Zara to expand its reach in India with online sales

For over five years now, 25-year-old Roshni Aditya has been planning her holidays around shopping.

Aditya, who heads a family business in Kolkata, is a big fan of Zara, which is yet to set up a store in that city. So she’s particularly happy about the launch of its online store. “It’s a relief to know that now we can shop Zara from the comfort of our homes, and don’t have to plan or wait for vacations to be able to do the same,” she told Quartz over a telephone call.

 

In March, Inditex, one of the world’s largest fashion retailers and Zara’s parent company, announced plans to retail online in Asia’s third-largest economy to reach customers outside of its current markets of Delhi-NCR, Mumbai, Bengaluru, Hyderabad, Surat, Chennai, Pune, and Chandigarh.

Its online store is expected to go live on October 4, 2017 and comes seven years after Zara entered India through a joint venture (JV) with the Tata Group. Since then, the Spanish brand known for its trendy fast-fashion has expanded to 20 stores, doing brisk business by selling clothing, bags, and accessories to both well-heeled and aspirational Indian shoppers. For the year ending March 31, 2016, Inditex Trent (the JV company) clocked a turnover of Rs842 crore, up 17% from the previous year.

And while India is still a small market compared to China where Zara has over 190 stores, the brand’s popularity among everyone from college students to young professionals to celebrities has proved urban India’s growing appetite for fashion.

As expected, competition is heating up, too, thanks to the entry of brands such as H&M and Gap. That is forcing existing brands, including Zara, to step up their game by slashing prices and expanding their reach online.

India’s fashion market is estimated at USD 70 billion, and online retail accounts for around 5 % of this, according to a March 2017 report by the Boston Consulting Group and Facebook. By 2020, though, the online fashion market is expected to treble to USD 12-14 billion, or around 12 % of the overall market. And the number of people shopping online for fashion is set to more than double to as much as 135 million.

That explains Zara’s move. Online retail serves more local customers, especially those living in towns and cities where quality malls are few and far between, and where opening large stores doesn’t make business sense yet. The company did not respond to Quartz’s request for comment.

Moving beyond the metros

India’s premium brands do the bulk of their business in the country’s top-seven cities. However, wealthy and aspirational shoppers live beyond these metros, too, and they’re ready to spend on fashion. While Zara already caters to such shoppers in Surat and Chandigarh, experts say online stores service customers without making hefty investments in smaller markets.

“I think they can reach out to a lot more locations in the country where it is not feasible to put up stores, and you’ve seen that the market for such premium brands is small beyond metros,” Pankaj Renjhen, managing director, retail, at real-estate consultancy JLLS, told Quartz.

Outside India’s big cities, quality malls are still a rarity, which poses a problem for fashion brands picky about the stores around them. Moreover, store traffic is significantly lower, meaning that it’s hard to justify the large capital investment required to set up a full-fledged outlet, Swarooprani Muralidhar, who covers India’s retail market for Fung Global Retail & Technology, explained.

By going online, Zara can reach a sizable group of underserved Indian consumers living in cities starved for fashionable brands.

That includes shoppers such as 21-year-old Dehuti Patel, a resident of Surendranagar in Gujarat, who stays over 350km away from the nearest Zara store in Surat. The computer engineering graduate, who prefers shopping online for foreign brands through websites such as Asos and Aeropostale, told Quartz she was “thrilled about the launch of Zara online.”

But the competition is closing in. Gap and Forever 21 already sell online through websites such as Myntra and Amazon, and H&M plans to launch its online store next year.

www.inditex.com

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