Zara in China and India
Discipline:
Zara in China and India
Discipline:
In 2016, Inditex as a group with worldwide sales of US$24.9 billion, and Zara, as its flagship retail concept store, had recorded significant year-on-year growth in net sales at 11.5% and 13% respectively. However, despite a presence across 93 countries, Inditex’s regional sales contributions were skewed. Europe, comprising only 26% of the global apparel market and exhibiting declining growth, accounted for 60.8% of Inditex revenues. The Americas, the second largest market in the world with 30% share, had the least contribution at 15.3%, and Asia Pacific, the fastest growing and largest market with 36% share of the global apparel market, contributed only 23.9%.
Unlike other apparel producers, Zara manufactured 60% of its merchandise in the ‘near markets’ of Europe and North Africa, close to its logistics centres in Spain. The labour costs in these markets were substantially higher than Asia, where the bulk of global apparel production took place. Would this put Zara at a disadvantage in reaching out to the high growth Asian consumer markets of China and India? Moreover, while Zara had been online since 2010, its online sales in 2016 accounted for only 7% of its total sales. As consumers increasingly shopped online, would Zara with its reliance on stores and impulse purchases become another retail casualty of e-commerce?
The discussion of this case study will enable students to understand strategic choice and execution in developing a unique business model. It would enable understanding of competitive advantage, international expansion, retailing, and concepts such as value innovation. Furthermore, with the rise of China and India, the case can be used as a springboard to illustrate the differential potential of the two countries across various industries.
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