It has been more than a year since the large-scale store closure of GAP and H&M, and this spring, this wind has blown on another fast fashion giant, ZARA.
Recently, there have been hot search news on the Internet that "ZARA withdraws from the Chinese market" and "a large number of ZARA fans urgently sweep the goods". The content is to the effect that ZARA has closed stores in many cities on a large scale and cleared promotions, attracting fans to scramble to pick up leaks.
For a long time, although the version and quality of ZARA's clothes have been criticized, it also has a large number of loyal users, and there have been no major problems in the business situation, so as soon as the news came out, it instantly attracted widespread attention.
In this regard, ZARA immediately responded that "the news of exiting China is not true", and said that it is constantly optimizing and upgrading its stores, and bringing a more integrated digital experience to Chinese consumers by opening larger-scale stores and equipping them with efficient digital innovation technology.
"It is impossible for ZARA to give up the big plate of the Chinese market. Cheng Weixiong, an independent analyst of the fashion industry and founder of Shanghai Liangqi Brand Management Co., Ltd., said firmly to "City Boundary".
As the flagship brand of the Spanish Inditex Group, it opened its first store in Shanghai in ZARA2006, bringing the latest clothing trends across the ocean to young people in China, and since 2011, ZARA has maintained an annual net opening of nearly 20 stores for 5 consecutive years, reaching 183 stores at its peak in 2018.
However, in the past seven years, the number of ZARA stores in China has become visibly smaller, and there are only about 90 stores left, which has dropped by more than half, with an average of 15 stores closed every year. What happened to ZARA?
01. More than half of the store is closed
On April 11 and April 14, "City Boundary" went to Beijing Chaoyang World Trade Center Tianjie ZARA store and Xihongmen Huiju ZARA store respectively to find out, and found that there was no large-scale promotion in the store. There will be no promotions at individual stores. A clerk said that in response to the rumors of withdrawing from China, the other party said, "I don't know." ”
Among them, the sales situation in the World Trade Center Tianjie ZARA store can be described as deserted. In the total three floors of the store, there are only five or six groups of customers, and more shopping guides are shuttling back and forth in the store, sorting out the shelves, and the fitting room is also empty. Opening the review software, many consumers commented under the store, "Why is the store that fashionable girls liked to visit more than ten years ago more and more depressed?"
The Xihongmen Huiju ZARA store is on the weekend, and there are slightly more people, and there are more than a dozen customers queuing up to try on clothes in the store. According to a ZARA fan who was queuing, the scene of the last year-end sale was much more lively than now, and the store was full. After queuing for half an hour, in order to save the queue, she bought it directly in front of the mirror. "It's not expensive anyway, a cotton T-shirt is more than 50 pieces. I usually come to shop, but only a few clothes have activities, and the price reduction is okay, and the clothes of more than 300 yuan can be reduced by more than 100. ”
▲ (Xihongmen Huiju ZARA store.) Photo source/city boundary)
It is an indisputable fact that ZARA is constantly closing stores all over the country. "City Boundary" combed through the financial reports of ZARA's parent company and learned that in the seven years to January 2024, the number of ZARA stores in Chinese mainland was 183, 179, 179, 141, 133, 119 and 96 respectively, almost halved.
At the end of March this year, Dongguan Xinghe City store, Huizhou Huamao store, and Shanghai Baoshan Wanda store were all closed, among them, Shanghai Wanda store has a history of more than ten years, and the stores in Huizhou and Dongguan are the only local stores, which have been open for more than ten years. According to customer service, there are currently about 90 ZARA stores in China.
Not only that, the Tianyancha App shows that a number of branches of SALA Commercial (Shanghai) Co., Ltd., the main operating entity of ZARA China, have been included in the list of abnormal operations by the industrial and commercial department because they cannot be contacted through the registered residence or business place, and nearly 80 branches have been cancelled.
It is these comprehensive news from many sources that give the outside world the impression that "ZARA has withdrawn from China".
