Sean Rain: The Demand For Luxury Goods In China Is Huge, And The High Cost Of Logistics Is A Challenge.

< p > Spanish high street brand ZARA is accelerating its expansion in China and plans to open its stores to three or four line cities.

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"P" recently, "a href=" http://news.sjfzxm.com/news/list.aspx "Classid=101112107105" > ZARA < /a > Global CEO Ai Haisu made a further opening to the Shanghai Nanjing West Road shop after reopening, and further confirmed to reporters that the plan is in the discussion stage.

"If there is a good location in the area and consumers need it, we will open our store in the three or four tier city."

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P > up to now, ZARA already has more than 1750 shops, which are located in the commercial centers of 86 major cities in the world.

In 2007, ZARA officially entered the Chinese mainland market and was rapidly rising in mainland China. At present, there are more than 400 stores in the country, which is an astonishing proportion of ZARA's global stores.

Among them, there are more than 40 large cities in Beijing and Shanghai, and in just 6 years, ZARA has entered 53 cities in mainland China, covering 21 provinces and four municipalities directly under the central government.

In 2012 alone, ZARA increased more than 120 stores in the Chinese market. These newly expanded stores are concentrated in the first and second tier cities.

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< p > nowadays, ZARA has already sniffed the business opportunities of the three or four line city market, and of course, the challenges are also around.

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< p > overseas market to make up for domestic "severe winter" < /p >

< p > some analysts have pointed out to reporters that China's three or four tier city market can really provide nourishment for ZARA's further growth in China, while other brands of its parent company Inditex group also rely on ZARA's reputation to open up the Chinese market.

ZARA's move, or its "slump" in Spain, hopes to further rely on overseas markets to boost performance and raise profits.

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< p > according to the announcement of the Inditex group, the company's net income reached 951 million euros (US $1 billion 250 million) in the first half of this year, compared with 9.44 euros (US $1 billion 240 million) in the same period last year.

In the meantime, Inditex group's net sales amounted to 7 billion 660 million euros ($10 billion 100 million), which is 6% higher than the net sales of 7 billion 240 million euros (9 billion 550 million US dollars) in the same period last year.

If calculated in local currency, Inditex group's net sales in the first half of this year increased by 8% year-on-year.

Although the performance in the first half of this year is higher than market expectations, it is the worst performance of the famous Spanish fashion retailer.

Over the past few years, the retailer's performance has continued to be strong.

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"P >" Inditex's global performance is good. Although Spain is experiencing a recession of two years, the unemployment rate in the second quarter of 2013 has reached 26.26%.

ZARA is the most important brand of Inditex group. Its main selling market is still in Europe.

According to the available data, Inditex accounts for 19.3% of sales in Spain, 44.6% in other European countries, 14.4% in the Americas, and 21.7% in Asia and the rest of the world.

From the above data, the Asian market is not a very high percentage of sales. However, as luxury brands continue to look favorably in Asia, especially in China, and enter the two or three tier cities of China, the high street brand, which is closely related to luxury brands such as ZARA, can not be ignored.

The analysts said.

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< p > despite the completely different consumer groups from luxury brands, Inditex, which originated with ZARA, has created a new mode of clothing utilization, which has turned the fashion world to a great surprise -- a glimpse of the luxury brand T platform, which can fill the world's ZARA stores at less than the original 1/10 price within 30 days, and let the latest trend turn into a Street crash.

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< p > according to Sean Rain, author of the fast fashion research and the end of cheap China in China, no matter in the second tier cities or the three or four line cities with considerable consumption ability, Chinese consumers are very few in their middle class. They imagine that one day they can be rich, because everyone has the same story: a certain person who is familiar with it is still a poor peasant 15 years ago, and now he drives BMW.

So they approach luxury in this way.

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< p > "Chinese market < a href=" http://news.sjfzxm.com/news/list.aspx "Classid=101112107107 > logistics cost < /a > high is a challenge" /p ".

< p > however, the production mode that ZARA is proud of has faced challenges in China.

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< p > according to the introduction of Ai Haisu, Global CEO of ZARA, "the vast majority of ZARA products are produced in the season. Designers will capture the most popular styles and fabrics in the season for production and processing. The vast majority of ZARA products are produced in the season, and the proportion of pre season production is only 10%-15%."

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< p > this is a 90 day cycle from most of the fast fashion enterprises in China to the listing of products, which is called "pre-sale".

It is understood that ZARA's parent company Inditex will exceed 1000 designers in market research and design.

According to the current published data, in order to reduce production costs, by the end of 2011, Inditex has 1398 suppliers in more than 40 countries.

When a new product is approved by the marketing department, the company often makes several factories submit their budgets for production simultaneously.

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< p > according to Ai Haisu, ZARA is proud of the 10-14 day reactive production distribution, that is, it only takes 14 days from design to sales counter.

In the direct shops in mainland China, most ZARA stores also achieved a 10-14 day response type < a href= "http://news.sjfzxm.com/news/list.aspx Classid=101112107108" > production distribution mechanism < /a >.

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< p > however, ZARA is also experiencing the challenges brought by the current season's production.

And this challenge will become more evident after entering the three or four tier city.

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"P >" China's logistics environment is not very favorable, especially in two or three tier cities or even four line cities, whether products can achieve 14 days cycle is a challenge.

The main reason is that China's railways are basically monopolized, but so far, railways are the most rapid and low-cost way of logistics.

In China, the logistics cost is much higher than that in the United States and Japan.

In the United States, the logistics cost is very low, less than 10%, while in China, shipping, rail and motor pportation is a comprehensive pportation, logistics costs up to 20%, so logistics is also a very big cost test.

A domestic fast fashion industry analyzed the times weekly reporter, and believed that with the further development of ZARA to China's three or four tier cities, excessive logistics costs might be passed on to Chinese consumers in the form of price increases.

"In fact, consumers should be able to feel that ZARA is basically rising every year in China."

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< p >, however, Ai Haisu responded to the times weekly reporter: "logistics cost has brought us great challenges in China, and we still need to find a solution.

But at least so far, we have no intention to solve this problem by raising the price.

The feeling that consumers have a price increase may be targeted at a specific type of price. If we look at our average price, ZARA has not risen recently. "

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