It has been over 100 days since the Spanish bon ton brand Zara has set its footprint in the land of elephants. For the €11 billion company Inditex that owns Zara, the prospects don’t look so bad at all.
Zara has done a lot of homework on product development and positioning before making its debut on Indian soil. So it’s not surprising that the brand has managed to increase footfalls per month in the malls where it has opened its stores by at least 10%. But this bon ton brand doesn’t believe in claiming or commemorating such success, at least so soon. It remains notoriously secretive and was guarded in revealing too much about its Indian business model on the day of launch in capital. But whether they reveal it or not, one thing’s for sure – Zara is betting for the big game in India.
But 46-year-old Inditex CEO Pablo Isla would be well aware of the fact that 100 days of success do not necessarily mean that the Indian market is there for the taking. Firstly, its global trend of driving new fashion in every season is not applicable in a country which predominantly has just one season – summer (or monsoon in certain parts). So Zara’s ability to get customers to visit and buy several times a year appears to be challenged here. Secondly, the product portfolio presents a problem of a different nature. In India bright colours are preferred as compared to the limited colour collections of Zara. Thirdly, the premium pricing might not work in India; so Zara has to tweak its model on that front as well.
Still, it appears that Zara does have its broad objectives clear for the next few years. As sources from the company confirm, India has a dozen cities whose populations exceed 3 million each and are suitable to have a Zara store (Jesús Echevarría Hernández, CCO of Inditex Group told us, “The Indian market promises substantial growth potential for Zara’s fashion and India is a very important country for us.”)
Zara realises that incremental and step by step expansion works better than launching a blitzkrieg. In India, most foreign retailers have struggled to build a strong franchise and probably that’s the reason why Zara has kept its retail penetration limited only to two cities – Delhi and Mumbai for now. Like McDonald’s, Zara is known for moving at a snail’s pace in whichever country they enter. Globally Zara’s expansion plan is based on a model that believes in opening a few stores first to get an understanding of the market. And the group is willing to wait for the availability of suitable locations. A spokesperson from Inditex (Communication and Institutional Relations Corporate Division India) admitted via e-mail, “When Inditex Group enters a new market, it never has a concrete objective related to a number of new openings or financial figures. Zara operates on a store by store basis. The brand’s expansion would depend on the feedback we get from customers.”
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Source : IIPM Editorial, 2011.
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
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