In the industry, ZARA is known as the four giants of fast fashion along with GAP, H&M, and Uniqlo.
An important manifestation of the so-called fast fashion is that it is fast. In the case of ZARA, it takes 15 days to complete the design to the ready-to-wear market, and the new products are updated every two weeks. If a customer encounters a favorite dress and doesn't buy it immediately, after a few hours or days, the clothes will be gone. In this way, fast fashion brands create a sense of urgency and scarcity among customers, prompting them to place orders quickly.
Fast fashion attracts consumers under the age of 30 who live in first- and second-tier cities and love beauty and socialization. This part of the people's preferences are changeable, a film and television drama, a topic may stimulate their enthusiasm for a certain style, a certain style. To this end, more than 400 designers of ZARA have been wandering the major shows for a long time in search of fashion inspiration, and the company is able to launch 20,000 designs every year to fully meet the needs of young men and women.
Moreover, ZARA is not greedy for sales on a single model, but adopts the rhythm of more and less models, which effectively controls the risk of inventory overstock, which the clothing industry is most afraid of.
With this magic weapon, ZARA has been able to develop rapidly in China. In the decade from 2006 to 2016, the Asian business was an important driver of Inditex's (ZARA) rapid growth, with the proportion of business increasing from single digits to more than 20%. By 2018, the sales volume of GAP Asia and H&M China was about 1.2 billion US dollars, the sales volume of Uniqlo China was 3 billion US dollars, and the sales volume of Inditex (ZARA) in Asia was 6.7 billion US dollars, which is not an order of magnitude with the first three.
In 2019, Inditex (ZARA) Asia's growth slowed significantly to 9.2%, while reverting to 2007, this figure was as high as 47.5%. What's holding ZARA back?
Cheng Weixiong said that the three-year epidemic has brought about the transfer of business districts and changes in consumption habits, in addition, the impact of e-commerce is a more important reason, compared with Chinese brands, the e-commerce layout of international brands is relatively backward.
"International brands represented by ZARA need a process of adaptation, after all, their main battlefield in the past was offline. Today's store closure is a normal channel strategy adjustment. Cheng Weixiong said.
02. There are fewer stores and more money
The number of ZARA stores in China is shrinking significantly, as is the number of stores worldwide, from 2,118 in 2018 to 1,881 in 2024.
However, the "city boundary" found that ZARA's earning power is getting stronger and stronger. In fiscal 2018 and fiscal 2019, revenue was 18 billion euros and 19.6 billion euros, respectively, and in 2020, due to the impact of the epidemic, it briefly declined, and then increased year by year, reaching 26.05 billion euros (more than 200 billion yuan) in fiscal 2023.
Because ZARA is a big revenue bull, it drives the group's revenue to rise. According to the 2023 financial report, Inditex's sales increased by 10.4% year-on-year to 35.9 billion euros, and net profit soared by 30.3% year-on-year to 5.4 billion euros, a record high.
As early as 2015, Amancio Ortega, the founder of ZARA, once surpassed Bill Gates to become the richest man in the world with a total net wealth of $79.8 billion. In 2023, his net worth has risen to $97.4 billion, an increase of $33.2 billion from the previous year, making him one of the top 10 richest people with the largest annual wealth growth, and the only one on the list from the fashion retail industry, firmly establishing himself as the richest man in Spain.
深究ZARA的店少赚钱多的奥秘,还要从Amancio Ortega的女儿说起。
In April 2022, 37-year-old Marta Ortega officially took over as Chairman of the Board of Directors of the Inditex Group. Prior to that, the daughter had five years of experience at the grassroots level of ZARA, and had rotated various lines such as sales, brand promotion, and design marketing.
Unlike her father's aggressive expansionist strategy, Marta Ortega, which aims to make the ZARA brand more premium and refined, has raised its price by a range. For example, she personally directed the design and launch of the Zara SRPLS high-end collection, which is made of cotton, wool, linen and silk with an average price of more than 1,000 yuan, and launched perfume and beauty products, ski products, and compete with luxury brands.
