Zara Was Asked To Turn Too Slowly. CEO Said Electric Shock Was A Good Thing.

Spain's fast fashion giant Zara has been challenged to turn too slowly as rents continue to rise and is dragged down by huge physical stores.

Zara parent Inditex CEO Pablo Isla appeared to respond to the activities of the Wall Street Journal on Tuesday. He pointed out that Zara did not enter the electricity supplier field until 2010, and its positioning and direction were more clear. Although its brand entered the electricity supplier field later, it led the group to take a lot of detours. "If it happens 10 years ago, it will be very different."

At present, Zara is also trying to deliver door-to-door services in China, and will expand to other markets in the future.

Pablo Isla also stressed that although the company's decisions are based on Algorithms and data, it will listen to the opinions of store managers, while managing data without losing humanization.

The group currently produces products in Portugal and Spain and has opened many distribution centers there. The industry generally believes that the new speed block on Zara has more advantages than its competitors.

At present, Zara is also trying to deliver door-to-door services in China, and will expand to other markets in the future.

It is noteworthy that in the 2018 fiscal year, the electricity supplier channel has become the most important driving force for the group's performance. Sales growth from this channel is 27%, accounting for 12% of total revenue, or 3 billion 200 million euros, but far less than the strong growth of 41% in the 2017 fiscal year.

Coye Nokes, partner of Coye & Co Strategy Consultants, a management consulting firm, said earlier that Zara was behind in the digitalization of apparel industry, accounting for only 12% of online sales, while its competitors' online sales accounted for between 20% and 30%.

But Zara is not a worry in China.

Some analysts have pointed out that Zara is facing a threat in the Chinese market, and the mainstream view may not be noticed yet.

First of all, China's e-commerce and O2O (online to offline) may weaken the traditional advantage of this fast fashion giant.

First, the way of dealing with consumers is changing.

Consumption is no longer just a walk into a shopping mall, and then into a good store, and now consumption experience has become a combination of shopping malls and smart phones and online ecosystem.

What will be the eventual evolution of this offline and online blending mode is yet to be seen, but China's retail industry is one of its biggest goals.

Besides, the apparel supply chain has been affected by new technologies and may even change.

This brings the question: can fast fashion global operation mode be reformed through technology?

Can Chinese companies acquire the traditional advantages of fast fashion giants through technology?

From the Tmall double 11 data in recent years, we can see that Zara has no advantage, and is left behind by its competitors and some domestic apparel brands.

China's fashion cycle has been very fast. Apparel brands actually carry out most textile production in China. Therefore, it is not clear whether Zara can maintain a high income and total profit margin in China, and the total profit margin in other parts of the world is generally 60%.

Another point of view is that Spain's Inditex group management is too slow, and Zara has been doing well in Spain for a long time, which can lead to complacency and may not be able to adapt to the fiercely competitive Chinese market.

It is a disturbing fact that there were no online stores in Zara until around 2010, when Gap opened online stores for 10 years, until 2014 when Zara opened online shops in Tmall.

Zara's inventory and logistics management are all first-class, but the rate of reaction to e-commerce is incredibly slow, which is why the above mentioned e - business /O2O is likely to happen to the Zara crisis.

According to fashion headline data, in the 2018 fiscal year ended January 31st, the sales of Zara parent Inditex (ITX.BME) group increased by 3% to 26 billion 100 million euros, an increase of 4% compared to sales, a further slowdown in sales growth of 9% over the 2017 fiscal year, 56.7% gross profit, and 12% to 3 billion 400 million euros in net profit.

Morgan Stanley analyst Geoff Ruddell believes that the further slowdown of the Inditex group's performance last year means that the restructuring measures have not produced much effect, while the slowdown in online retail growth shows that the competitiveness of the group's online market is not as good as expected.