Economic Times – Elargir Views on Zara crossing 1,000 crore’s mark despite competition

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The world’s largest clothing brand Zara, entered the country in 2010 and initially doubled sales every two years. With average sales per INR 50 crore, the apparel retailer’s performance is even higher than India’s largest jewellery chain, Tanishq. More Zara stores are planned over the next three to four years in the major cities, after two additions last year took its total outlet count to 20.

Zara posted 21% growth in India to cross the INR 1,000 crore sales mark in the year ended March, but intense competition took its toll. Profit nearly halved as the Spanish fashion brand cut prices to match international rivals such as H&M and Gap, which have made an India entry in the past two years.

Inditex Trent, the joint venture between Zara brand owner Inditex and Tata Group’s retail arm Trent, clocked sales of INR 1,023 crore for 2016-17, from INR 842.5 crore in FY16, according to Trent’s annual report.
However, profit after tax fell to INR 48 crore in the same period, compared with INR 80 crore a year ago, after Zara slashed prices by 10-15%.

However, it grew much slower -an average of 20% -in the last three years, indicating that its novelty factor may be waning. Ruchi Sally, director at Elargir Solutions, a retail consultancy firm said, “Zara’s monopoly of being an international fast fashion brand has diminished with new anchor tenants such as H&M, which is a right priced brand for price-conscious yet trendy Indian consumers.”

Inditex Trent has replicated a globally successful model in India -creating affordable copies of the latest fashion or designer wear in double-quick time. But rivals are catching up fast -in one financial year, Hennes & Mauritz (H&M) has come halfway as far as Zara did in seven years in India.

H&M’s India unit posted INR 445 crore in sales for the year ending November 2016. H&M too turned profitable in its first six months of India operations.

India is an attractive market for US and European brands and has, over the past few years, attracted a clutch of the world’s largest private labels that are banking on young consumers increasingly embracing western-style clothing. Ecommerce companies could have added to their sales as well considering that apparel accounts for nearly 25-35% of overall sales for the likes of Amazon, Flipkart and Snapdeal.

Click here for original source – Economic Times

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