Cheng Weixiong understands ZARA's high-end move very well. He believes that in terms of low price, ZARA will definitely not be able to roll up China's current clothing industry, and the road to high-end will be different. "Of China's 1.4 billion people, there may be 1 billion people who are price-sensitive and seek cheapness. But there will definitely be some people who pursue quality life and experience, and pursue brand stories, brand values, brand culture, and so on. This is also the fundamental reason why there will always be a market for big luxury brands in China. ”
The price increase alone is not enough to boost ZARA's performance growth. At present, in addition to its own official website and App, ZARA's figure can be seen in Tmall's flagship store, WeChat mini-program store, and Douyin live broadcast room. In its 2023 financial report, Inditex Group is very satisfied with the results achieved by online sales, which surged by 16% to 9.1 billion euros, accounting for 25.35% of total sales. In comparison, Uniqlo, which frequently appears in the top list of e-commerce promotions, accounts for only 20% of the e-commerce business in China and 15% in Japan.
Of course, for traditional offline channels, ZARA is also adjusting according to market and trend changes. One of the most obvious actions is to change the store opening strategy. While the customer service denied the withdrawal to the "city boundary", he added that "we will optimize the service experience of the stores and open more stores in different cities." ”
What is the logic of opening a store while closing the store? The answer is that ZARA wants to open a bigger store. It can be calculated through the financial report that in 2018, the total area of stores corresponding to the 2,118 ZARA stores was 3,256,300 square meters, and the average store area was about 1,500 square meters. By 2023, the total store area corresponding to 1,881 stores will be 3,078,600 square meters, with an average store area of about 1,600 square meters. In 2023, the most representative ZARA Shanghai Nanjing Road store has taken the lead in undergoing expansion and renovation.
In response to this change, Lai Yang, a member of the Expert Committee of the China General Chamber of Commerce, explained, "In the era of cloud consumption, compared with online direct sales, the cost of offline chain stores of fashion brands is too high, which has become a burden on operations. Apparel brands are transforming from sales-oriented offline stores to image stores and concept stores to enhance interaction with consumers and improve the attractiveness of brands to consumers. ”
He further said, "The future trend is to attract consumers' preference for brands through a limited number of offline experience stores, and rely more on online direct sales. ”
Cheng Weixiong also said, "To put it bluntly, the upgraded digital stores can guide each other online and offline. "This approach will also have a positive effect on driving the overall sales of ZARA.
Inditex Group said it will invest 1 billion euros in the future for digital channels and 1.7 billion euros for technology investment in channel integration.
03. Where does fast fashion go?
The changes and challenges faced by ZARA are the same as those of other fast fashion giants.
Back in the days when they were at their most beautiful, the streets and alleys of Beijing, Shanghai and other places were full of bustling young people queuing up to try on clothes, and even consumers who were not interested in fashion frantically poured into the stores.
According to data from Guojin Securities, in the ten-year golden period from 2008 to 2018, the number of Uniqlo stores in China increased from 13 to 633, an increase of 48 times, the number of Inditex's ZARA-based Chinese stores increased from 14 to 593, an increase of 41 times, the number of H&M stores in China increased from 13 to 530, an increase of 40 times, and the number of GAP stores in Asia increased from 131 to 372, an increase of 1.84 times.
Since 2018, the entire fast fashion market has staged a major brake due to the oversupply caused by the rapid opening of stores, with H&M's China business growing by -3.0% and GAP's Asia business growing by -18.2%.
Immediately afterwards, British high street brands TOPSHOP and NewLook announced their withdrawal from the Chinese market, Forever 21, C&A, and Esprit fell one after another, and ZARA's sister brands Bershka, Pull&Bear and Stradivarius also closed all offline physical stores and online shopping entrances in China.
