Fast Fashion Brand Zara Falls Into "Lawsuit Gate"

The Inditex SA Indo Textile Group has eaten in the United States in the deep-rooted sense of rights protection.

Devin Rose, an American customer, filed a complaint against the Zara USA Inc. in the Federal District Court of Losangeles last Friday for fraudulent pricing.

Devin Rose said that the brand did not reflect the actual exchange rate in the pricing of products (Euro to us dollar), which led to American consumers paying far more than the real value for their products.

In May of this year, Devin Rose bought three jackets at a Zara store in California, with the tag price of 9.95 euros.

When he arrives at the counter, the price of each coat is changed to $17.90, and the unit price at that time should be $11.26, which means that the price is raised by nearly 60%.

He immediately questioned the price, but said that the answers to price and exchange rates varied.

Devin Rose also believes that Zara USA Inc., which uses foreign currencies to show low prices to attract consumers to settle accounts, does not disclose consumers' Covert markup appropriately, so that consumers can pay an average of 5-50 dollars more than the lowest price shown in euros, which is a violation of state and federal laws.

The prosecution demanded compensation from Zara USA Inc. and is seeking a class action lawsuit, which is also said to be a lawsuit of more than $5 million.

Zara USA Inc., who denied the "unfounded" allegations through a spokesman, said he would fully defend her legal process.

The company also said that it always adheres to its commitment to pparency, honesty and morality, and will continue to focus on providing excellent customer service to customers and fashion products with high quality and value for money.

In fact, the pricing differences between Zara and Inditex SA Indo Textile Group and even the retailers in various industries in the world are normal. The author can find in the Zara store stores in China that the price tags with euro prices are relatively low from time to time, believing that this is only the negligence of the relevant employees, and that they have not changed their prices in time.

However, the prosecutors of the case believed that the move was deliberately done by Zara. Even though the brand was re priced in the US dollar, the price of the dollar was much higher than the original price of the euro, and it had nothing to do with the real exchange rate.

As for the price of Zara, Tang Xiaotang, a retail industry analyst, said the global price is not normal. "Tariffs, excise taxes, local labor costs, logistics and even sales products all decide whether the price of a single product or the average price is different."

Tang Xiaotang also said that in the field of fashion, countries such as Asia and South America are generally higher in prices for some products than in European countries, mainly due to the effects of heavy taxes and exchange rates.

In the middle of 2015, Morgan Stanley (NYSE:MS) Morgan Stanley and Research Institute AlphaWise released a research report on global pricing of Zara.

The report combines the pricing of 7000 products in 14 main online stores in Zara, ranking the selling price of Zara, and the benchmark is the mobile phone in the Spanish local market.

The report shows that Zara is the most expensive seller in Korea, which is 95% higher than the Spanish market price, or nearly doubled.

Surprisingly, the US price is also very high, which is 192% of Spain's.

China's Zara products are 78% more expensive than Spain's. The three main markets in Russia, Japan and India also sell 76%, 62% and 53% respectively compared with Spain.

Spain's European market, though relatively cheap, still has a premium of over 20% relative to Spain's pricing.

Zara is the largest single market in Germany, which is 124% of the Spanish market price. The situation in Italy is the same as that in Germany, even the most closely priced France is 22% more expensive than the local market.

Consumers who care about the huge difference in price are very few, and Zara pricing is originally "affordable" level, totally unimpeded Inditex SA.

According to statistics, the world's largest apparel retailer has maintained rapid growth in the first quarter, and sales and profits have exceeded market expectations.

In the first three months to the end of April, the group's net sales increased by 11.5% to 4 billion 879 million euros compared to the same period last year. After the exchange rate effect, the group's sales increased by 17%. In the first half of the two quarter of May 1st, -6, the fixed exchange rate group sales also increased by 15%.

However, the performance of earnings was weaker, and the growth rate slowed sharply compared with the first quarter of fiscal year 2015 and the whole year.

Net profit increased by 6.3% to 554 million euros per annualized year, even though it was 547 million euros better than the market expected, but the growth rate reached 28% and 15% in the same period last year and 2015 fiscal year respectively.

Profit margins also showed a setback. The core profit margin of EBITDA fell from 20.5% in the same period last year to 19.6%, and gross profit margin also dropped by 130 basis points to 58.1%.

Barclays PLC PLC (BARC.L) Barclay said in her research report that Spain's wage expansion in the past two years was at the headquarters of the Inditex SA, India and India Textile Group headquarters and most of the logistics infrastructure. The current growth rate is 5%. The bank estimates that the gross profit margin of the group will be significantly affected in the next two years.

Group Chairman and chief executive officer Pablo Isla 3 revealed at the beginning of the month that the customer price of the e-commerce channel was higher than that of the physical store, which helped to increase market share and promote revenue growth with less input cost.