Zara'S Suspension In China Was Horrified By The Bubble In The Shopping Center?

In recent months, news of fast fashion giant Zara has continued.

First, the market value of the parent company Inditex has soared more than 100 billion dollars. In the semi annual report, there has been good news: from February 1st to July 31st, the Spanish Company, which owns Zara, Zara Home, Massimo Dutti, Bershka, Stardivarius and other brands, rose 17% in the first half of the year, or about 10 billion 600 million dollars.

Net profit rose 26%, about 1 billion 160 million dollars.

However, amid the good news, a Spanish media has disclosed a puzzling decision of Inditex: the group will suspend shop after the total number of stores in Greater China is more than 500.

In its recent semi annual report, the company wrote that in the past six months, the Spanish Company has opened 94 new stores, including 24 Zara stores, all over Brussels, Amsterdam and Vladivostok, Russia.

At present, the brand has 6777 stores in the world, most of which are concentrated in Europe.

This year, Zara has opened an electronic shopping channel in Hongkong and Taiwan. At present, the brand offers 28 countries and regions online shopping platform.

Why is this fast fashion company still in steady expansion? Why is the brake decision made in the Chinese market that most brands attach great importance to?

A common misconception is that China's economy is not working.

Indeed, not long ago, the yuan had depreciated rapidly, and China's stock market also experienced a sharp concussion.

Light luxury brands have made a decision to shrink.

However, the fashion industry also has the "lipstick effect" theory. The poor economy, the fashionable products that can improve the image will sell very well, such as lipstick.

By contrast, Zara's colleagues did not step on the brakes in China.

UNIQLO continues to open stores at the rate of 100 per year, and has recently launched several sister cards under its fast selling group. H&M's shop opening plan has remained at about 80 a year. In the conference call after the annual earnings report, it has made it clear that it will develop all kinds of brands. Following the high-end vice card COS, another sub &Other Stories will also enter the Chinese market.

It can be seen that Zara and even the entire INDITEX group slow down shop in China may have its own reasons.

In the Spanish media interview, Inditex gave the reason: the early garrison in shopping centres is too urgent, and the next task will be to open flagship stores in key cities.

Zara is the first brand to enter the Chinese market in the group. In February 2006, it opened its first flagship store in Nanjing West Road, Shanghai. The total number of stores in China now reaches 166, and stores have entered more than 60 cities.

As for the whole INDITEX group, the number of stores opened in China in the past few years is very fast. Before 2011, there were only 119 stores in the country, but in 2011, there were 156 new stores in one year, 121 in the following year, and only 61 in 2013. Only 8 stores opened in the first quarter of this year.

The rapid growth from 2011 to 2012 is not an example of Zara. H&M, UNIQLO and other brands are also increasing the growth of sales with the increasing number of stores.

The reason for rapid expansion is not related to the blowout of domestic commercial real estate that started in 2011. In that year, 400 new department stores were added, and about 250 new ones were added in 2013.

Commercial real estate has led to the rapid development of the fast fashion brand. Because of the strong brand, the cost of entering commercial real estate is quite low, which is reflected in free shop rents and even decoration subsidies.

The result of a radical store may be a dilution of the sales profit, and the location error caused by the quick opening of the store will also bring a drop in single store sales. Even if there is a rent subsidy, the fast fashion brand must be weighed according to the business logic.

The unique mode of Zara makes them more sensitive to single store sales than competitors.

The lifeline of clothing is supply chain and inventory.

Zara, which takes fashion as the selling point, is carried out in a short and fast supply chain mode. Inventory backlog is a major taboo. This leads to a higher cost of logistics for Zara.

For example, a new store in A city needs a new 21 garment on a certain day. These goods may be shipped directly from the 13 places in 9 countries to the store with the best route and can arrive on the same day.

Zara logistics does not have the concept of urban pit. If the layout of shops is not proper, the cost of supply chain will increase linearly.

From a strategic point of view, once a store

Without the expected figure, Zara should turn off the store.

Although Zara has planned to sink to the three or four tier cities in 2013, from the current layout of Zara in the domestic market, the number of shops up to 85% is distributed in the second tier cities, and the rest are in the economically developed cities such as Ningbo and Suzhou. The proportion of shops in three or four line cities is very small.

Enquiring about the opening of Zara in China last year, the new shop city is still a key second tier city such as Chongqing, Nanjing and Hangzhou.

Zara seems to be waiting for the three or four tier cities. They seem to be more active in e-commerce than in the channel.

The main types of stores in Zara are mainly shopping centers.

Wanda is almost every city Zara must enter shopping malls, in addition, Hong Kong Hui, Wangfujing, Joy City and other mainstream shopping centers are also their first choice.

We have analyzed the complementary relationship between Zara and shopping centers.

But because of the overdevelopment of the shopping center and the pre cooling of the electricity supplier, Zara has been hit by it. The fate of Zara is tied up with the shopping center.

Now the strategy of Zara is to set up flagship stores in important cities.

The "important city" here refers to the non first tier cities with enough consumption.

Because of the fierce competition in the first tier cities, fast fashion brands have begun to shift to the second tier developed cities, the "key cities" of the group, and the flagship store of China's image.

For example, at the end of last year, Zara opened three storey single flagship stores in Chengdu Ocean Pacific.

The flagship store is often set up in important business circles in big cities. It expands a larger shop than the general stores in a large traffic location. According to the existing flagship store model, the Zara flagship store area is above 2000 square feet, with sufficient supply, and more complete product display. Its decoration, experience and service will also be better.

"Opening 100 stores of 200 square meters, and opening 10 stores of 2000 square meters, obviously the latter's management cost will be lower."

Raymond Wong, a senior consultant at POP's high-end trend network, told the curiosity Daily reporter that the single store is even more effective.

The so-called "Ping" effect, that is, the turnover that can be generated on each flat area, is an important indicator for measuring the operation of a supermarket or department store.

According to ruyd's data, the flagship store's sales performance is generally 3-4 times that of ordinary stores, with a maximum gap of 6.6 times.

In addition to the advantages of Ping efficiency, flagship stores have an unparalleled advantage in display, window design, shop decoration and other brand image.

Because of the requirement of fast fashion brand positioning, we need to reduce production cost to the greatest extent. Therefore, the advertising form that is commonly used to update products with regular season does not apply to advertising.

And flagship stores can make up for this shortcoming.

Take UNIQLO as an example. UNIQLO opened a large flagship store near The Paris Opera House, which is adjacent to the old Buddha's and Wakubo Rei's stores, which is a big advertisement in Paris.

Of course, Zara and UNIQLO have very different market strategies, but there is no difference between the two brands in terms of the benefits that the flagship store can bring.

According to the simplest logic, because the commercial real estate tends to be saturated and the quality is not high, the profit of Zara single store decreases. On the other hand, it lacks the strategy of judging the location of the three or four line cities, leading to the opening of the flagship store with higher efficiency and better image in the "key cities".

As for Zara, who opened its flagship store last year, Tmall has a lot of things to worry about. It's too early to talk about making up a physical store.