Zara plans a long haul in India but also respects the fact that this market has a very different approach to fashion to what the company is accustomed to
 
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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09/08/2011 3:17am

The differences between a Zara in Europe and a Zara in the US can be confounding at times. The prices for the clothing in the US are higher and the choices are less varied.

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09/08/2011 3:22am

I really hope they fix all this stuff in the coming months. I loved Zara for lots of reasons; their amazing t-shirt designs for one, and the ability to redo an entire wardrobe in one outing without breaking the bank, but none of that is apparent at this location. The only thing I found really interesting was a velour track jacket, and that as mostly a joke purchase. It's also marginally annoying when stores charge more for certain designs of an article of clothing, and Zara is totally guilty. Going through their shirts, you'll notice that anything you're interested in is $10 more than the rest. Way to tax the stylish.

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09/08/2011 3:26am

Zara is indeed the Coca-Cola of the fashion world. Starting sometime in the mid-Seventies in Spain, Inditex, the Euro 11 billion (revenue) company that owns Zara and some other labels, built a hugely successful business model of taking the latest catwalk designs and converting them into affordable high street fashion in a matter of three weeks. Zara focuses on rapid product development and design and outsources the manufacture in small batch sizes to a network of dedicated suppliers. Its ability to bring changing fashion quickly to market has meant that while customers in Europe visit other fashion stores just three times a year, they visit Zara 17 times, according to one study.

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09/08/2011 3:29am

Now let’s look at its initial performance. The fact is that Zara has had an opening few foreign brands have had in India. Through the opening weekend, there were long queues outside its trial rooms as women jostled to try out clothes. According to industry sources (Zara itself is famously reticent about sharing numbers), it had sales of close to Rs. 1.25 crore in the first weekend in Delhi and nearly the same in its Mumbai store. Delhi’s Select Citywalk mall recorded 40 percent more footfalls than it usually does and Mumbai’s Palladium mall recorded close to 30 percent higher footfalls.
“Any mall owner will want Zara now for free because it has an ability to bring more people of a certain kind into the mall,” says Arjun Sharma, promoter of Delhi’s Select Citywalk mall.

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