In June 2022, H&M's three-storey Sanlitun flagship store with an area of more than 1,200 square meters was empty, which was embarrassing. In November of the same year, GAP's Greater China business was sold to Baozun E-commerce, a domestic e-commerce service company, for less than 300 million yuan. These landmark events all prove that the defeat of fast fashion in the Chinese market has been unstoppable.
On the contrary, the national tide brand has quietly risen. In 2018, Anta's revenue growth rate was 45%, and the revenue growth rate of Bosideng and Semir Apparel also exceeded 30%. UR, which imitated ZARA's debut, is known and loved by more and more young people with the help of emerging social media and live e-commerce, and is even regarded as a "replacement for ZARA" by a small number of people.
In 2019, UR sales reached 5 billion. In 2023, 618, UR will top the women's clothing sales list on the three major platforms of Tmall, Douyin, and JD.com. Up to now, UR has more than 400 stores worldwide, covering Singapore, Thailand, the Philippines and other global markets.
The reason why international brands welcome the tide of closing stores, but the national tide can break out against the trend, the reason is that Chinese brands understand Chinese better and have natural advantages in localization. "ZARA's clothes are too provocative, the design is strange, the short ultra-short is like a children's model, the long super long can be used as a mop, and the quality of the clothes is getting worse and worse. I buy UR now, and I will consider the figure of the Chinese on the basis of fashion. A post-90s girl said.
If localization can be slowly changed and learned, the rapid development of domestic e-commerce does not give international fast fashion brands time to react.
"Through the iteration of technical means and tools, China's shelf e-commerce and content e-commerce have exerted their C-end reach to the extreme. If you pay today, you will be able to go on the market tomorrow. Cheng sighed. Even if ZARA is only updated in 7 to 15 days, it needs a production cycle and a global supply chain collaboration.
Economist Pan and Lin also said that ZARA closed stores in a large area of China because China's offline fast fashion can no longer beat online fast fashion. China's online fast fashion is also evolving to on-demand production, with pre-sale, then production, and then delivery. Behind this is the transformation of China's garment supply chain system.
In the face of China's huge clothing market with a population of 1.4 billion, except for ZARA, the other three giants are trying their best to find different ways to survive.
After GAP China sold out, it threw out production, promotion and omni-channel sales. Baozun, the receiver, has reconfigured the brand's men's, women's and children's clothing with a dedicated design director and slashed the price tag, and on social media, "de-GAP leakage" has almost become a trend.
H&M's strategy is to look for new markets in other countries and launch high-end brands. In 2021, its high-end brand ARKET opened its first store in a high-profile manner, located in Taikoo Li Sanlitun, Beijing, just a few hundred meters away from LV and Canada Goose.
UNIQLO's civilian and comfortable product positioning has been relatively successful. Over the past decade, it has maintained a rate of about 80 to 100 new stores per year in China, and has gradually penetrated into second- and third-tier cities. As of the end of fiscal year 2023 (the end of August 2023), UNIQLO has accumulated 1,031 stores in China, surpassing the 800 stores in Japan and ranking first in the world. During the same period, the revenue of the Greater China business reached 620.2 billion yen, accounting for 22% of the total revenue of the parent company Fast Retailing Group, and the operating profit accounted for 27%.
"If international fast fashion wants to hold the Chinese market, the future transformation will inevitably be inseparable from several major ideas. Cheng Weixiong said that the first is to gain insight into the needs of Chinese users, design and produce suitable for Chinese according to the body shape of Chinese users, and at the same time make good use of local IP to effectively combine Chinese culture and international fashion trends; second, we must know how to adapt to and embrace the development of China's e-commerce, do a good job in online and offline interconnection; third, we must learn to tap the Chinese market and sink into regional layout.
Ten years of prosperity once shattered a dream. After enjoying the super dividend of China's fast fashion, what awaits ZARA is not that "China's fast fashion has become difficult to do", the key is how to do it and how to do it.
Author | Chen Chang
Edit | Chen Fang
Operations | Liu Shan