20.
Wu Daiqi, CEO of Shenzhen Siqisheng Company, said that with the abundant material life and rising prices in the local market, the mid-to-high-end at that time may be low-end compared with current consumption. In addition, the young consumer group attracted by Zara's entry into the Chinese market has become middle-aged and has gradually become the mainstay, and they need higher-end quality clothing, Zara no longer meets their needs, and this has forced Zara to transform.
Zara's "slowness" in the Chinese market is also reflected in the financial report. Zara accounts for more than 70% of the Inditex Group's overall sales. As of January 31, 2024, Zara's share of sales in Asia and the rest of the world declined to 16.9 percent, compared to 23.2 percent in 2020.
Judging from the financial report data, the overall performance growth rate of Zara's parent company is also slowing down. Between February 1, 2023 and January 31, 2024, Inditex Group sales increased by 10.4% year-on-year to EUR 35.9 billion. This is a significant slowdown from 35.8% in FY2021 and 17.5% in FY2022.
Under pressure from the performance, Zara and the Inditex Group need to make changes. Since the beginning of fiscal 2021, Inditex Group has repeatedly stated that it has carried out a series of reform measures in response to risks such as rising raw material costs, including redefining Zara's brand and product strategy, targeting the target group in the high-end transformation of the affluent class, raising prices, and promoting the upgrading and digital integration of stores.
Such a strategic decision has allowed Zara to start a large-scale store closure, and at the same time, it is also cautiously selecting new stores in prime locations around the world.
In 2020, Zara opened Asia's largest flagship store in Wangfujing, Beijing, with four floors spanning more than 3,500 square metres and equipped with the latest retail technology. In the first half of 2022, Zara opened a two-storey store in Changsha Huiju Mall, which is also equipped with digital equipment such as self-checkout. In August 2022, Zara opened a new image store in Shanghai Sun Palace, covering an area of nearly 3,000 square meters, with digital fitting rooms and a new online and offline sustainable shopping experience.
According to the information disclosed in Inditex's financial report, the total area of Zara's offline stores will increase by 4.5% in 2023, and store sales will increase by 7.9%. In its FY2023 report, Inditex revealed that new security technologies will continue to be introduced in offline stores in 2024, and this system is the foundation for Inditex to continue to deepen the digitalization of stores and integrate stores and e-commerce in the coming years. Closing small stores and opening big stores is becoming Zara's main task in the Chinese market.
Zhan Junhao, a well-known strategic positioning expert and founder of Fujian Great Aim Brand Positioning Consulting, said that the consideration behind Zara's opening of stores while closing stores is mainly to optimize store layout and enhance brand image. Closing stores that are underperforming or not aligning with your brand's positioning, while choosing to open larger, higher-end stores in prime locations will not only enhance your brand's overall image, but also better meet the needs of your target consumers. "For fast fashion brands, closing small stores and opening big stores may become a trend, but this needs to be judged according to the specific situation of the brand and the market environment. Zara's strategic adjustment is also based on the high-end strategy of the brand, by opening larger and more high-end stores, Zara can further enhance the value of brand positioning, so as to attract more high-end consumers. ”
Pan Jun, director of commodity strategy consulting at a world-renowned consulting company, added that Zara has been positioned as a mid-to-high-end urban white-collar worker when it entered the Chinese market, and then slowly became popular, and now it is back to the mid-to-high-end positioning, which is to adapt to the changes in the Chinese market and consumer needs. With Chinese consumers increasingly demanding quality and branding, Zara needed to restructure its positioning and product line to meet the needs of today's high-end market.
According to publicly available data, since January 2022, Zara's starting price has increased by more than 10% every month compared to the same period last year. In July 2022, the average price of Zara's clothing products increased by 12.2% year-on-year.
When the fast fashion of the past slows down, stores are closed, stores are opened, and prices are raised...... Zara is looking for the optimal solution.
Beijing Business Daily reporter | Guo Xiujuan Zhang Junhua
Edited by Topol