Zara’s E-Commerce Strategy; Decision to Close 1.200 Stores!

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Intidex group targeted to expand e-commerce operations in 2018 around the world under e-commerce strategies framework.

Intidex group targeted to expand e-commerce operations in 2018 around the world under e-commerce strategies framework. Within this framework, Inditex group started to sell online in Europe in 2018 with Zara, Bershka, Massimo Dutti, Stradivarius, Pull & Bear, Oysho, Uterqüe brands. CEO Pablo Isla stated in that period that “We want to offer our fashion collections to our customers no matter where they are. Even to markets that we don’t have physical stores!” Group’s e-commerce revenue of that year increased by 10% compared to total revenue. So, what was the e-commerce strategy of Zara under the group?

E-Commerce Strategy of Inditex

Inditex carried the digital transformation to Near East in 2019. Spanish fashion company which is the leader in terms of revenue started e-commerce with Zara in five countries: Qatar, Kuwait, Bahrein, Oman and Jordan. Group opened online stores in nine markets including South Africa, Colombia, Philippines and Ukraine in 2019.

In line with these, the group carried Zara online in Morocco, Egypt, Lebanon, Israel, Serbia, Indonesia, United Arab Emirates and Saudi Arabia. Additionally, is opened in Brasil. Inditex started e-commerce of Uterqüe in Mexico. The group developed e-commerce omnichannel integration strategy in all countries regardless of the presence of a physical store in 2020. In terms of e-commerce strategy, the ratio of 2019 e-commerce increased to 14% in total revenue.

E-Commerce Strategy of Zara

In 2019, the largest competitor H&M’s e-commerce sales volume reached twice as Zara. But the main reason for H&M’s performance was pricing strategy. While 68% of the products online were below 15 Euro, 40% of Zara’s online products ranges between 15 and 30 Euro. In 2019, while a Zara customer spend 142 Euro on average, an H&M customer spend 104 Euro.

Zara’s e-commerce strategy - In 2019, the largest competitor H&M’s e-commerce sales volume reached twice as Zara.
H&M and Zara e-commerce sales (Source: FoxIntelligence)

At the end of 2019, Inditex group that has Zara, Massimo Dutti, Bershka and Pull & Bear brands experienced a historical moment. Spanish retail giant closed more stores than it has opened for the first time in the company’s hospital. This number which was negative at the beginning for a company that invested in opening physical stores offered a second approach. E-commerce become strategic for the future of Intidex.

Until 2022, Inditex wants to have 25% of the revenue from digital platforms. Inditex CEO Pablo Isla stated that “it was important for the company to use online channels and integrate with the remaining things.” Isla explained, “at the end of 2020, all Inditex brands will be operational as global online stores.” In this period, Covid-19 has not yet spread.

3 billion dollars of investment was planned to e-commerce until 2022!

At the end of 2019, Inditex had 7.469 sales points around the world. These stores were the only advertisement of the company and logistic base. They were key for end-customer delivery. In CEO and founder Amancio Ortega’s mind, physical stores function to prevent inventory accumulation as well as distribution centres as the exit points for online sales. This made Inditex the most agile company in terms of logistics. Pablo Isla stated that, “sales growth and decreased inventory shows the power of Inditex.”

On May, total revenue of Inditex decreased by 51%. If the Covid-19 lockdown that forced 90% of global Inditex stores to be closed is considered, the numbers are not that bad. According to the company, electronic sales played a key role to save Q120 numbers. While Inditex e-commerce sales increased by 50% in the 1st quarter, the numbers increased by 95% on April.

With the balance sheet, Inditex announced a new e-commerce strategy update: Until 2022, 3 billion dollar investment for the e-commerce and closing on 1.200 physical stores! In addition to that, 64.000 sqm online studio and full-integrated RFID system establishment was decided.

Three main e-commerce strategy are digitalisation, online platform integration with stores and sustainability. Thus, stores can reach global customers with digitalisation. They will play stronger role to develop online sales. Therefore, the group will focus on high-quality stores to reach the long-term strategic targets. With this updated, Inditex once more focuses on e-commerce which is the sales channel of the future. Because mandatory mask use, capacity limitations in physical stores, mandatory social distance and new normal might decrease flow but changing purchasing habits can be a step for e-commerce strategy.

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